Houses have been getting scooped up before getting listed, and some people are concerned about being shut down from homeownership. Off-market listings, also known as pocket listings, are not a new thing in the housing market. However, they have gotten prevalent and grown by about 67% after 2020 broke the housing market
After the National Association of Realtors realized that brokers were using this strategy to corner the market, they passed a policy against it. However, there’s always a loophole here and there that still allows the practice to persist. So, what is an off-market listing?
In this guide, we’ll take a comprehensive look at what off-market listing means. We’ll discuss its pros and cons and everything you need to know.
What Is Off-Market Listing?
In real estate, an off-market listing refers to a house that has not been listed for sale in the Multiple Listing Service database. Off-market properties, also known as pocket listing, give investors and savvy buyers an opportunity to find great deals.
Essentially, this is because the property doesn’t have multiple offers or any offers for that matter. An off-market property is a house that sells without being marketed publicly.
To sell an off market property means advertising the home privately to a group of potential buyers. Or you can opt to negotiate with buyers directly without ever advertising your house publicly. Off-market listings are more popular than a lot of buyers realize because about 10% of sellers find buyers without listing on the MLS.
Off-Market vs. Pending vs. Contingent
Off-market listings are not similar to pending or contingent properties. When properties are marked pending, it means that an offer has been made, accepted and all contingencies have been met. This means that these properties are no longer active.
On the other hand, contingent properties are still active. These properties are simply liable to fall out of contract if all the provisions are not met. A contingent listing can either go to pending status or fall back and go to active listing.
How Off-Market Listings Help Sellers
One of the most significant reasons why sellers would want an off-market listing is privacy preservation. This can be a great option if you’re concerned about having multiple people come to your home and don’t want to generate unwanted attention. Your real estate agent will share information with a select few potential buyers.
You could also opt for an off-market listing to test the market and see whether the price you set for your property would get attention. The best part about this is that you can simply stop the private listing and move to the multiple listing service if your price is too high. The public will not know that you have changed the price or whether your home has already been on the market.
Some sellers also prefer an off-market listing to avoid disturbing tenants living on the property. If you have a property where one or more tenants are living, you may opt for a private listing. You’ll limit the number of showings and avoid disturbing your tenants.
How Off-Market Listings Hurt Sellers
There are several reasons why you may want to avoid an off-market listing. One of the most considerable reasons is the fact that you’ll limit your potential market, and it may be harder for you to find a buyer for your price point.
When you expose your property to a few select buyers, you might not even get an actual test for your listing price. If your home is reasonably priced, you could also miss out on a bidding war among prospective buyers in a public market.
What Are the Benefits of Purchasing Off-Market Properties
You may be wondering whether it’s a good idea to purchase off-market properties. While all real estate strategies have their own pros and cons, buying an off-market property has several merits. Let’s look at some of those reasons below.
You’ll Have a Competitive Edge
When properties are listed on the Multiple Listing Service, you’ll be competing with numerous potential buyers. However, when you opt for an off-market property, you’ll only be competing with a few potential buyers, if any.
This means you’ll have less competition and a bidding war is very unlikely to occur unless it’s an excellent property. Hence, it’ll be easier for you to get the property at a reasonable price.
You’ll Have a Better Chance of Inspecting the Property
Most sellers who list the properties publicly on MLS are usually looking for a quick sale. One of the most significant drawbacks for buyers is that they don’t have enough time to scrutinize the property before making an offer. You may feel like somebody else will get the property ahead of you and make an offer before doing a thorough inspection.
This means that you could end up with buyer’s remorse after you start finding things that you were not initially aware of. However, when the property is off-market, and there’s no rush to sell, you’ll have enough time to do your due diligence before making an offer. Of course, this does not necessarily mean that off-market properties take longer to close, especially those from distressed sellers.
Flexible Negotiations
Given that most off-market properties don’t have time pressure, you can have more relaxed negotiations. You may be able to draft a contract that would otherwise be impossible in an open market.
This means it could be a win-win situation for both the buyer and the seller. Still, if you opt to purchase an off-market property, make sure you meet all the contingencies and understand the terms you want.
You Could Get a Unique Opportunity
A seller may prefer to list their house off-market due to unfortunate circumstances. They could be facing financial distress or looking to make a quick exit for various reasons. They may also have little experience in selling homes, which could put you in a unique investment opportunity.
It’s possible you’ll find a hidden chair that you won’t have to compete for with the public and get it for a low price. You may be able to get a higher profit margin as a real estate investor.
Off-Market Listing: Everything You Need to Know
There are many benefits of an off-market listing, just as there are drawbacks as well. As a seller, you will avoid having multiple open houses if you want to keep your life private.
As a buyer, you can get an incredible opportunity and very little competition. As a real estate investor, you may be able to get a great deal and a higher profit margin.
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