Have you ever missed out on purchasing a property because of competition from another buyer? Next time you may consider looking for a pocket listing to avoid counteroffers and pressure from other brokers. Here is a closer look at how to find pocket listings.
What Are Pocket Listings?
Pocket listings – also known as “off-market -properties”- are homes for sale that have not been listed on the MLS or other real estate websites like Zillow, Trulia, or Realtor.com. In this sense, they are exclusive listings that can only be accessed through the seller or the broker representing them. Typically, the broker and seller will sign an agreement to keep the listing private for either a predetermined period or until someone makes an offer.
Under normal circumstances, when a seller hires a broker to market a property, the listing will be put up on the MLS to help find a buyer. But some sellers desire more privacy or exclusivity and therefore will keep their home off the MLS and other popular listing sites. This presents interesting opportunities for real estate investors and those who want to buy a home without the added competition.
How to Find Pocket Listings
In order to find pocket listings, you have to get in direct contact with the seller or the agent representing the seller. So, you’ll have to do some old-fashioned networking if you want to locate these exclusive properties.
There are several methods you could use to find pocket listings, including:
- Cold Calling: You can start by calling up local real estate brokerages and asking if they have any off-market properties they’re looking to unload. Perhaps you fit the seller’s profile and have a budget they find satisfactory. You’ll likely face a lot of rejection, but if you’re patient, you may stumble upon a great deal.
- Networking Events: Another option is to attend local real estate networking events and built relationships with brokers in your area. If you make a good impression and let it be known that you’re in search of off-market listings, you may be the first person they call when a pocket listing comes on the market.
- FSBOs: You can always bypass the broker and go straight to the buyer. Many people choose to save themselves the cost of a commission and list the property themselves. These properties – also known as For Sale by Owners or FSBO’s – are typically not on the MLS and may not be on other listing websites either. There are websites like FSBO.com and ForSaleByOwner.com where you can find these properties, or you can just keep your eyes peeled for FSBO signs in your area.
- Friends & Neighbors: Leveraging your personal network is also a smart way to find off-market properties. Real estate is a business that everyone must engage in at some time or another, which means anyone is a potential lead. If you let your friends and neighbors know that you’re on the lookout for off-market properties, they may come to you first when they’re ready to sell their home because of the personal connection.
- Motivated Sellers: Another way to find off-market properties is to be the one to convince the owner to sell. The best way to do this is to identify motivated sellers – or homeowners who have an increased desire to sell quickly because of a major life event or financial problem. Their motivation could be a recent marriage, divorce, death, or sudden relocation. Or it could be that the owner is in pre-foreclosure or underwater in property taxes. There are many ways to find motivated sellers, including referencing county court records, doing direct mail marketing, posting ads on Facebook, or looking for distressed properties in your neighborhood. You have to have a soft touch when you approach these homeowners, so you don’t come across as predatory or opportunistic. But identifying motivated sellers is a great way to scoop up an off-market property at a discount.
Are Pocket Listings Illegal?
Pocket listings are legal but must be treated delicately. In 2019, the National Association of Realtors moved to ban pocket listings and now requires that members submit all new listings within one business day. However, there is no state or federal law that outlaws the practice, and not all real estate agents are members of the NAR.
There are ways that pocket listings can lead to a violation of fair housing laws. For instance, if a homeowner wants to keep a listing exclusive because he or she only wants to sell to a certain race, ethnic group, or other protected class, that would be against the law.
Pocket listings are typically associated with celebrities who want to keep their business out of the press and know that listing it on the MLS would attract unwanted attention. Or the seller may be an ordinary person who has gone through a traumatic experience like a death or a divorce and doesn’t want information about the sale to be available to the public.
As long as it’s the seller’s decision and they understand that keeping the listing exclusive may impact the final sales price and how quickly they get an offer, there is nothing illegal about keeping a listing off-market.
How to Buy a House that’s Not on Market?
In theory, the process of purchasing a home that is not on-market is the same as purchasing one that is listed on the MLS. You simply contact the buyer, make an offer and then fulfill the requirements of the closing. However, there are often additional steps that may make the process more complicated.
You may have no idea what kind of an offer the seller may accept because the property is not being listed at a particular price. This means you’ll have to do the research yourself and determine a number that makes sense based on your budget and the available sales data. You may also have to explain to the seller why the amount your offering is fair because you won’t have other competing offers to validate the price.
Depending on the circumstances, the seller may be a bit harder to deal with. If they choose to keep the property exclusive, it means they don’t want to deal with unwanted attention. So you may have to work a bit harder to convince them to sell to you or even agree to meet with you in the first place.
The hardest part of buying an off-market property is locating it and getting the seller to agree to your offer. Once you’ve gotten over those hurdles, the closing process is no different than purchasing a listed property.