When you dip your toes into the wide ocean of real estate, it can be easy to get flooded by jargon when all you want to do is find a fantastic home for a good price. But one term you should keep in your mind as you navigate those choppy waters? “Off market homes.”
So what does off market mean? Simply put, it can refer to houses that have been taken off the market by a buyer, are no longer for sale, or have already been sold. It can also refer to houses that are for sale, but are not publicly advertised.
This article will delve into the topic of off market housing and go over some of the pros and cons you might expect when trying to find or buy an off market property.
Pro Tip: Our agent finder tool gives you a personalized match to a buyer’s agent in your area who can answer any questions and help you throughout this process!
Off Market Homes: The Basics
What does it mean when a house is off market? Off market homes are sort of like the secret menu of the real estate world.
In the past, off market property or home sales had been reserved for high profile or extremely expensive estates. However, with the recent dramatic increase in buyer competition, off market strategies are being deployed more than ever.
There are more off market real estate homes out there than you might think. You just have to sniff them out.
Why Do Sellers Offer Homes Off Market?
Off market houses simplify the selling process immensely for the seller. Typically, property owners and/or sellers favor this type of private or “exclusive” listing because they:
- Don’t want to deal with a ton of people visiting their property
- Only want to communicate with serious buyers, inquiries, and offers
- Want to keep their sales private
- Are looking for a particular kind of buyer to take over ownership of their home
- Prefer a smooth, stress-free transaction facilitated by an agent they trust
Why Buy “Off Market”?
Off market homes have a unique appeal as they circumvent so many typical headaches of the home buying process.
As many hopeful home-buyers may know, today’s housing market has a high demand and dwindling supply. Listings which appear on Multiple Listing Services (MLS), Zillow, or on brokerage websites usually don’t stick around for long. If you do get your foot in the door to a showing and manage to make an offer, expect many other potential buyers. In some extreme cases, upwards of twenty other bidders all compete for the same listing, which leaves many smaller buyers in the dust, especially those relying upon lending.
Off market acquisitions cut straight through all that nonsense, and in some cases, they can be a savvy way to navigate the real estate market without suffering from its intense pace and competition. Here are just a few benefits to buying off market:
Off Market Benefit #1: Less Competition, More Privacy
An off market listing does not suffer from extreme market competition, depending on who knows about it. A listing’s status could be shared through word of mouth between agents and sellers, might exist only within a brokerage’s network, or appear on other exclusive listing services you may not immediately have access to.
Other times, an agent could be waiting for a suitable buyer to come around who fit the criteria for their “pocket listing,” a situation where an agent purposefully keeps a listing private since they have been contracted by a seller to do so.
By buying off the market, you cut the competition down significantly, which makes negotiation and finding a property that’s within your price range much more manageable. It also affords you a higher degree of privacy if you don’t want the whole world to know about your purchases.
Off Market Benefit #2: More Time, Less Pressure
As a buyer, it’s important to know if a potential property is the right fit for you, especially when buying your first home.
A public sale can sometimes be a whirlwind which forces you to make speedy, competitive offers. This means potential problems with a property could fly under the radar and cause problems later down the line. Any repairs will fall on you if not caught before the sale closes.
Because there’s no rush to beat the crowds of potential buyers in an off market home, buyers and sellers can afford to take their time finding the right fit and taking a closer look at the property.
A more relaxed off market experience also means gentler negotiations. If you’re one of few bidders, or a sole buyer, it’s far easier to communicate with a seller because they are likely to be less swamped with inquiries from a horde of potential buyers. Less hectic negotiations with fewer potential parties means you’re more likely to end with a deal you’d never see in the public market.
Off Market Benefit #3: More Savings? More Money!
Less competition and better negotiations can spell cheaper closing costs. If those negotiations work out so you can put down a higher percentage of the home value up front (20%+), it could also mean less expensive mortgage payments over the lifetime of your loan. Larger down payments on properties come with a smaller loan amount, which typically means lenders will offer reduced interest rates and you can save on private mortgage insurance. This can be especially advantageous if you're buying an investment property where lending qualification criteria is more strict.
