Houses not sold on MLS have been on the rise this year. Just a month ago, twice as many have closed off market in 2017 vs. in 2016 .
While there are certain advantages to buying or selling “off market”, there are also potential issues. Our manager always points out that many of the legal disputes she has seen in real estate happen in off market sales. Sellers sometimes believe they didn’t get enough for their home, and buyers sometimes believe they paid too much.
We almost always recommend putting a listing on MLS. By listing a home through Coldwell Banker, the MLS listing gets fed immediately into over 900 real estate websites, from Zillow to a number of international sites. More exposure means more buyers look at the house, and more buyers looking means more money for the Seller.
Occasionally, there may be situations where it makes sense for the Seller not to put it on MLS. For example, the house may require extensive work to get it ready for market, and it’s late June, the end of the selling season. Rather than doing the work and putting the home on in August, it may make sense to offer it for sale off market in its current condition- but still at the price it would be in August. This works in that the Seller may get their price without investing significant money and time in home prep, and the Buyer gets to purchase in a non-competitive situation.
How do Buyers get connected to off market deals? Through connected agents, who have strong networks of other agents and spheres of influence in the community. The home never appears on MLS, so the general public never even knows the house is available, let alone get the chance to write an offer on it.
It is not for everyone. The house may have flaws, sometimes big ones, the Buyer will have to take on. It also requires a Buyer who knows the market, and what they want. When writing an offer and the Buyer knows four other people are writing as well, there is a feedback loop that says “this house is worth it, all of these other people want it.” In an off market deal, they Buyer may be alone, without all of the external cues of going to a crowded open house, seeing the home in perfect condition, or hearing about all of the other interested parties.
We successfully negotiated an off market sale a few months ago for a Buyer in Chapman Park, a very desirable area in Corte Madera. The home had been severely damaged by fire, and the Seller was waiting for the insurance settlement to clear. Once they had the money, the Seller would then have to go through an extensive renovation and permitting process to make the house habitable again. The Seller was a trustee who lived out of state, so this was not going to be easy.
Further complicating this was that since the house was not habitable, banks would lend on it based only on land value, a fraction of the price, so it would require an all cash buyer. We knew the listing agent well, had been in contact with her about the home for several months, and as the Seller’s frustration grew, we moved. We were able to put together a deal that worked for everyone, as our client had cash and the expertise to take on the risks of a fire damaged home. In this case, everybody won. The Buyer got a good house in a great location, the Seller got a fair return, and did not have to deal with renovation, permitting, and insurance settlements from the East Coast.
It’s always best when everyone wins!