Content of the material
- What is an Off-Market Property?
- Better deals
- Private transactions
- Builders Contractors
- Kit Home Loans
- Company Title Mortgage
- Approach Homeowners
- What Does Off Market Mean on and Zillow?
- Off-Market Listings: How They Help Sellers
- How Technology Can Help
- What are Pocket Listings?
- Why would a house be temporarily off the market?
- Other Reasons Sellers List Off Market
- Test Market the House
- Avoid “Days on Market”
- Should you hire an attorney or escrow company?
- The Practical Impact of MLS Statement 8.0
- Why Keep Real Estate Deals Off The MLS?
- Avoid Extensive Prep Work
- Minimize The Risk Of Becoming A Stale Listing
- Automate Your Off-Market Lists
- Online Sites
- Are there savings on the real estate commission?
- Benefits as a seller of off-market deals
- Pros and Cons Of Selling Off-Market
- Pros of selling your property off-market:
- Cons of selling your home off-market:
- Where to Find Off Market Property Listings
- 1. Property management companies
- 2. Real estate wholesalers
- 3. HomeQT pocket listings
- 4. Roofstock Marketplace
- Drawbacks Of Off Market Properties
- Key takeaways: Why off-market is a better growth strategy
What is an Off-Market Property?
An off-market property – also known as a pocket listing or off-market listing – is a property for sale that is not being marketed to the general public. The first reaction of many people is to wonder why on earth a seller would try to “secretly” sell, but there are actually plenty of good reasons for buying and selling off-market properties.
The first reason is to save money on commissions.
Although real estate commissions are always negotiable, when you list a property for sale the traditional way on the MLS sellers usually pay a sales commission of 6%. With a normal commission split, half of the sales commission goes to the seller’s broker and half to the buyer’s broker.
According to Zillow, the typical home value of homes in the U.S. is $287,148 (May 2021). The typical seller would pay a real estate sales commission of over $17,200. That’s an awful lot of potential profit to lose and money that could be better spent investing in more real estate.
To save money on a sales commission, a growing number of homeowners and rental property investors are turning to online real estate marketplaces such as Roofstock, where the sales fee is 50% less than what a real estate agent would charge.
Another reason for buying or selling off-market properties is confidentiality.
When you list a property on the MLS, everybody and their brother knows that your house is for sale, the asking price, and details like the age and size of the home, recent updates or needed repairs, and your property taxes. For normal homeowners who are selling to another normal homeowner, the more people know about the home the better.
However, for people who value privacy and confidentiality, off-market property listings can make perfect sense. Celebrities and athletes obviously don’t want anybody and everybody looking at their houses.
The same thing is true for real estate investors selling rental property. The main reason that investors buy homes is for the rental income. If a tenant knows you’re selling, they could be more apt to try to break the lease or stop taking good care of the house, which in turn lowers the home’s value and the price you’re likely to get.
By selling and buying a property off-market, sellers can target the most qualified buyers, and buyers can avoid dealing with inexperienced listing agents who don’t understand investment real estate.
Builders and contractors can be essential allies when looking for off-market properties. Few people are as well placed to know about abandoned builds and renovations. This can give you some pretty hot leads that your competition won't know about.
Kit Home Loans
Need finance to buy a kit home? Find out which banks will approve your mortgage and release the funds up front.
Company Title Mortgage
Buying a company title property? Some banks don’t like the ownership structure of these unit types. Discover if you qualify for a company title mortgage.
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.
What Does Off Market Mean on and Zillow?
When you see properties on the popular real estate portals Zillow and Realtor marked as “off-market,” it means they are not listed for sale. Sometimes there are mistakes made on websites, or the information has not been updated yet.
It is always worth speaking with a real estate agent to double-check if you suspect a home is for sale.
Off-Market Listings: How They Help Sellers
Here are a few reasons why an off-market listing might be the way to go if you’re selling a home:
- Preserving privacy. An off-market listing might provide peace of mind if you’re concerned about people knowing where you live or you don’t want to generate unwanted attention. In this scenario, agents share the listing with an informal network of other real estate professionals—in their office or elsewhere—who know prospective buyers. Even though this tactic is less likely to start a bidding war than a public listing would, you might be able to sell your home without much fanfare.
- Testing the market. You could decide with your agent to put your home on a private online network as a test run, to see whether the price you set gets much interest. The advantage to this approach is that if your price is too high and you’re not generating much buyer interest, you can stop the private listing and move to the MLS without anyone knowing the price changed and that the home already had been on the market. When the entire MLS can see that your price dropped and that the home has been on the market a while, it might embolden buyers to ask for a price cut.
- Avoid disturbing renters. If you own a property that has one or more renters living within the building, you might prefer a private listing that limits the number of showings that might be required in a full market listing.
How Technology Can Help
If you are concerned about repeated home visits from potential home buyers if your listing is on the MLS, then you could use technology to limit your exposure.
