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In your search to buy a home, you may encounter the phrase “off-market” concerning a real estate listing. Depending on the context, this could mean two things: a publicly listed home for sale but is not currently available, or it refers to a home for sale but not publicly listed on any Multiple Listing Service (MLS) websites. The latter is often referred to as a “pocket listing” by real estate agents and can often mean an excellent opportunity for buyers looking for a particular property.
Here, we explain all you need to know about off-market listings and the pros and cons of buying one.
What is an “Off-Market” Property?What is an “Off-Market” Property?
The first definition is a publicly listed home on an MLS but marked as “Temporarily Off-Market” (TOM). Temporarily Off-Market means that the listing is no longer active and cannot be bought or shown to interested buyers, at least for the time being. There are a few reasons why a seller might do this. For instance, they could be making repairs or have houseguests staying for the holidays. Whatever the case, when a listing cannot do showings, most MLS sites require that it be placed in TOM status until it can. Also, many MLS sites only allow a listing to be placed in TOM status for 30 days. After that, it must be either placed back inactive status or removed entirely.
There is not much you can do about a listing in TOM status for interested buyers. You can still keep an eye on it and ask your buyer’s agent to inform you immediately if it becomes active again or reach out to the listing broker/owner to see if they would consider selling. But beyond that, the best you can do is continue your home search.
The other type of off-market listing presents a far more significant opportunity for savvy buyers. This is when a home is sold without the seller ever advertising the property on an MLS website. Instead, they advertise it privately to a select group of potential brokers and buyers directly without prior advertising. Off-market sales like this are more common than most people think, especially in hot markets like NYC.
Why Do Sellers List Properties Off-Market?Why Do Sellers List Properties Off-Market?
Off-market sales usually are made because the seller prefers privacy. They don’t want to draw public attention to why they’re selling, which could be due to a divorce, financial difficulties, or some other issue, and they’re not ready to go public. This is common amongst celebrities or other high-profile individuals in the public spotlight.
A seller’s reasons for going off-market can also be more mundane; perhaps they don’t want any nosy neighbors traipsing through their home. It might be a rental property, and they don’t want the tenants to know about the sale. Some sellers plan to list the home on an MLS eventually but are going off-market to test buyer interest and pricing.
Benefits of Buying an Off-Market HomeBenefits of Buying an Off-Market Home
The great thing about off-market homes is that they usually mean the sellers are in no rush to sell the property. For buyers, there are a few advantages to this.
1. Allows You to Stay Ahead of the Competition1. Allows You to Stay Ahead of the Competition
Off-market properties allow you to consider inventory that other buyers may not know. This could mean less competition, probably only one or two other prospective buyers at the most. In hot markets like NYC, this can significantly reduce the stress of getting an accepted offer.
2. More Flexible Negotiations2. More Flexible Negotiations
Since the sellers would be dealing with fewer prospective buyers, negotiations will likely be more relaxed and smoother. The reason is that both the sellers and their listing agent can devote all their time to your offer. They don’t need to deal with open houses or a rush of other offers. Also, there’s a good chance you’ll be able to purchase at a discount. Most off-market sellers are not looking for top dollar unless it is a luxury pocket listing.
3. A High Level of Privacy3. A High Level of Privacy
The lack of any spotlight on the sale can benefit the buyers just as much as the sellers. An off-market property provides a considerable degree of privacy and control over the transaction for buyers in a high-profile position who don’t want to draw too much public attention to their purchase.
Downsides of Buying an Off-Market HomeDownsides of Buying an Off-Market Home
Just because a property is not listed on an MLS doesn’t mean it is always a good deal. Care needs to be taken to decide a fair market price for the property. The easiest way to perform a Comparative Market Analysis (CMA) is to see how it matches up against like-kind properties over the past 6-12 months.
Also, as you can imagine, finding off-market properties for sale can be quite a challenge. It requires more time and patience than regular property searches on MLS sites, not to mention the right contacts. Having a highly experienced buyer’s agent who has connections can help immensely, but it still requires patience. Off-market properties are not for buyers who are in a hurry to close and could also end up costing more.
Final ThoughtsFinal Thoughts
The benefits of buying an off-market property are those that you’ll seldom encounter in a traditional sale. Less competition, a high degree of privacy, more flexibility in negotiations, and the chance for a significant discount all make them desirable propositions.
However, they are not for everyone, and you will need a lot of patience and an experienced buyer’s agent that can keep their ears to the ground. There’s also no guarantee that the off-market listing can be had at a bargain, as some sellers use going off-market to gauge the market. Not very reassuring, but something you should prepare for when looking for properties like this.