Between open houses and bidding wars, buying a home can be draining. Meanwhile, in-the-know and select clientele have the chance to tour and purchase properties before they even hit the market.
The practice, known as pocket listings or whisper listings, is becoming more common in real estate.
This insider access may sound tempting, especially in a hot housing market, but there are legal caveats and financial considerations to account for before pursuing a pocket listing.
What Are Whisper Listings?
Whisper listings are properties that are promoted by a real estate broker to an exclusive group of trusted agents to find a buyer who can pay the desired asking price. In other words, agents utilize their professional networks to sell a property rather than putting it on the market. Prospective buyers outside an agent’s inner circle will likely never know the property was for sale.
To further clarify the whisper listings definition, it can be helpful to highlight how they differ from traditional real estate transactions.
For instance, pocket listings are not listed on a multiple listing service (MLS) — the databases real estate professionals use to help clients buy and sell property — even though they’re technically for sale. Popular listing websites like Zillow and Realtor.com source many of their listings from MLS feeds.
You also won’t find a “For Sale” sign in the front yard of a secret real estate listing.
Nationally, whisper listings accounted for 4% of real estate sales and rising in 2021, compared with 2.4% in 2019, the CEO of Redfin said. In more choice neighborhoods and communities, the figure can be as high as 10%.
Are Pocket Listings Legal?
Yes, although there are consumer rights and laws that offer some protection to prospective homebuyers. For example, the Fair Housing Act gives buyers the right to be free from housing discrimination during the sale, financing, or rental of a property.
Because of their exclusivity, whisper listings have been criticized as discriminatory. In fact, the National Association of Realtors® established a clear cooperation policy in 2019 with the goal of reinforcing consumer benefits and competition in the housing market.
The new policy requires Realtors to list any property they are marketing to buyers on association-owned MLSs. New listings must be submitted within one business day of any public marketing, meaning other agents should be aware of and able to see the property the following day.
There are some loopholes in the policy that allow whisper listings to continue in specific circumstances. Namely, Realtors can still take advantage of “office exclusives,” which are listings shielded from the public and marketed to their internal agency network. The agents in those offices can then share the property information with their clients.
Listing agents can also take advantage of the one-business-day grace period to promote the property to a select clientele. The policy is that “within one business day of marketing a property to the public,” which can include yard signs and flyers displayed in windows, “the listing broker must submit the listing to the MLS for cooperation with other MLS participants.” Since business days exclude weekends and holidays, the exclusive group of buyers can get a jump on the competition for putting in an offer.
How to Find Whisper Listings
By definition, pocket listings are about connections and insider knowledge. A useful place to start is by finding a real estate agent with a strong professional network and familiarity with the neighborhood you’re hoping to buy-in.
Experienced agents may be more prepared to figure out how to find pocket listings thanks to a larger client base, too. Having handled numerous real estate transactions in the community, they could have insight into when former clients want to put their homes back on the market.
They may also know the prices and terms that prior clients would be willing to part with their homes for. Essentially any property can be treated as a whisper listing if you’re able to make an offer on a house that is attractive to the owners — even if they weren’t considering selling.
Is It a Smart Approach to Home Buying?
Real estate whisper listings may be advantageous for buyers for several reasons. First, there is generally less competition for off-market homes than those listed widely on an MLS, helping buyers purchase a home at or below asking price.
Given the word-of-mouth nature of pocket listings, potential buyers are generally hand-picked by listing agents based on both their qualifications and the type of property they’re looking for. This approach can cut down on the number of showings in the home buying process, which may be important for some buyers due to privacy and time.
Before committing to this strategy, there are some additional benefits and drawbacks to consider.
Pros of Secret Real Estate Listings
A secret real estate listing can offer advantages to sellers and buyers alike.
For sellers, a pocket listing affords considerable privacy — both in terms of keeping the sale status under wraps and reducing foot traffic at a property. By focusing on qualified buyers in the listing agent’s network, the sale process could be expedited without the hassle of negotiations and contingencies.
Sellers may opt for a pocket listing to test out an asking price and gauge interest. If the whisper listing doesn’t secure a full-price offer, sellers can reconsider the price before putting the property on the open market to attract new buyers without any record of a price change. This is helpful since prospective buyers may view a price cut as an opportunity to make an offer under the asking price.
The primary benefit for buyers is reduced competition on a property. Since the listing has only been shared with a select group, it’s less likely that a listing will go into a bidding war or be sold out from underneath them.
Recommended: How to Negotiate House Prices: 7 Tips
Cons of Secret Real Estate Listings
Whisper listings are often pursued in the hope of fetching top dollar from buyers. From a buyer’s perspective, the perk of first dibs on a property may come at the expense of an accurate assessment of its value and the ability to negotiate. Putting aside the allure of exclusive access is important to ensure that the property fits your needs and makes financial sense.
For sellers, a secret real estate listing limits the potential pool of buyers instead of promoting the property on any of the hundreds of multiple listing services and across major real estate sites. Opening a property to the market can increase your chances of a multiple-offer situation and getting bids over the asking price.
In May 2021, nearly 50% of homes sold over the listing price, Redfin noted. Both 2019 and 2020 saw roughly 25% of properties go over listing price during the same month.
Whether the market is hot, cold, or somewhere in between, restricting the number of prospective buyers could reduce how much you sell your home for. And while a pocket listing may reduce the hassle of multiple showings, the approach could extend how long it takes to find a buyer for the price you want.
A whisper listing, also known as a pocket listing, is shared only with an exclusive group of agents’ inner circles. Secret real estate listings can offer advantages to both sellers and buyers but may have some drawbacks.
Here’s something that isn’t a secret: If you’re house hunting and need financing, getting prequalified is a useful first step to show you’re a serious buyer and can afford the property. Give SoFi home loans a try.
SoFi offers fixed-rate mortgages with as little as 5% down.
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