With an off-market sale, “people are able to sell their home without worry, know it’s done, and be able move on to the next chapter of life.” —-
Sometimes when you’re ready to sell your home, the conventional listing process doesn’t serve you — or your property — well. Maybe you’re a private person who doesn’t want to indulge every curious visitor interested in taking a peek inside your property. Or perhaps your current circumstances don’t leave you with a lot of time or energy to coordinate showings or open houses.
That’s where selling a house off market can be the better option, says real estate agent Jim Griffin, a top real estate agent in Johnson City, Tennessee. “The sellers that we’ve been able to help with their properties, it’s usually something along the lines of, their home might need some repairs, and they don’t have the finances to be able to pay for those repairs before it hits the market,” he says.
With an off market sale, “people are able to sell their home without worry, know it’s done, and be able move on to the next chapter of life and … still put a sizable amount of money in their pocket and hit their financial goal,” Griffin says.
Let’s look closer at what selling a house off market entails so you can decide if this is the right choice for you.
What does ‘off market’ mean in real estate?
When selling a home the conventional way, your real estate agent enters your property’s details into a multiple listing service, or MLS, a cooperative web platform and database that gives agents and their clients access to “the largest pool of properties for sale in the marketplace,” according to the National Association of Realtors (NAR).
The MLS includes statistics and information about properties such as price, square footage, number of bedrooms and bathrooms, days on the market, property taxes, and the listing agent. These details also can turn up on social media, public websites, and real estate listing sites such as Realtor, Trulia, Redfin, and Zillow.
By contrast, an off-market listing doesn’t ever appear on the MLS or get marketed to the broader public.
“An off-market transaction is a person-to-person deal; it doesn’t have to be with a real estate agent,” says Griffin. For instance, this could be a home that’s listed as “For Sale By Owner,” advertised through classifieds or a sign in the yard, marketed by word of mouth, or sold to a friend or relative.
How “off market” deals changed in 2020
It used to be a popular practice — especially in major markets like San Francisco, New York, and Los Angeles — that agents would sell homes off-market as “quiet listings” or “pocket listings.” With pocket listings, an agent wouldn’t list a property in the MLS but instead pitch it to a select group of potential buyers or their agents.
“A pocket listing restricts other agents from having access to view it: ‘This is my listing; I’m not going to give anybody access to it,’” Griffin says.
In the high-end market, pocket listings promised exclusivity, according to Forbes, noting that some of the luxury agents featured on Bravo’s Million Dollar Listing Los Angeles brokered these types of off-market deals, such as a $7.9 million Malibu beach house.
However, concerned that the exclusivity of off-market sales hindered a fair and competitive marketplace, NAR in 2019 approved a “Clear Cooperation” policy. As of May 1, 2020, the policy requires properties to be listed on a local MLS within one business day of being marketed to the public, effectively banning the controversial practice of pocket listings.
The pocket listing ban was instituted as a consumer protection to ensure that all potential buyers — including minorities and those of more modest means — weren’t shut out of the opportunity to access the full real estate marketplace, reports the Washington Post. The policy also is meant to prevent sellers from listing off-market against their own best interest by guaranteeing that a listing receives maximum exposure.
Why sell a home off-market?
Although NAR has banned pocket listings, there are other ways to sell your house off-market. Off-market sales can work for sellers in various everyday circumstances such as any of the following:
- Damaged property. Griffin sold one homeowner’s 1,600-square-foot home off-market after it was severely damaged in a fire. The structure “had to be taken down to the studs,” not the ideal condition for a conventional sale. He presented the property off market to his office’s pool of roughly 15,000 real estate investors and brought the owner a cash offer for about $46,000, which she accepted. “She could use the funds from the house sale to start over fresh,” he says.
- A health or financial crunch. Griffin coordinated another off-market sale for a client selling a relative’s house so the relative could move into assisted living. The family couldn’t deal with inspections and repairs at the time; they hoped to net about $118,000 for the relative’s living expenses. “We were able to put up closer to about $130,000 net to them,” Griffin says. “They were able to help out their family member, didn’t have to deal with all the stress and anxiety and the other stuff that goes along with the [sale] process, and hit their goals.”
- Selling to a cash buyer. Most property investors and direct buyers prefer to purchase homes off-market for the flexibility it allows. Therefore, cash buyers can be a good match for sellers who’d like to bypass the traditional listing process. HomeLight offers the convenience of selling your house for cash, off-market, through our Simple Sale platform, which gives you access to hundreds of pre-approved real estate buyers from our network. You don’t have to prep your home, stage it or show it with Simple Sale, or pay any agent fees.
- Selling to a friend or family member. If you’ve already discussed selling your home to a friend or a relative, there’s no need to widen the buyer pool. Just be sure to work with an attorney to handle the paperwork, and be mindful to sell at fair market value or no more than 25% less than that. Otherwise, you’ll open yourself and the buyer to IRS scrutiny, especially if the agency thinks you’re trying to avoid paying capital gains tax.
The pros and cons of selling off-market
Off-market sales have their benefits as well as drawbacks. Because the home isn’t marketed to the public through an MLS, the advantages include:
- Maintaining control, confidentiality, and privacy over your property. This discretion can appeal to high-end sellers as well as those with financial difficulties, or people in the midst of sensitive personal matters such as a divorce.
- Avoiding the logistics of staging, showings, and open houses, which reduces the amount of traffic in your home as well as the stress of coordination.
- Facilitating the sale faster. Some sellers opt for an off-market sale when the purchase of a new house is contingent on the sale of a previous house, or when they find their dream home through other means. Andy Peters, a top real estate agent in Georgia, arranged such a transaction after sending out mailers for a client — a family of four and their dog — interested in a particular neighborhood. A seller contacted Peters to say they’d met with an agent and planned to list their home in 30 days; they sold to Peters’ clients before it hit the market.
- Paying a reduced commission, such as a discount of about $10,000, even for a small house, which is possible with only one agent involved, The Washington Post says.
There are some disadvantages, however, such as:
- Less publicity for your property. By not listing your home on the market, your home has less exposure to potential buyers. An agent has a network of agents and potential buyers, plus advertising through the MLS — and there are between 600 and 700 MLSs in the United States, according to Realtyna, a real estate technology company that maintains a comprehensive list of these services.
- A potential discount in selling price. Because of the limited number of potential buyers off-market, there’s less chance of a bidding war and the possibility that you won’t get someone who agrees to your asking price. “You might take a little less money than if you went on the open market,” Griffin says. “You’re looking for the ease of the process versus making a number. It’s time versus top dollar when it’s off market.”
- Finding the right agent who can advocate for you. An agent who isn’t experienced with off-market listings won’t be as proactive or have the investor pool, the resources, or the initiative to present your home as an opportunity and generate multiple cash offers for you. Evaluate their experience by asking: Do you have a buyer pool or an investor pool that you’re currently working with? How many people in your database are buyers actively looking for properties?
If you’re unsure about whether selling your home off-market is right for you but still on the fence about a traditional sale, talk with a real estate agent about your concerns on both fronts.
A seasoned agent can outline ways to protect your privacy and alleviate your stress through a conventional sale as well as explain the pros and cons of an off-market listing. As Griffin notes, “You’re trusting somebody with one of your largest financial assets, and it’s an important thing that they need to respect and help you with.”
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