Content of the material
- Finding your Off-Market Dream Home
- Making an Offer on a House that Isn’t for Sale
- What Are Private Networks?
- Understanding Real Estate Listing Status Terminology
- What is a Contingent Listing?
- What is a Pending Listing?
- What Does a Backup Offer Mean?
- Off-Market vs. On-Market
- Initial Off-Market Round
- Fully Off-Market
- Off-Market, Followed By On-Market
- Should you hire an attorney or escrow company?
- What is a pocket listing?
- Are there savings on the real estate commission?
- Approach Homeowners
- Benefits Of Selling Off Market Properties
- MLS Statement 8.0
- Know Your Terminology
- Contact Real Estate Agents
- 3 Reasons a Seller Might Keep a Home Off Market
- Benefits as a seller of off-market deals
- Dont Be Fooled By Pre-foreclosure Listings on Zillow
- Find out what your home is worth
Finding your Off-Market Dream Home
An off-market home is one that isn’t listed on the MLS or isn’t for-sale-by-owner. You can find them by driving through your desired neighborhood and identifying homes that you love. Try looking up houses that you lost out on buying years ago. Have the owners had more kids? They may want to upgrade to a bigger home.
Websites like Zillowand Trulia let you set up alerts for properties that you like. Zillow has a “Make Me Move” feature where owners list their dream price for a property. Your off-market dream home could be on that list, which at least tells you that the owner has some interest in selling.
Don’t think that an agent can help you find a home that isn’t already for sale? Think again! Agents are often aware of upcoming listings in their brokerage or in the neighborhoods they serve. Armed with your criteria, they can network with other agents to jump on a listing before it’s actually on the market and avoid a bidding war.
Making an Offer on a House that Isn’t for Sale
Armed with the information on why the house isn’t currently for sale, prepare an offer letter tailored to the owner’s situation.
Be flexible and work with the owners on a possible move-in date, or offer to let them rent from you while they find a new house. And get pre-approved for the mortgage before making the offer. You want to make it as easy and attractive as possible to them to sell their house.
Along those lines, consider writing a personalized letter to the owners to explain why you want to buy the house. Maybe it’s in the neighborhood you grew up in, or it’s your childhood best friend’s house. Perhaps you’ve always wanted a rock garden in your front yard. For more ideas, read about how to write a persuasive offer letter.
It’s still possible to buy a house in a seller’s market if you think outside the box (or in this case, the MLS). You’ll have the best luck working with an experienced agent, so contact a Clever Partner Agent today!
What Are Private Networks?
The NAR still allows private listings in which a seller can ask a broker to make a listing available to other real estate professionals but not to the general public online.
“Under existing policies, it would be possible to have it submitted to just the broker cooperative,” Galicia says. “The seller can provide instructions not to promote it on the Internet, but put up a ‘for sale’ sign.”
One example of this type of marketing platform is the Private Listing Network (PLN) offered by Midwest Real Estate Data (MRED), which serves more than 45,000 real estate professionals in Northern Illinois and some adjacent areas. Agents can post home sale listings through MRED that are accessible only to professionals in the PLN.
Understanding Real Estate Listing Status Terminology
It isn’t only “off-market” that could confuse you in the listings. There are other terms like “contingent” and “pending” to understand. These two listing statuses mean that a home is off the market because a contract to purchase has been executed by both a buyer and seller.
To be able to purchase one of these properties, the sale would need to fall through.
What is a Contingent Listing?
Contingent listings remain active because there is a chance that the clauses in the contract won’t be met. If that happens, the seller will be looking for another buyer. But the chances are that the contingent deal will proceed to close.
Take a look at the reference for an in-depth explanation of the meaning of contingent status. Quite often, a contingent property will still show up as being an active listing.
Some MLS systems refer to this as active contingent status.
What is a Pending Listing?
Pending is the stage after contingent when the seller has accepted the offer and the contingencies in the contract have been met. Since there isn’t much stopping the sale from closing once the contingencies have been completed, pending listings aren’t considered active.
