What Does Off-Market Mean? Understanding the Pros and Cons
Just because a house isn’t listed on the multiple listing service (MLS) doesn’t mean it’s not for sale. Off-market listings are homes that aren’t publicly marketed as “for sale” but are available for purchase. While they didn’t used to be too common, a 2021 report from the National Association of Realtors (NAR) about homebuyer and seller trends found that 11% of all sellers find a buyer without publicly listing their homes.
In this post, we’ll explore why a seller might choose to sell their home this way, the benefits and drawbacks of doing so, and how buyers can find off-market homes.
Let’s get started!
Why Sell Your Home Off-Market?
There are plenty of reasons why homeowners decide to avoid MLS listings:
Homesellers Value Their Privacy
When you list your home on the market, your address is out there for the world to see. While others may not mind as much, not all property owners want their sale price to become public knowledge. Off-market transactions keep your address off the MLS and sites like Zillow or Realtor.com, making it more difficult for people to discover how much money your home sold for.
Some Sellers Prefer Pocket Listings
Pocket listings occur when a seller works with a real estate agent to sell their home privately or off-market. In turn, these agents market these houses as “office exclusives” to a select group of potential buyers or real estate investors within their brokerage. In the real estate industry, it’s not uncommon for them to share pocket listings with other local agents to secure an off-market deal.
Testing: One, Two, Three...
Before putting a house on the open market, some sellers prefer to test the waters and see if the valuation of their home is aligned with what a potential buyer might pay. You can raise the price before listing it on the MLS if it's considered below fair market value. If your valuation is too high, you can lower the price before listing it on the MLS. Conversely, if you decide to put it on the MLS and then publicly reduce the price, you may encounter a string of lowball offers or deter buyer interest.
Avoid the “Days on the Market” Stigma
Speaking of lowball offers, owners of off-market homes don’t have to worry about potential buyers and buyer’s agents wondering why your home hasn’t sold yet. Usually, when houses are on the market for long periods of time, people begin to wonder what’s wrong with them. The real estate market is unpredictable, and some homes simply take longer to sell, even in a hot market.
Coming Soon to a Market Near You
When agents market real estate, you often see them list a home as “coming soon.” Sellers and their agents sometimes do this to gauge potential buyers' interest before deciding whether or not to list their homes on the MLS.
Avoid Causing Tenant Panic
If you’re considering putting a rental property on the market or you are entering into foreclosure on it, you may not want to alert your tenants immediately. While you’re still required to provide your tenants with proper notice, if your tenant discovers that your home is for sale or that you’re potentially preparing for an upcoming real estate auction (and you haven’t told them yet), it could cause concern.
Lack of Showing Availability
In order to publicly market your home, you have to be available to show it. If you live out of state or are taking a summer-long vacation, you may not be able to hold open houses, making it much harder to sell your home. If your home is going to be vacant for a while, it may be wise to take it off-market so you don’t lead potential buyers on.
Benefits of Off-Market Properties
Off-market sales come with a lot of perks for buyers and sellers alike.
- Find unique deals. Some sellers want to make a real estate transaction without the whole world knowing and are willing to do so below fair market value.
- Less competition. Everyone has access to sites like Zillow and Realtor.com, but fewer potential buyers are looking for off-market, which can give you an advantage.
- Potential for bidding wars. Pocket listing your home can spurn a bidding war and potentially let you sell your house well above fair market value.
- Less stress. Off-market sellers don’t have to worry about how their home will fare on the MLS. If you’re selling off-market, you can control more of the process.
Drawbacks of Off-Market Homes
Going off-market isn’t for everyone. Here are the possible cons for buyers and sellers:
- Longer closings. You may be disappointed if you’re looking to close the deal quickly. Typically, the off-market seller isn’t in as much of a rush to sell their home.
- Lack of comparative market analysis. You may buy a house above its fair market value and not know it. Since the home is off-market it’s harder to determine if you’re getting a good deal compared to what else has sold in the area.
- Extra fees. Some off-listing markets and pocket listing services charge membership fees to list on private channels — this isn’t true on Aalto, but could be true on other sites.
- Lack of comparative market analysis. You may sell a house below its fair market value and not know it. Since the home is off-market, it’s harder to determine if you’re getting a good deal, but if you are working with an expert, they will be able to help with your pricing questions.
How to Find Off-Market Homes
Finding your dream home is a little more complicated when it’s only available off-market. While you won’t find off-market houses on sites like Redfin, you can find them elsewhere:
- Real estate auctions: Sites like Auction.com and Hubzu allow you to bid on houses that are bank-owned or in foreclosure. However, we recommend thoroughly researching any home for auction before you buy because you’ll be buying it as-is.
- Real estate networking groups: Build your real estate investing and agent network to get inside information about home sales and hot deals only available off-market. A simple Google search can show you multiple real estate networking opportunities in your area.
- Pocket listing services: Pocket listing websites can discreetly connect sellers and buyers. You’ll be required to pay their fee, but you could save time and money in the long run.
- Newspapers: Yes, those old things. Newspapers still list homes for sale and can notify you about potential houses coming up for auction.
- Public records: Check public records for homes that went off-market after failing to sell on the MLS. While this will take some digging, you may be able to strike a deal with a discouraged but motivated seller.
Is Selling Off-Market Right for You?
Choosing whether to sell your home off-market or publicly is one of the many decisions homeowners have to make. Luckily, it’s not a choice you have to make alone.
We’re on a mission to make buying and selling less daunting with Aalto. Our self-service real estate platform gives you full access to on- and off-market listings, coming soons, expired listings, homes up for auction, foreclosed homes, and more.
Buyers can access transparent information on any home, no agent needed. Browse at your own pace and get a Deep Dive analysis for homes you like, including buyer demand, disclosures, inspection reports, pricing feedback, and escrow information. No gatekeeping here!
Sellers can connect directly with people looking for off-market houses through in-app messaging and have control over every step of the sale, saving up to 80% in commission fees. No more endless coordination with your agent trying to get information from prospective buyers and asking for updates. You can get help from our experts on-demand if you have questions on all the finer details.
When you sign up with Aalto today, you’re saying yes to the modern way of buying a home.
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.