Why Sell a Home “Off-Market”?

The Big Trade-Off.

One of the hot topics lately in real estate (aside from high interest rates and commission lawsuits) is the “off-market” listing. These are homes that are being offered for sale, but are not listed on the public-facing Multiple Listing Service (MLS), or any of the third-party websites like Redfin or Zillow. That means the online visibility, if any, is restricted to licensed agents with access to the MLS.

For buyers, the benefit of finding an off-market listing is obvious — it allows them to sidestep the multiple-offer circus that we're seeing right now in this inventory-constrained market. My past three San Carlos listings netted a total of 29 offers — that's 29 buyers vying for just 3 houses! What buyer wouldn't want to avoid that?

So what's in it for the sellers? Why would they want to forgo broadcasting their home to the largest number of buyers possible in a white-hot market like this one and reap the benefits of potentially getting multiple offers? There are actually two reasons, and I'll discuss them below.

Convenience.

Some sellers opt to move their home off-market simply because it is more convenient for their particular situation. One example is if the seller is still living in the house while it's for sale. The off-market approach usually means there are no open houses and the private showings are fewer and far more vetted, which means far less intrusion than if the home was broadly marketed.

Another convenience factor might be timing. A seller may need to sell their home quickly, and having a willing and able buyer in their pocket is more valuable than spending the extra time preparing the house and listing it on the market in order to potentially get a higher price.

Either way, for some sellers the convenience factor is more important than ensuring that every conceivable buyer got to see their home.

Privacy.

The second reason why sellers may keep their homes off the MLS is privacy. Not everyone's situation is rosy when they are selling their home. Financial distress, divorce, and health issues are just a few of the less-favorable catalysts behind someone deciding to move, and they simply don't want their dirty laundry out there for everyone to see, especially their friends and neighbors.

Even if there are no nefarious factors influencing the decision to sell their house, some homeowners just can't stand the thought of hundreds of people traipsing through their house. We all know that not everyone that comes through an open house is a ready-and-willing buyer, so selling the home off-market is an effective way to control who sees the house and when.

The “What If” Factor.

One of the misconceptions about selling a home off-market is that the seller will never get the best and highest price since they didn't market it to the widest group of buyers possible. While I rarely ever list a home off-market (reasons below), I did receive a pre-emptive offer on a listing a few years ago that was so ridiculously high that my sellers couldn't sign the offer fast enough. But in my experience, that's the exception and not the rule.

What I have seen after listing over 100 properties is that a pre-emptive or off-market offer is rarely as high as what I'm able to get for my sellers by exposing the home to the market and negotiating the best possible deal from a pool of motivated buyers.

But the real reason that I prefer not to sell a home off market is because of the “What If” factor, and that's simply this: No matter how good of an offer I am able to negotiate off-market, there's always going to be that little voice in the seller's head stating, “That's great, but I wonder what price we would have gotten if we had put it on the market?”

Why have that hanging over everyone's head?

Here's another way of looking at it. Selling their home off-market is akin to marrying the first person that you date. It may all work out fine, but you're never going to know what could have been if you didn't at least play the field a little bit.

In the end, I'll do whatever my client prefer, but as their listing agent, I'd rather see them play the field that is currently tilted very much in their favor.