What’s The Deal with Off-Market Properties?

There seems to be some confusion about whether off-market properties are a good idea or a bad idea, so I wanted to clear this up for you.

An off-market property is a home that is not listed on the MLS (multiple listing service – a database established by cooperating real estate brokers to provide data about properties for sale).  Both buyers and sellers often think that an off-market property provides a more “exclusive” transaction. Let’s review the pros and cons for both buyers and sellers before you move forward with an off-market home. 

Sellers:  Is An Off-Market Sale Best for You?

There are several advantages to selling your home off market, and it can make your life easier during the selling process. However, without listing it on the MLS where it gets exposure to all buyers, you face the potential of leaving money on the table if you decide to go this route.

Advantages

• Test market your home and price before it hits the market.  You can get an idea of its “sale-ability” and see how the local market views your home and its price. If it’s priced too high, you can lower it before you list it on the MLS and avoid a public price reduction.
• Avoid the ticking clock of “days on market” since your home is not officially listed on the MLS. There’s no pressure worrying about your home going stale or having it sit while buyers increasingly wonder what is wrong with it. That could be ripe for lowball offers. This tactic works best for very high-end homes that take longer to sell even in a fast-paced market.
• Maintain more control in the selling process. You can sell your home on your terms – who can see your home, when it’s available, etc. When there are fewer homes on the market but lots of buyers, you can be more selective and not go public with your sale. Why would you do this?  Usually if you don’t want your neighbors to know you’re selling or if you’re not interested in having a parade of buyers come through. 
• Avoid the hassle of time and costs to prepare your home for open houses and multiple showings. You don’t want the inconvenience of constantly being on-guard for sprucing up your home.  Off-market properties typically get fewer showings but more serious buyers.  This cuts down on the number of showings you have and the times you have to get your home ready at the last second for an unannounced showing.
• Avoid the MLS limelight and have a more low-key approach if you want privacy. Some sellers find it too overwhelming to have the whole world seeing photos of their home and belongings online.  Or, if you don’t want lots of strangers in your home. Once it’s listed, your home is in the public domain for all to see.
• Sell your home discreetly and more simply if you face a divorce, an estate sale due to death, or another reason for a forced sale. Adding the formal process of selling your home can increase stress when you least want it. This way you can avoid that.

Disadvantages

• Fewer buyers mean less competition for your home.  The more people who see your home, through the MLS and in person, the more likely your home will sell faster and for more money. 
• Potentially a lower price than what the market might bear.  When you sell your home off market, you’ll never know what it could sell for if it had been listed on the open market where more people could become interested in it.  In a seller’s fast-paced market, it’s not out of the ordinary to have a bidding war where the price increases tens of thousands of dollars or more.  With fewer buyers seeing your home, you are less likely to have a bidding war to drive up the price.

Buyers:  Should You Buy An Off Market Property?

Off-market properties can really be a win for the buyer.  Because the home never hits the open market for all buyers to see, there’s usually less competition for off-market properties. This means you might be able to get a good deal! 

Advantages

• Access to homes not on the MLS. When inventory is low, this is another outlet to potential sellers. You might find a hidden gem that most other home buyers will never even know about.
• Less competition from other buyers means you could get a good deal.  The fewer buyers who see the property, the less likely there will be a bidding war so you could potentially get the home for less than if it hit the market. 
• More time to make big decisions. Since fewer buyers will know about the property, it could take the seller longer to sell the property. This means you might be able to take more time making such a huge decision. 
• Announce your specific buying objectives to home sellers (even those who have not yet officially decided to sell). You can uncover the “right” home and let potential sellers know what you want.
• Avoid looking at tons of homes and the crush of buyers at open houses. It won’t be as overwhelming and tiring.

Disadvantages

• You never know what price the home will get on the open market. You may end up paying more or less, but you’ll never truly know since the sale was not open to the public.

How to Find Off-Market Properties

Here are just some of the ways I find off-market properties for my buyers:

• For Sale By Owner – Sometimes, I come across For Sale by Owners (FSBO’s) – these are homes that are being sold by sellers directly, that do not want it on the open market.   Typically, I see them when I drive around or posted online or word of mouth.  I have negotiated contracts with them on behalf of buyers, giving buyers a good deal and getting the property off the sellers’ hands.    
• Wholesaling – Also, at times, I talk to “wholesalers” throughout different neighborhoods.  These are people that know when sellers are looking for buyers who can take the homes off their hands, quickly and discreetly.  Sellers sometimes are in a financial situation where they want a quick sale and want quick cash in their hands without the hassle.    I will represent the buyer and they will compensate me for representing them in the transaction, where I handle the details with the title company and/or the attorney.   Note that to make this a quick sale, the sellers must have enough equity in their property where the sale price will pay off the mortgage(s), liens, judgements, etc.  If their existing mortgage is more than the price being offered, then it will turn into a “short sale”, which is a whole other issue.  It can take months and, in most cases, sellers will not make any money but will be able to move on once the short sale is approved.   By the way, I am also certified to do them – but that is a whole other topic for a future post. 😊
• Farming – This is simply sending good old-fashioned letters to a particular neighborhood that a buyer of mine wants to move into but there are no homes on the market.  Simply, writing letters to property owners to see if they have any interest in selling.  This method may take many months, but it can be worthwhile to both parties. 
• Predictive Algorithms – with today’s developing technologies, this is a relatively new method that I have just started to engage in.  I have access to sites that utilize predictive algorithms which are computer programs that determine when a property owner is likely to sell.  This is based on their online patterns and behaviors.  As I mentioned, this is very new, but results have shown it can be effective.    Once a property owner is identified, I will show up in their online communications where they can contact me to let me know they are thinking about selling.  

All in all, off-market properties are more likely to benefit a buyer in this market, but this option can be a good idea for a seller who wants a very noninvasive, private sale.  Consider the pros and cons above and always reach out to me to see whether I can help you find something that might not be on the market yet!