Pending typically means off-market or not available to purchase. You can see a comprehensive explanation of what pending means in this resource.
In some areas of the country, the listing agent can choose the status they feel is in the owner’s best interest.
What Does a Backup Offer Mean?
When you have been actively searching for your dream home, you may lose out to another buyer. Maybe the timing wasn’t perfect, or you were outbid.
Whatever the reason, if you still have a strong desire to purchase the property, you can put in what’s referred to as a backup offer.
With a backup offer, you will be in the first position to purchase the home if the contract with the first buyer falls through. Homes sales falling apart is not uncommon. For example, a home inspection could reveal problems that a potential buyer does not want to deal with.
The main reason a home sale will fall apart is inspection reports filled with unexpected issues.
A buyer may also not procure financing for many reasons, including a low real estate appraisal or credit scoring issues that did not turn up.
Off-Market vs. On-Market
There are many ways to approach marketing your home as a seller. In our experience, we most often see sellers choose to do one of two things. Either they choose to sell off-market from the get-go, or they choose to test the waters and see what the off-market interest is, before going on-market.
Initial Off-Market Round
The vast majority of sellers tend toward the latter, in which they work with their agent to do an initial round of off-market marketing before going on the market. This off-market period allows sellers to entertain potential offers, get a better idea of the value of their property in today’s market, and see the conditions and stipulations put forth by potential buyers.
Sometimes, sellers who intended to go on-market will receive an off-market offer that blows away their initial expectations, often from buyers who may be willing to pay a premium to avoid competing with other buyers.
As a result, those sellers may choose to forgo listing their property publicly on the MLS so that they can take the stellar off-market offer. Sometimes, this helps to minimize the prep work and additional renovation costs they were planning to invest, thus further contributing to their overall proceeds from the sale.
Off-Market, Followed By On-Market
Other times, even with great offers in hand, sellers may choose to forge ahead so that they can see what will actually happen when listing it on the MLS and mass-marketing the property. Of course, there is no right or wrong path for everyone; it depends on each seller’s motivations and individual goals for their homes.
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.
What is a pocket listing?
A pocket listing is a type of off market sale where the seller contracts with a real estate agent who markets the home privately.
Agents typically advertise these properties — which they may call “office exclusives” — to select clients within their brokerage. They may also share pocket listings with a small group of other agents in the area.
Once an exclusive process, the practice has become a lot more common. It’s so common that the National Association of Realtors (NAR) has a policy prohibiting its members from marketing pocket listings outside of their brokerages.
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.
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.
Benefits Of Selling Off Market Properties
Now that we’ve gone over the drawbacks of selling off market properties, let’s go over its advantages. Off market deals offer benefits to both buyers and sellers. For buyers, mainly investors, the key benefit of finding an off market property is not having to deal with competition. Because the property isn’t listed on public sites such as MLS, Zillow or Realtor, it won’t have a high amount of visibility that leads to numerous offers from agents and other buyers. If you’re able to locate a property before it hits a market and make a swift offer, you’re more likely to beat out potential competition (and avoid getting into a bidding war.)
For sellers, you also have privacy and convenience to gain. For instance, you don’t have to deal with the hassle of listing and advertising your property. This also means your current tenants can live in the property at peace without nosy passers-by until it’s time for them to move out. A pocket deal will allow an agent to sell a property quickly without having to sift through and entertain buyers who aren’t qualified to begin with and aren’t serious about making good offers.
MLS Statement 8.0
The National Association of Realtors (NAR) enacted a new policy at the end of 2019, called the MLS Statement 8.0 Clear Cooperation Policy, regulating off-market properties on the MLS. The policy took effect in 2020 and requires real estate brokers to submit all property listings to the MLS within one day of marketing the property to the public. Marketing is defined as posting the property listing on public-facing websites, yard signs, flyers, digital communications, and other platforms that potential buyers can access. The purpose of this regulation is to increase cooperation among real estate professionals. So, what does this mean for investors?
