With real estate inventory still tight in many markets around the country, as a potential homebuyer, you want to stay ahead of your competition. This is where off-market listings come in. Also known as quiet or pocket listings, these homes may be for sale but aren’t listed on multiple listing services (MLS). That means real estate agents who sell these properties must do the legwork to find buyers on their own.
Listing homes off the market was a bit of a rarity in the past but has gained traction with homeowners in recent years, making these listings part of a secondary market of sorts—especially in the face of ever-increasing demand.
A new policy from the National Association of Realtors® known as “MLS Statement 8.0” greatly restricts off-market listings.
Off-market listings may seem counterintuitive to a seller. After all, there is more demand than inventory, which means bidding wars are common in many neighborhoods. So why would sellers want to do secret listings, and how do you—the buyer—find them?
- Off-market listings are properties that are for sale but aren’t listed on multiple listing services.
- Some sellers desire an off-market listing to test the waters, maintain privacy, save on commissions, or create a sense of exclusivity that could result in a higher selling price.
- For buyers, off-market listings provide access to additional inventory, an opportunity to save if the commission is lower, and the opportunity to avoid competition for property in a desirable area.
- Off-market sales involving only one agent can sometimes provide very little wiggle room for buyers looking to negotiate a price.
- To get access to these listings, buyers can approach agents or homeowners directly, or try going online.
Advantages for Sellers
Some home sellers opt for an off-market listing to test the waters while others want a more private sales process or the opportunity to negotiate a lower sales commission as there is only one agent involved.
Certain homeowners have thought that a pocket listing creates an allure that will get them a higher price. After all, if the home is listed and ends up sitting on the market for more than 30 days, there is a good chance that potential buyers will try to make lowball offers. Without the "days on the market" ticker going off, there isn't as much chance that a seller will be undercut.
How Buyers Win
For you as a buyer, the benefits of an off-market listing are twofold. For starters, it gives you access to inventory that fellow homebuyers aren’t seeing. If you are buying in a particularly hot market, pocket listings may be the only way to purchase a home. In regular market climates, you may get a deal partly because the commission that the seller has to pay is lower.
Not all homebuyers are looking for a primary residence. You may be searching for an investment property, or homes to buy and flip for a profit. An off-market listing in a great neighborhood can be an excellent way to accomplish that goal.
MLS Statement 8.0 Clear Cooperation Policy
A significant roadblock to off-market listings came with the recent passage, by the National Association of Realtors, of “MLS Statement 8.0 Clear Cooperation Policy.” This policy, effective January 1, 2020, with local implementation mandatory by May 1, 2020, requires any real estate broker who participates in a multiple listing service to submit their listing to the MLS within one business day of marketing the property to the public.
The Practical Impact of MLS Statement 8.0
It’s worth noting that MLS Statement 8.0 is not the law in the traditional sense. According to Realtor Doug Wagner of RE/MAX Victory + Affiliates, “The National Association of Realtors is a governing association, not a legal entity, but all member MLSs, brokerages and agents of the association must abide by the new policy.”
Wagner notes that licensed agents who are non-Realtors (not members of the National Association of Realtors (NAR) are not bound by the policy. However, given the fact that in 2020, 88% of homebuyers used a real estate agent or broker, the practical impact is that Statement 8.0 applies to most residential real estate transactions.
Off-Market Listings Remain
Fortunately, MLS Statement 8.0 does not mean the end of off-market listings. NAR’s new policy has built-in options that allow member agents and brokers to maintain both limited and full off-market listings.
For example, under MLS Statement 8.0, sellers may opt-out of the MLS IDX or Internet display. Another option, known as an “office exclusive” listing is also available to sellers who want to maintain privacy. In the case of an office exclusive, the agent can share the listing with other agents in the office or one-on-one with buyers.
Certain other off-market options previously available through brokers, such as “private listing networks” are no longer permitted by Statement 8.0. Others, including “coming soon” and “delayed showing” will be under the control of local MLSs but will include new restrictions that prevent agents from sharing them with buyers.
According to Wagner, online website Zillow, which draws listings from MLS data but is not a member of NAR, is not precluded from continuing in-house off-market programs such as "Coming Soon," "FSBO," and "iBuyer."
Contact Real Estate Agents
Finding a traditional, exclusive, off-market home requires a little homework and lots of networking. Once you pinpoint the neighborhood you want to buy in, you’ll need to come up with a list of top real estate agents and contact them about any office exclusive listings they may have.
In addition to contacting real estate agents directly, buyers have tools available to them online to find non-MLS listings such as For Sale by Owner (FSBO), newspaper classifieds, or even Craigslist. As noted above, the online website Zillow has several off-market programs available to potential sellers and buyers.
If there's an area or neighborhood you're particularly interested in, one option is to check in with homeowners directly. You may be able to find a lead by door-knocking or sending out mailers. Though it will cost you time and money—and won't guarantee success—there is a small chance at least one person will respond.
Don't rule out neglected properties, especially if you know you can afford to do repairs. Perhaps there's a homeowner who's so overwhelmed with the costs of upkeep—and one who never believed he could ever sell—that an unsolicited offer would be considered a blessing.
Just so you don't end up breaking the bank, make sure you print mailers that are both cheap and effective. After all, you want to seem as professional in your approach as possible. And you never know until you ask.
Know the Process
Finding an off-market listing is only half the battle. Seeing a deal go through is the endgame, which is why buyers of off-market listings have to know the ins and outs of the process. Once you get to contract, it is a standard deal, but as the agent is likely representing both of you, it can get a bit murky.
Known as a dual agency sale—while perfectly legal—it can be hard for the buyer to tell if the agent has their best interest in mind. The higher the sale price, the heftier the commission for the agent. If you are buying in a market with little inventory, it may not matter if you get the best deal as long as you get the home, but it pays to be aware of any conflicts of interest.
The Bottom Line
The real estate market is still hot in many areas of the country with more demand than inventory. Frustrated buyers who have been bid out of homes need any advantage they can get. Although MLS Statement 8.0 severely restricts access to off-market listings it does not ban them entirely. Do your homework, realize that there are risks, and know that finding your next home through an off-market listing can be worth the effort.