What does off-market mean?
If you’ve ever browsed the Multiple Listing Services (MLS) looking for a home and seen a beautiful home listed as “off-market,” you might have assumed you missed your chance to buy. But that’s not necessarily the case.
In real estate, “off-market” can mean either that a house has been sold or that it is for sale, but it hasn’t been added to the MLS. These “off-market” properties — often referred to as pocket listings by real estate agents — may offer a great opportunity for potential homebuyers. Whether a home is for sale by owner (FSBO) or a real estate agent has some inside information on a house that will soon hit the market, it’s valuable for potential homebuyers to understand the off-market concept.
To reiterate, off-market can mean a couple of things.
Generally, the term is unambiguous: Off-market means the property isn’t listed for sale. However, that can mean the property has already been sold, or that it simply hasn’t been added to the national MLS database.
When a property is for sale but isn’t on MLS, it means the seller is privately advertising the home or negotiating directly with a buyer. These pocket listings are frowned upon by the National Association of Realtors (NAR), but their 2021 Home Buyer and Seller Generational Trends Report found that 11% of all sellers found their home without listing on an MLS. These sales are most common in areas where the housing market is in high demand.
MLS services like Zillow will label FSBO properties when it has that information available so if a home is listed as off-market there, it’s generally because the home is already sold.
In addition to off-market, you may also encounter the terms “pending” and “contingent.”
Pending means a seller has accepted an offer on a property and all contingencies have been met. This isn’t technically off-market as the sale hasn’t closed but these listings are no longer considered active.
If a property is listed as “contingent,” it means that there is a deal in place but it may fall through due to contingencies attached to the offer. These listings are still considered active.
Sellers list properties off-market for a number of reasons, but they all stem from a desire for privacy. You could understand why somebody might not want to share with the whole neighborhood that they’re moving.
If a seller owns a rental property, they may not want other tenants to know a unit or house is for sale. If a seller must sell due to a life event like a divorce, financial hardship, or death, they might not want to talk about it. Maybe a seller just wants to avoid the foot traffic and constant bombardment of questions that come from selling in a hot market.
Sometimes, that privacy can also facilitate an easier sale. Keeping the house off-market can help a seller test the market with help from their agent. By testing, they can also avoid a dreaded “days on the market” price reduction that occurs when buyers see that a house hasn’t sold after a long time of availability. If the seller had a buyer already lined up before deciding to sell, that can also make for a quicker closing.
The greatest benefit of buying an off-market home is that you might get a discount. Sellers tend to list their homes on the market for privacy reasons and reducing the pool of prospective buyers is not a way to get top dollar. These sellers usually have other concerns in addition to the price of the property — it’s up to you to figure out what those concerns may be and adjust your offer accordingly.
Owners who are selling their home off-market usually are not in a rush to sell. They kept their property off the market to have some more control over the market so if you want to shop around a little, expressing interest in an off-market home is a good fallback while you search.
Finding out about off-market sales in the first place requires some savvy (or a great real estate agent). When you find a for-sale home that isn’t listed anywhere, you’re likely one of only a few prospective buyers. That’s a much better place to be than in the open market where you may be squaring off with a dozen others. As such, you’re less likely to overpay for a listing since you won’t get caught in a bidding war.
Again, most sellers who sell off-market are seeking privacy and flexibility. In many instances, this means negotiations should be easier. There’s no time pressure and there’s much less competition with other buyers.
Buyers often have the upper hand in off-market negotiations, too. Many off-market sales happen because the seller is dealing with a distressed asset or they need to quietly gain some liquidity. They may be more inclined to bend to buyer wishes or agree to waive fees or reduce conditions for the sale. As such, you could get a purchase contract that is a lot better tailored to your unique transaction than the typical homebuying deal.
While you may be able to find a discount on a home, using pocket listing services or off-MLS marketplaces are not free. You’ll have to pay monthly membership fees. If you’re efficient with your search, those fees may feel negligible. If it takes you a while to find the right off-market home, those fees add up.
While having less pressure for negotiations is definitely a good thing, this could also lead to slow, drawn-out closings. If you’re in a rush to buy a home, an off-market property may not be for you.
This isn’t a hard-and-fast rule, as sellers have all types of motivations. But most of the time, if a seller listed off-market, they aren’t in a rush and are under no obligation to expedite the process for you.
And that’s not to mention the time it may take to find a good off-market home in the first place.
In the open real estate market, the invisible hand is hard at work. Between buyer offers and comparative market analyses, it will become clear what you have to pay to buy a house you love. (You might pay over what might be considered fair market value, but that’s the market!)
Because off-market properties are available to a smaller number of buyers, it can be difficult to gauge what a property is really worth. There are no offers to compare yours to. As such, you should pay for a professional comparative market analysis to understand what the home is worth in a normal marketplace.
Here's how you can find off-market homes:
Pocket listing services and real estate auction websites let sellers advertise properties without using MLS. You can pay a membership fee to join these off-market listing services and get more exclusive access to off-market properties.
You may have seen “foreclosures,” “short sales,” or “bank-owned home” on MLS services like Zillow or Redfin. Technically, these are considered off-market properties. You might not be able to purchase through normal channels, however. Most of these properties are sold “as-is,” with as much expediency as possible so you need to do your homework on them.
In addition to real estate sites, you can also find these properties at real estate auctions, bank websites, or in the newspaper.
Maybe you’ve worked with a real estate agent that you like. Call that agent and see what they’ve heard in terms of off-market properties. If they don’t have any insight, call some agents who work in the area you’re interested in. Chances are they know about off-market listings that may be coming down the pipeline.
Finally, real investigators can go the old-fashioned route and check out the public records office. These records will show expired listings of homes that went off the market after they failed to sell. Maybe that experience changed the seller’s mind, maybe it didn’t. You can always ask.
Off-market properties make up more than 10% of annual home sales these days. There are benefits to both sellers and buyers in selling a home this way. But there are also drawbacks and obstacles to be wary of. This guide will help you find and successfully navigate an off-market purchase. And if you want to browse regular listings, visit Orchard’s home listings in your market.
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