If you've been frustrated by the low supply of homes for sale in the past year, you're not alone. Many people are searching for creative ways to approach homebuying and potentially increase their chances of having an offer accepted. One such strategy is buying off-market properties.
Off-market properties are simply homes for sale that aren't listed on a multiple listing service (MLS), a private online database used by real estate agents. You might pursue off-market sales in a variety of forms, such as through word of mouth, negotiating with a homeowner directly, or even buying a home at auction. The one thing these sales have in common is that buying an off-market listing isn't as easy as buying a home on the MLS. Here's what you need to know about off-market listings.
- Off-market listings are properties that aren't listing on an MLS, including private listings, for-sale-by-owner listings, and homes being sold at auction.
- Finding out about off-market listings can be challenging, but strategies include networking and working with a niche-specific agent.
- Off-market properties may wind up being more affordable since you'll have less competition with other buyers, but they can be hard to find.
What Are Off-Market Listings?
An off-market listing is any home not listed on the MLS. They make up a small percentage of overall listings; 89% of homes for sale are listed on the MLS. In fact, the National Association of Realtors even requires its members to list clients’ homes on the MLS within one business day of starting to market them, unless the seller requests the listing not be publicized. This is known as requesting an off-market listing.
There are a few reasons why a seller might not want their home listed on the MLS. Selling a home is a very public endeavor. A lot of people walk through your property, and anyone can look up pictures of your home, along with its price. Not everyone wants that kind of attention, especially people like celebrities or those who just prefer to keep things on the private side.
Since off-market listings are often sold by word of mouth, real estate agents may also call them "office exclusives" or "pocket listings." Other off-market listings, such as homes purchased at auction or homes for sale by their owners, may not involve a real estate agent at all.
How To Find and Buy Off-Market Listings
The biggest challenge in buying a home off-market is often finding that home in the first place. Remember, these listings aren’t advertised, so the onus is on you to seek them out. Here are some ways to find off-market listings.
The best way to find an off-market listing is through word of mouth, and the only way to do that is by networking. This usually means schmoozing with people at real estate meetups, which attract investors and the people who cater to them. It's also a good idea to get to know construction companies, lenders, and landlords, all of whom may be able to point you toward off-market properties.
Exploring Your Preferred Neighborhoods
If you don't mind buying a fixer-upper, a strategy known as "driving for dollars" can be a good way to pick up an off-market listing for a good price. This just involves driving around an area you want to live in and looking for properties that show signs of abandonment, poor upkeep, or other signs the owner might not be actively using them—and might be willing to sell them to you for a good price.
If you've got a particular type of home in mind, such as farmland or equestrian property, or you want to live in a certain area, find a real estate agent who specializes in your preferred properties. Since they're more familiar with what you're looking for, they may be more aware than your typical real estate agent of homes that fit the bill.
Real estate wholesalers find cheap properties and put them under contract to purchase. Then they swap that purchase contract with another buyer (you) to complete the purchase, charging a fee in the process. This is another common real estate investing strategy you can adopt to buy a home you plan to live in.
Pros and Cons of Off-Market Listings
Less competition with other buyers
Can be cheaper
Can give you more options in a limited market
Agent may be biased
Can be harder to find
Can take longer to negotiate a deal
- Less competition with other buyers: Your only competitors are people whom the seller notifies, meaning you may be able to get fewer concessions or avoid rushing to put in an offer.
- Can be cheaper: Since you're competing with fewer buyers, there's less of a chance you’ll face a heated bidding war.
- Can give you more options in a limited market: Just about every buyer limits themselves to the MLS. In today's limited-inventory markets, going beyond the public listings can open more buying opportunities for you.
- Agent may be biased: In off-market listings, a real estate agent often represents both the buyer and the seller. This means you may not be getting the best advice because your realtor is also looking out for the seller's best interests, which may not match your own.
- Can be harder to find: It’s easy to find homes listed on the MLS, but you may need to put in quite a bit of work to find an off-market listing—if you're able to find one at all.
- Can take longer to negotiate a deal: Sellers aren't usually motivated to make a quick sale (if they needed to sell quickly, they'd likely list the property on the MLS).
Frequently Asked Questions (FAQs)
How do you find the selling price of off-market listings?
You'll need to negotiate a price with the seller. The MLS is handy because it lists a sale price; without that information, you'll need to ask the seller directly how much they're asking for the property.
How do you finance off-market properties?
It depends on the type of property. Homes purchased at auctions usually can't be financed because they don't allow for inspections, and banks are hesitant to lend money on such risky investments. If the property is able to go through the traditional underwriting process, you should be able to access financing.
What percent of properties are sold off the market?
About 11% of all home sales are completed without ever being listed on the MLS, according to the National Association of Realtors.