The passage of MLS Statement 8.0 does require brokers to post more properties on the MLS, but this does not necessarily mean the end of off-market real estate. Brokers are still allowed to create limited off-market listings to preserve seller privacy or create an office-exclusive listing. In these cases, brokers and agents can choose who can see the official MLS listing. For example, the listing can be shared exclusively with buyers working with the firm. Investors will need to leverage their existing real estate networks to find these exclusive listings, which may require more effort than before to access.
Investors can also market directly to motivated sellers, such as owners with distressed or vacant properties. These properties are often not listed, but that does not mean the owner isn’t ready to hear about direct offers. It is also worth noting that the new regulation is not a law, rather a regulation set forth by the NAR. This means For Sale By Owner (FSBO) properties can still avoid being listed on the MLS. Investors can find these listings through several marketing strategies.
Know Your Terminology
There is a difference between “off market”, “pending”, and “contingent.” We’ve already defined “off market.”
When a property is marked as “pending,” it means that an offer has been accepted and any contingencies have been met. Homes in pending status are no longer considered active listings.
“Contingent” deals, however, are still active listings because they are liable to fall out ofcontract if requested provisions are not met. If all goes well, contingent deals advance to a pending state.
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.
3 Reasons a Seller Might Keep a Home Off Market
Homeowners might choose to keep their property off the multiple listing service, or MLS, on account of privacy concerns or as part of a strategy for garnering the highest possible price. Consider these three reasons a seller might choose to keep their real estate off market:
- Generate or gauge interest: Some homeowners choose the off-market route to gauge the potential interest or market value they could receive from a future home sale. As market sales skyrocket above asking price, they might post a “coming soon” listing to judge if they should add their property to traditional MLS real estate listings or pursue an off-market sale.
- Keep the bidding group small: Some off-market homes fall into the category of “pocket listings” or “office exclusives.” In these scenarios, sellers choose singular brokers, or brokerages, to control the property listings and keep the sale out of public records. Knowledge of the selling property travels by word of mouth only to a small and select group of serious buyers. With a smaller bidding pool, sellers can mitigate cutthroat bidding wars that are common at real estate auctions or auction websites.
- Maintain privacy: High-profile homeowners might want to keep the selling of their home private from the prying eyes of their neighbors or the general public. Home sellers must deal with the time-consuming hassle of open houses and showings. Additionally, if an unfortunate, life-changing event triggered the initial selling process, showings might hold even less appeal for a homeowner wishing to maintain their privacy.
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.
Dont Be Fooled By Pre-foreclosure Listings on Zillow
The popular real estate search site Zillow has a very misleading feature called pre-foreclosure listings. The pre-foreclosure listings cause confusion and frustration among real estate agents and consumers alike.
Zillow publishes properties through a partnership with Realty Trac of homeowners who have missed a mortgage payment. Of course, missing a mortgage payment in no way means someone wants to sell their property.
More than likely, it means they have hit a financial bump in the road.
Unfortunately, Zillow makes it look like these homes with missed mortgage properties are listed for sale. They are NOT! In the truest sense of the word, they are off-market properties that will likely never be for sale.
Most of the time, the homeowner becomes current, and the property does not become a foreclosure home you’re able to purchase. In fact, they usually don’t become a short sale either.
There are numerous times clients will call me about houses they think are for sale seen on Zillow that are not on the market. Recently one of my clients called on a house in Westborough, Massachusetts, that was not for sale.
It can be super frustrating for real estate agents and consumers alike.
Find out what your home is worth
If you are considering selling a house off-market, it can be helpful to have an idea of what the value of your home might be. Using HomeLight’s Home Value Estimator tool, you can learn the value of your home in just two minutes by answering seven simple questions. Our home value estimator uses market trends, sales data, and your home’s last sales price to determine the value of your home.
If you have the opportunity to make $20, $30, $40 or $50,000 over asking, it doesn’t make sense to sell off-market. On the other hand, somebody may make an offer higher than the listing price to stop the property from going on the market. Kim Pratt Real Estate Agent Close Kim Pratt Real Estate Agent at NextHome On Main 5.0 Currently accepting new clients Years of Experience 13 Transactions 506 Average Price Point $228k Single Family Homes 483