Hip Pocket Listings Only Benefit Real Estate Agents

Image created by Stuart Miles, provided by freedigitalphotos.net

Image created by Stuart Miles, provided by freedigitalphotos.net

Never let an agent market your home as a Pocket Listing.  If you do, you will limit your home’s marketing exposure, attract fewer buyers and eventually sell your home for less money in a longer amount of time.  Why do agents like Pocket Listings?  Easy.  A pocket listing gives an agent a better chance to earn a higher commission by representing both the buyer and seller.   The chance at a higher commission is why some agents push this sales technique on their clients.  Pocket listings are almost always a bad idea for the seller.

What is a Pocket Listing?

A pocking listing, sometimes called a hip pocket listing, is a type of real estate listing where the selling agent does not list the property for sale on the multiple listing service. By keeping the listing “in their hip pocket,” the selling agent only shares the listing with his or her own clients, or clients represented by agents in the same office, rather than the open real estate market.

Typical listing practices involve immediately promoting the listing on the multiple listing service, often referred to as MLS, for every interested buyer and agent to see. The MLS is what feeds data into real estate agent tracking tools and public directories and real estate apps such as Zillow and Trulia.  It’s the best way to proclaim to the world that “This House Is For Sale.”  Pocket listings?  Not so much.

Why are they good for agents?

For self-serving agents, pocket listings are a tempting idea. In most real estate transactions, the seller pays a 6% commission from the proceeds of the sale. That six percent is generally split evenly between the buyer’s agent and the seller’s agent.

In the cases a seller’s agent can convince their customer to accept a pocket listing, the selling agent is set up to find the buyer and act as both seller’s agent and buyer’s agent. Rather than taking home 3% for the sale, they can take home a 6% commission. On a $250,000 home sale, that is a $15,000 paycheck instead of $7,500 for doing just a little extra work.

Why are they bad for sellers?

As a seller, you should always avoid hip pocket listings. While the seller’s agent is double dipping on their commission, you are missing MLS exposure and the opportunity for multiple bids on the home.  The bids you do receive will probably be at a lower price since there’s little buyer competition.

Another reason why hip pocket listings are a bad idea for sellers involves the law of agency.  You hired an agent to represent YOUR best interests.  If the same agent that is representing you also represents your buyer, your agent is limited in the amount of advice they can provide since they have to be loyal to both parties.  They can’t help you negotiate a better deal or better closing.  They can only act as a referee or traffic cop.  They can only be fair and impartial.  Why would you want to pay a commission for that?  In case you’re wondering.. you don’t.

In a hot real estate market, a home in a good location may be able to attract multiple offers and even a bidding war. In a bid war, multiple competing offers are made on the same home trying to out-bid each other until a winning offer is picked.  But it won’t attract a competitive bid situation if only a handful of people even know your home is for sale.

So while the listing agent is incentivized to maximize their potential commission through a pocket listing, the seller is far better off with their home listed in MLS with as many potential buyers as possible.

If Your Agent Suggests a Pocket Listing, Find a New Agent

It is always important to find the right agent for your needs, that wants to represent your best interests.  Any agent that suggests turning your listing into a hip pocket listing is only looking out for their own interests, not yours.  Always be sure to look at the details of the agent paperwork when signing on with an agent to make sure you are not going to get stuck.

While it is common to have an exclusive period with a new agent, a pocket listing is not typical and you should respond to that with a big NO. It is your property and you deserve the best sale price possible and you can’t get that if people don’t know your home is available for sale.

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.