Most home listings include many photos, and some sellers provide virtual tours through a collection of images or video. Also, an agent could conduct a live walkthrough of the house by phone while the other agent and potential buyers watch it and provide feedback. The broker could also limit in-person tours to people who have made serious offers.
What are Pocket Listings?
Pocket listings are when homes are marketed privately by real estate agents. The seller will contact the real estate agent who will offer it to select clients of the brokerage. These are sometimes referred to as office exclusives or in-house listings.
These office exclusives might be shared around with a few other agents in the area. This practice, which is now more common than it used to be, is restricted by the National Association of Realtors to keep pocket listings within the brokerage.
Take a look at the detailed resource above to get a better explanation of pocket listings.
Why would a house be temporarily off the market?
Sellers may take the house off the market temporarily because active MLS listings must be available for showings. When a home isn’t available for showings, the listing agent will change its status in their local MLS to “Temporarily Off Market.”
There are a couple of routine reasons houses get taken off the market temporarily. One is that the seller is making repairs to the home. Or the seller has house guests — this happens mostly during the holidays.
Other Reasons Sellers List Off Market
Test Market the House
Sellers can test the home’s saleability and get local market reactions to the house and its price. They can lower the price before putting it on the MLS, if it’s priced too high, and avoid a public price reduction.
Avoid “Days on Market”
Sellers have no worry about the home going stale or having it sit while people wonder what’s wrong with it. This works best for very high-end homes that take longer to sell even in a fast-paced market.
Should you hire an attorney or escrow company?
There are some situations in which the buyer has a specific home they want to buy and a fair price is obvious to both parties. Maybe there is a one-of-a-kind home they’ve been eyeing in their neighborhood for years, and they know the value because they live nearby. Or the buyer may find a home on Zillow with a “Make Me Move” price in line with their budget. If the prices are right for both parties, and there aren’t any complications in the disclosures or inspections, they may hire an attorney or an escrow company to facilitate the deal for a flat or hourly rate.
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 of Dayton, Ohio, “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.
Why Keep Real Estate Deals Off The MLS?
Savvy property owners and experienced real estate agents know that listing real estate properties on the MLS can take a lot of work. For one, there’s often a lot of prep work that goes into cleaning up and preparing the property for sale. Sometimes, this can include updates and renovations, staging, painting, and more.
Avoid Extensive Prep Work
When you market real estate deals off-market, you can potentially attract a buyer or real estate investor who might be willing to buy the property as-is, without the additional prep work. This can often save you time, money, and headaches and get the property under contract quickly and with much less hassle.
Minimize The Risk Of Becoming A Stale Listing
On top of that, once a property is listed on the MLS, the clock starts ticking on the MLS’s “days on market” counter. This is one of the many data points that the MLS tracks, but it’s an important one that buyers and real estate agents take notice of.
Typically, here in the competitive Bay Area real estate market, popular real estate deals fly off the market, often in under 14 days. Once a property is on the MLS for longer than, say, 3 or 4 weeks, it starts to lose steam fast and is perceived as a stale listing. At that point, potential buyers start to think that something may be wrong with the property, and interest drops fast.
This is one of the potential risks of putting your property on the MLS, especially if you’re not fairly certain that it will attract a good amount of interest and sell quickly. That’s why shopping real estate deals around off-market first can be a great strategy to test the waters and see what the general appetite is for your property.
Automate Your Off-Market Lists
If you’ve made it this far, you’re a pro. You’re well on your way to creating your own hyper-targeted and hyperlocal lists. Automations to scale your businesses separate the professionals from the experts. PropertyRadar features in-app automations and connects with over 4,000 best-of-breed marketing and productivity tools via Zapier. You bring your favorite tools, and we’ll automatically keep them filled with your perfect leads.
Sites like Zillow show properties listed on the MLS, but they also can show off market ones. For example, Zillow lets you list a home 30 days before it goes onto the MLS. This lets you see deals before most of the competition.
While looking online is more cost-effective, you might have more luck being proactive. Not to mention that with everyone using the internet, there could still be a lot of competition. After all, the internet is a vital part of property marketing.
Are there savings on the real estate commission?
Many sellers see the opportunity to sell off the market as a chance to save the agent’s standard 6 percent commission. But this can be short-sighted. First, both parties often bring a real estate agent into the transaction at some point. Second, the buyer might want the 6 percent commission deducted from the purchase price, but the seller doesn’t see it that way. For example, the seller might want $500,000. The buyer offers $470,000 ($500,000 minus the 6 percent commission). If they split the difference and the home sells for $485,000, they both win.
What ultimately happens is that the market decides the purchase price. If inventory is low and the buyer wants to make the deal work, they may pass the savings on to the seller. Or if it’s a slow market and there’s too much inventory, the seller may pass on the savings to the buyer. Many times, however, the seller and buyer agree on a number in the middle of the 6 percent, so each party benefits.
Benefits as a seller of off-market deals
Many people may be asking, “why wouldn’t an agent list a property in the most visible place to attract the largest number of potential buyers and thus the greatest number of offers?”
