When you want to sell your home or an investment property, you may not be looking forward to the standard process of working with a real estate agent, placing a public listing in the MLS, disclosing lots of private financial and personal details, and then opening your home (or subjecting your tenants) to regular invasions by prospective buyers.
Or perhaps you just don’t have room in your work calendar for open houses or spur-of-the-moment showings. If you wish there was another way, you might be a good candidate for a more discreet process; a private listing to sell your home off-market.
What is an off-market listing?
To sell a property off-market, a seller and agent list the property information privately, sharing it only with a network of potential buyers. This is the opposite of the conventional process, where your agent sets up a description in the Multiple Listing Service (MLS), which is designed to be accessible to all other real estate agents, as well as to the general public.
In this article, we’ll take a look at how off-market listings work, and we’ll help you consider the pros and cons of selling off-market, as well as some alternate ways to avoid a public MLS listing.
What is a “pocket” listing?
At one time, it was fairly common for agents to keep special properties out of the MLS, selling them off-market as a “pocket” listing, which was not shared with other realtors, or even with other agents in the same real estate office. In many cases, the agent would share the property details only with a network of private buyers.
Some sellers choose an off-market transaction because they already had an interested buyer or they were seeking the simplicity or privacy of an off-market sale. The advantage for the agent was that many pocket deals enabled an agent to keep the full sales commission, which is more often split between two agents: one representing the seller and one the buyer.
How Pocket Listings Changed in 2020
As pocket listings became more common, the National Association of Realtors (NAR) became concerned that the potential for extra commission might tempt an agent to make decisions that were not in the best interest of the home seller.
In addition, the NAR was concerned that the private nature of pocket listings would limit fair access to real estate markets for minorities or people with lower incomes. To prevent those possibilities, the NAR decided to ban pocket listings for its member realtors, effective May 1, 2020.
The new NAR “MLS Statement 8.0 Clear Cooperation Policy” requires properties to be listed on the MLS within one business day of being marketed to the public. How do they define “marketed to the public”? If there is a signed listing agreement and a sign in the yard, the property must also be listed on the MLS system.
“Marketed to the public” is defined very broadly to include many types of public notice. Even if sellers post on social media that their house is for sale, that counts as marketing to the public.
Does the Clear Cooperation Policy ban selling off-market listings?
No. The NAR was sensitive to the fact that some sellers want to keep their financial and personal business private. They also felt that sellers should have the option to work with a real estate professional while keeping the details of their property and the sales transaction private.
Your real estate agent can still list your home privately through an “office exclusive” listing, which is shared only with the other agents in the broker’s firm, or one-on-one with certain buyers.
The listing does not have to be entered in the MLS under the rules established by the NAR. However, it may not be promoted to the public by any of the conventional real estate marketing methods, such as yard signs, fliers or other public notices.
What are the advantages of off-market listings?
Protect your privacy.
As we have noted, the main advantage of selling off-market is privacy. Celebrities or wealthy homeowners often choose to sell through off-market deals primarily to avoid unwanted attention.
Test the market.
Selling off-market also allows a homeowner or investor to test the waters before putting a property on the open market. If your test price is too high, you can reduce it and go into the public MLS without agents and buyers knowing that your house was on the market and did not sell.
With an off-market listing, you won’t have to invest as much money into preparing your house for public marketing. These expenses might include updating the HVAC system, replacing windows, remodeling dated kitchen appliances, replacing worn flooring, painting, landscaping and buying furnishings or decoration to stage the property for visitors. Agents report average costs for staging from $1,600 to $2,400. An off-market buyer may prefer to take the property as-is.
Another principal advantage of selling off-market is convenience. You won’t have to invest the hours it will take to stage the house and keep it ready for visitors. You won’t have to find somewhere to be on the weekend when your agent wants an open house, and you won’t have to jump every time a buyer’s agent wants to bring over prospects for a walk-through.
Limit contact during the pandemic.
While the coronavirus is still with us, it may be important for seniors or a seller with a compromised immune system to avoid having prospects and their agents coming into your home for open house events, regular showings and inspections.
Advantages for landlords.
For real estate investors, the advantages of selling off-market also include avoiding the need to bother desirable tenants or rushing to invest in property improvements that new buyers might prefer to do their own way.
What are the disadvantages of off-market listings?
A private listing takes longer.
A house that hits the market with a splash, visible to all agents and buyers, is likely to be find a buyer sooner. At this writing, homes are flying off the market, often attracting multiple prospective buyers who are eager to compete in a bidding war.
In the current market, the average property has an offer and acceptance in three to four weeks. Once the seller and buyer have a deal, it will take another four to six weeks to complete all the steps for closing. So the average total time from listing to closing is seven to 10 weeks.
With off-market listings, the time needed find a buyer may vary greatly, depending on the agent’s professional network and the seller’s circumstances.
Sometimes, the entire purpose of private listing is to transact a sale between a buyer who is ready and willing before the listing, such as a sale to a friend or family member. Otherwise, the seller must rely on the agent’s network of investors and other prospective buyers, which could either take weeks or months to be effective.
Private listing attracts less competition.
As noted earlier, a new listing in a hot seller’s market will attract multiple buyers, who may be eager to win a bidding war. Without that competition, the seller or agent may have priced the property too low, leaving money on the table. Likewise, a price that is too high for an investor or a private buyer may have been a perfectly acceptable price in competition between buyers in the open market.
On the other hand, prospective buyers often view an off-market property as a special opportunity. This adds an element of exclusivity, which may allow the seller and agent to get a higher price than they would have on the open market.
How Buyers Look for Off-Market Listings
Private buyers look for the right agents.
In today’s competitive real estate market, some buyers are smart enough to search for off-market property to stay one jump ahead of other potential buyers. Whether looking for a primary residence or an investment property, many buyers know that they can simply call real estate agents and ask about private listings.
To find the right agents, private buyers check online reviews on Zillow, Yelp, Google, Facebook and Realtor.com. When they have a list of likely candidates, they start calling, asking whether the agent is representing any private listings.
Private buyers search online.
Buyers also look for non-MLS listings online, such as For Sale by Owner (FSBO) and Craigslist. Zillow allows sellers to list their property for 30 days before it is listed on the MLS. Private buyers monitor Zillow, Trulia and other FSBO sites for these opportunities, as well as for foreclosures and tax sales.
Private buyers keep their eyes open.
Some private buyers find off-market properties by sending out direct mail or posting neighborhood signs. Again, while you and your agent may be prohibited from using those tools, you can certainly take note of a postcard from a private buyer who is looking for off-market properties like yours.
Showing your house when selling off-market.
Even when your primary objective in selling off-market is privacy or avoiding in-person visits during the pandemic, you can use new technology to enable a virtual open house, showing or walk-through without opening your doors to a thundering herd of strangers.
Using systems such as Matterport, your agent can provide 3D floor plans, including self-guided walk-throughs that allow the buyer to inspect every detail of the property. To interact directly with a buyer, your agent can arrange a Facebook live virtual open house or showing, enabling the buyer to ask for another look at the master bath or kitchen. Less formally, a buyer can ask your agent for another quick look using Zoom, Skype or Facetime – all without using your time or requiring you to meet in person.
The Bottom Line
Despite recent changes that limit the flexibility of an agent who is a member of the National Association of Realtors, it is still possible to take advantage of the privacy, convenience and economy of selling your home off-market with a discreet private listing.
While an off-market sale may take a little longer and will attract a smaller group of interested prospects, the right real estate agent can help you connect with a private buyer who will protect your privacy, make the process easy and perhaps bring you a better deal than a sale on the open market.