Additionally, more time spent inspecting the property means you don’t miss problems that need fixing when negotiating repairs with the seller. Sellers have an obligation to repair any damages to the home before the deal can close, but if buyers are pressured to act ‘now or never’ due to market pressures, they might choose to ignore them just to be able to buy. In doing this, they end up needing to pay for the repairs themselves later on.
It’s in these very small, but meaningful areas that off market listings can save you serious money.
But keep in mind that some off-market sellers may be conducting off market deals because they face challenging financial or physical circumstances, or simply don’t know how to navigate the real estate market. Getting out of that property might be their top priority, even over potential profits.
So while it’s obviously hard to object to a low ball offer that favors you, make sure to avoid taking advantage of sellers who may not know better.
Disadvantages to Buying Off Market
Though there are plenty of ways off market listings can prove beneficial to certain types of buyers and sellers, naturally there are some drawbacks of buying off market:
- Longer time to close – If you’re desperate to close on an offer quickly, the slower nature of an off market transaction may not give you the turnaround you’re looking for. Time is money, so there comes a point where putting in time to find these rarer listings and working through the offer at a slow pace might not be worth the time.
- Data not present on MLS – Since these listings won’t necessarily exist online in some cases, it makes understanding its cost respective to other similar listings more difficult. As such, coming to a clear fair market value for the listing could be a difficult thing to do on your own. However, due to the National Association of REALTORS’ update to the MLS Clear Cooperation Policy in 2020, all licensed NAR realtors who sign a listing agreement to sell a home must list the property on their local MLS within 1 business day of marketing the property for sale. That means that when you do discover a pocket listing, either the listing agent is not a licensed realtor by NAR, the home may be just hours away from being posted on the MLS, or the sellers may be unrepresented by an agent (meaning it’s even more important that you have a buyers’ agent working with you to protect your interests in the transaction).
- Potential fees – If you're looking to peruse these types of listings on your own on particular pocket listings or off market listing services, they may require you to pay a fee to use their service or database.
Now that you’re up to speed with the concept of off market, you’ll need to know where to start if you want to use it for your own housing search.
How Do I Buy Off Market?
While you could hear about an off market sale through a friend, colleague, or family member, this method is a rarity, and can’t be relied upon. You could also use a pocket listing service, but there’s no guarantee all the various off market listings will show up on those websites.
In order to really tap into the off market realm in a way that is effective, a real estate agent is required for buyers.
Buyer’s agents provide services, including insider information on off market deals, which you shouldn’t overlook. Bonus? In most cases, you never directly pay an agent for their services.
Instead, agents make commission when a sale closes, at the expense of the seller, not the buyer. Often, the seller will bake the cost of commission into their sale price in order to get around this, so it would be wasting money not to work with a buyer’s agent at your side.
Agents can also offer tremendous assistance in the form of:
- Finding listings, including pocket, exclusive, or off market listings
- Scheduling viewings
- Negotiating with sellers
- Help setting up appraisals and inspections
- Establishing and transferring to escrow accounts
- Doing your paperwork, paperwork, and more paperwork!
Finding an Agent and “Off Market” Properties
Now that we’ve answered “what does off market mean in real estate,” your next question is probably “how do I find that off market home I’ve been dreaming of?”
The answer? Dwellful.
At Dwellful, we pair buyers and sellers directly with vetted real estate agents who are part of our professional network. All it takes is answering a few questions with our agent finder technology so we can get to know you and match you instantly to an agent that suits your needs. Whether you're a first time home buyer looking for first time home buyer tips or a real estate investor interested in how to find a buyer's agent, Dwellful can help. Find a first time home buyer real estate agent today.
Our network of agents spans the United States and is growing every day. These real estate experts can attend to all your needs, including searching for off market listings. And unlike exclusive agent networks or pocket listing services, Dwellful is completely free to use (no fees, contracts, or commitments). In fact, with the referral fees we receive from agents when we make a successful match, we actually pay you when you close on the purchase or sale of a home.
Find your dream home today with a Dwellful-recommended real estate agent by your side.