A Signed Contract That is Never Advertised Nor Entered Into a Multiple Listing System
A pocket listing is a real estate industry term used in United States which denotes a property where a broker holds a signed listing agreement (or contract) with the seller, whether that be an "Exclusive Right to Sell" or "Exclusive Agency" agreement or contract, but where it is never advertised nor entered into a multiple listing system (MLS) or where advertising is limited for an agreed-upon period of time. In Canada, this is referred to as an "Exclusive Listing".
When a broker is hired to sell a property, a listing agreement is executed in writing. In an "Exclusive Right to Sell Agreement", the broker normally agrees to cooperate with other brokers and to share a portion of the total real estate commission paid by the seller. However, in this situation, it is stated that the property shall not be placed in an MLS, and thus there is no agreement to work cooperatively with other brokers.
An alternative form of Agreement might be "Exclusive Agency" where only the broker is given the right to sell the property, and no offer of compensation is ever made to another broker. In that case, the property will never be entered into an MLS.
The reasons for a pocket listing may vary from the need for privacy or secrecy to discrimination, and some sellers may have their own reasons for not advertising a listing in conventional ways, including wanting to sell only to certain types of people.
Many full-time agents have knowledge of pocket listings in their own office or in other offices of their own company. While many MLS systems may try to limit this type of listing by requiring execution of a written notice relative to the benefits of MLS publicity, they may encourage members to refrain from taking pocket listings. There are some companies which list property as pocket listings for a short time before entering it into their MLS. With the written agreement of the seller, this would allow the company to try to obtain both the listing side and the "selling" side of the commission, an industry term known as "both sides of the transaction".
A real estate company which is not a member of any MLS may have pocket listings, but may still be willing to cooperate with other real estate professionals in the sale of their listings.
A broker or agent having a Pocket Listing can sometimes imply that the property will be sold directly to a buyer by the seller's agent.
Comparison with open listings
Pocket listings are not "Open Listings". An open listing is an Agreement between a seller and a broker whereby the property is available for sale by any real estate professional who can advertise, show, or negotiate the sale, and whoever brings an acceptable offer would receive compensation.
Real estate companies will typically require that a written agreement for an open listing be signed by the seller to ensure the payment of a commission. "For Sale By Owners" (FSBOs) often also offer open listings by signing an agreement to pay a broker who brings them an acceptable offer, but these will usually not be pocket listings.
Pocket listings may give buyers an extra advantage when searching for real estate which is not advertised anywhere else. These special properties, while under listing contracts, may be unique because they are sold privately and may never be intended to be listed on the Multiple Listing Service (MLS). Many property owners want to sell their real estate, but do not want the aggravation associated with showing the property. This is especially true in a slower market where sellers of real estate want buyers, not just curious people.
On the other hand, sellers genuinely want to sell their property and will show it to serious buyers. To ensure this, the seller typically has a real estate broker who qualifies a potential buyer on their availability to purchase. A very important benefit to the seller is that the transaction typically only has one real estate agent, thus potentially lowering the overall commission costs.
By directly connecting themselves with sellers' agents, home buyers eliminate the need for a buyers agent (although they will lack buyer representation). If the buyer's objective is to look at all the available homes for sale in a given area, they would need to look at MLS and all private listings for sale. Only then, would they have completely exhausted their search.
Ultimately, the seller must decide if exclusion from the MLS is in his/her best interests and does not limit exposure on the market.