The answer is often privacy. If the owner of an apartment building is looking to sell, they may not want to spook the tenants into moving out because then the building isn’t performing as well as advertised. If the building ultimately doesn’t sell, then the seller just shot themselves in the foot.
Additionally, many sellers’ agents will subsequently get a lot of interest from buyers, many of whom are simply kicking the tires and are not serious nor qualified to close on their property. Thus, keeping a property as a pocket listing will allow a seller’s agent to pick and choose whom to market the property to, which often makes the job of selling the property much easier for all parties involved.
In no particular order, let’s jump into all the various ways there are to find and source off-market deals.
Pros and Cons Of Selling Off-Market
Selling your home off-market isn’t right for everyone, which is why we highly recommend that you discuss your overall real estate and wealth goals with your agent, so they can help you decide on the best strategy for you.
Regardless of whether you actually sell your home off-market, there’s almost always tremendous benefit that comes when you market properties off-market, at least initially.
Pros of selling your property off-market:
- You may be able to sell without doing some or all of the prep work (painting, repairs, upgrades, staging, etc.).
- You may be able to sell your home faster and with fewer showings.
- You may be able to find buyers willing to pay a premium to avoid the competition of an on-market listing.
Cons of selling your home off-market:
- You’re not exposing your home to the maximum number of buyers, so you may be forgoing potential bidding wars that could increase the price of your home.
- You’ll never know exactly what the market would have been willing to pay. It’s possible that listing your home on the MLS would have attracted a higher offer, but it’s also possible that that off-market offer is far above what you’d get after listing your home on the MLS. If you choose to accept an off-market offer, you’ll have to be okay with not knowing for sure.
Where to Find Off Market Property Listings
One way to try and find listings that aren’t being marketed to the public is by speaking with a real estate agent. Although the NAR technically prohibits REALTORS® from taking off-market property listings, they might still know if something is available.
While there are more commonly known tactics to finding off-market deals like direct mail marketing, auction websites, REOs, and short sales, there are several other ways to find off-market properties:
1. Property management companies
Houses and multifamily properties taken care of by property managers are owned by real estate investors who might be willing to sell.
The management company already knows the property condition, the tenant, and the financial performance of the home so that you know if the property is a good match for your investment objectives.
2. Real estate wholesalers
Professional real estate wholesalers spend their entire day finding undervalue property, estimating repairs, putting the home under contract, and assigning the contract to a real estate investor such as yourself.
One of the biggest advantages to buying a wholesale property is that even after the money has been spent on repairs and updating, the house should still be below fair market value, creating instant equity for an investor.
3. HomeQT pocket listings
Pocket listing services such as HomeQT are an online option for finding off-market properties for sale. The website lists property for sale that is not on the MLS and facilitates communication between property owners and sellers.
While the site may be a good place to look for private listings, the drawback is that you can’t complete the entire transaction online, which is a distinct disadvantage for remote real estate investors.
4. Roofstock Marketplace
The Roofstock Marketplace is the #1 website for buying and selling rental properties and investment real estate. Single-family homes and smaller multifamily properties are listed for sale on Roofstock.
Many properties listed on their marketplace come with inspection reports, neighborhood ratings, and financial pro-formas to help you evaluate and compare properties.
The site also offers real estate portfolios to diversify rental property investments in a single transaction.
Drawbacks Of Off Market Properties
Off market deals are associated with so many benefits, it can be difficult to think about anything else. However, there are a few drawbacks associated with off market properties to be aware of:
Lack Of Availability: In light of the NAR’s new policies, there has been a significant reduction in the number of pocket listings that are bought and sold. While there are exclusions to the rules, availability is simply not what it once was.
Hard To Find: Given the availability changes, investors should ensure they are utilizing multiple lead generation techniques at once. Relying solely on off market listings could slow down your portfolio’s growth rate and make it more challenging to continue securing deals.
Inexperienced Sellers: One of the exceptions to MLS Statement 8.0 is for For Sale By Owner (FSBO) properties. These do not have to be marketed the same way as other listings; however, investors could find navigating an FSBO transaction more challenging depending on the circumstances.
Key takeaways: Why off-market is a better growth strategy
Finding off-market properties isn’t as challenging with a great data partner like PropertyRadar. The real challenge is using data to find the right off-market opportunities based on your specific criteria and objectives. With PropertyRadar, you can:
- Use 250+ criteria to build your perfect list.
- Use tools like heatmaps, Dynamics Lists, and Insights to better understand and refine those lists for the best targeting.
- Take your hyper-targeted lists and create powerful, personalized marketing messaging that resonates with your audience to help turn those leads into off-market deals.
- Use built-in automations and integrations to automate your workflow and scale your business.
If you’re a professional real estate investor or Realtor® and you’re looking to uncover off-market properties that no one else knows about (yet), then PropertyRadar is the property data and owner information platform you need. Start your free 3-day trial today and discover the power of PropertyRadar.