With real estate inventory still tight in many markets around the country, home buyers need to find a way to stay ahead of their competition. That's where off-market listings come in. Also known as quiet or pocket listings, these homes may be for sale but aren’t listed on the multiple listing services (MLS). That means real estate agents who sell these properties have to do the legwork to find buyers on their own.
Off-market listings may seem counter-intuitive to a seller. After all, there is more demand than inventory which means bidding wars are common in many neighborhoods. So why would a seller want to do a secret listing, and how do you—the buyer—find them?
Off-Market Listings: An Overview
Listing homes off the market was a bit of a rarity in the past. But it has recently gained more traction with homeowners, making these listings part of a secondary market of sorts—especially in the face of ever-increasing demand.
Homebuyers aren't just looking for primary residences anymore. In fact, many buyers want investment properties, or homes to buy and flip for a profit. And an off-market listing in a great neighborhood may be a great way to accomplish their goals.
Some homeowners may opt for an off-market listing to test the waters while others want a more private sales process. Certain homeowners even think a pocket listing creates an allure that will get them an even higher price. After all, if the home is listed and ends up sitting on the market for more than 30 days, there's a good chance potential buyers will try to make lowball offers. Without the "days on the market" ticker going off, there isn't a chance that a seller will be undercut.
- Off-market listings are properties that are for sale, but aren’t listed on the multiple listing services.
- Many of these properties are exclusive, prestigious listings that a realtor keeps in his or her back pocket.
- Off-market listings give buyers exclusive access to inventory, and a better chance at closing a deal.
- To get access to these listings, buyers can approach agents or homeowners directly, or try going online.
Beat the Competition
For buyers, the benefits of an off-market listing are twofold. For starters, it gives them access to inventory that the competition isn’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, pocket listing buyers often get a deal partly because the commission the seller has to pay is lower.
Buyers who have access to these off-market listings increase the odds they will end up purchasing a home. And today, it is easier than before to locate off-market listings. In the past, the only way to hear about a pocket listing was through word of mouth. The internet changed all that and now websites like Zillow, Zenlist, and Hidden Listings are examples of places buyers can find off-market houses.
Types of Off-Market Listings
Off-market listings often come in different flavors, sizes, and neighborhoods. Unlike traditional listings, off-market homes don't come with the normal things that come with a regular home for sale including a for sale sign, regular showings, open houses, or broker tours—all of which can be a big boon to sellers who may not want the headache of listing their home on the market.
Off-market listings are generally the traditional, secret, prestigious listings you'd probably imaging. These are exclusive, million dollar homes that most of us only see on television. Then there are listings that show up on real estate search websites 30 days or more before the house hits the multiple listing services that everyone has access too. Finally, there are the opportunistic off-market listings where a real estate agent approaches a homeowner about selling their home.
Real Estate Agents are the Key
Finding a traditional, exclusive, off-market home isn’t as easy as searching the web. It 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 agents and contact them about any pocket listings they may have.
This means cold calling or sending emails to make contact. Some real estate agents even have websites where they showcase their off-market houses and have services buyers can subscribe to and get email alerts about new listings.
There may be very little wiggle room for buyers looking to negotiate the price of an off-market listing.
In addition to contacting real estate agents directly, buyers have a lot of tools available to them online to find listings before they open up to the general public. You just have to know where to look.
Zillow’s “coming soon” feature lets agents, brokers, and multiple listing services market homes on Zillow a month before they hit listing services. This gives quick-acting buyers a bit of an early advantage, granted their competition isn’t using Zillow as well. ZenList lists off-market real estate, and merged with PocketList, another service that pooled listings in the local San Francisco Bay area.
Be sure to check out other, less traditional sites for sales—especially if they're being sold privately by the owners themselves. It may seem strange to go through your local paper's classified ads or even Craigslist, but these sites also have homes for sale that may not be on the market just yet.
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. While 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, right?
Know the Process
Finding a pocket listing is half the battle but seeing a deal go through is the end-game, 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 since 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 his or her's best interests 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. Enter the pocket listing or off-market homes.
These are homes that aren’t being seen by the general public, which means there’s a bigger chance of buying them. But it’s not without risk. There is a potential conflict of interest which has to be weighed against realizing the dream of homeownership through an off-market listing.