Off-market is a great way to sell your home. It’s cheaper, gives you greater control, and promises maximum returns.
But, how exactly does it work, and can anyone sell off-market. Or is it a preserve for a specific type of homeowner? Let’s take a closer look.
What are Off-Market Listings?
Also popular as pocket listings, off-market listings are home sales that happen outside the traditional market. In other words, the sales are not advertised in the open market. Instead, the transactions occur privately between the seller and buyer.
Most sellers (and even buyers) opt for off-market transactions when the open market is deemed too unbalanced. Typically, sellers and buyers will forego the primary market for off-market transactions if the market exhibits two main signs;
A rising market
Also known as a sellers’ market, a rising market in real estate is characterized by low supply and excess demand. With more buyers than sellers in the market, bidding wars and price hikes are inevitable. A buyer looking for value may avoid the hostile conditions and attempt to find opportunities off the market.
A falling market
A falling market is the opposite of a rising market. It happens when there’s more supply than demand, i.e., the number of listings far exceeds the number of buyers. When this happens, sellers may try to find value off the primary market. Falling markets are also known as buyers’ markets.
*Some sellers also opt for off-market listings in rising markets, despite typically strong demand, to avoid protracted and sometimes chaotic bidding wars.
Pros and Cons of Off-Market Selling
Once a preserve for the wealthy, off-market listings have become popular even among ordinary Americans as sellers and buyers begin to see the value of transacting off the primary market. At the same time, some people entirely avoid off-market homes for various reasons.
If you’re planning to sell soon, the following are the main pros and cons of selling off-market to help you make an informed decision.
Off-Market Selling Pros
The main benefit of selling off-market is convenience. You don’t have to worry about the stringent rules of the primary market. Other than that, off-market home selling is beneficial for three reasons;
1- Complete privacy
If you’d prefer to sell your home quietly without announcing the process to all and sundry, an off-market transaction would be the best way to sell. Perhaps the home isn’t in the best shape. Maybe it needs significant repairs. Or perhaps you just don’t want the neighbors to know that you’re moving. Off-market selling allows you to move the property quietly without anyone knowing.
2- Avoid adverse market forces
A common problem with the primary market is that homes that take too long to sell may repel buyers, causing the property to stay even longer in the market. Such properties also tend to attract lower offers. This is particularly common among expensive multi-million homes and properties on the other extreme (in a dire state needing significant repairs). Selling off-market allows you to evade the adverse market forces, such as “days on the market” pressure, that may negatively impact the sale process.
3- Easier, cheaper preparation
Preparing a property for sale can be extremely expensive. According to CBS News, homeowners spend an average of $21,000 prepping their homes for sale. Not everyone can afford this money immediately. And, even if you can, it eventually eats into your profits. Off-market homes are cheaper to prepare because you only need to show the home a few times. Moreover, since off-market homes only attract very serious buyers, you may be forgiven for overlooking cosmetic improvements.
Off-Market Selling Cons
Despite all the advantages, though, off-market selling comes with a few downsides that you should keep in mind to avoid regrets down the line. The two main downsides are;
1- Limited exposure
Off-market homes have pretty much zero exposure. The result is that there’s very little competition for the property, often leading to lower bids. Worse still, the opaque nature of off-market transactions means you rarely know whether you’re getting the best price for your property.
2- A longer time to sell
Although off-market homes don’t suffer “days on the market” pressure, there’s a greater risk of a prolonged selling time. This is partly due to the lack of competition. However, another major factor is the lack of incentive. When there’s little pressure to sell, you may become complacent and lose the motivation to get the deal over the line.
Selling outside the open market can be a great way to sell your home. For one, off-market homes afford you a level of convenience and privacy that’s impossible with open market selling. You can also look forward to serious buyers and don’t have to worry about high staging costs.
However, beware that the lack of exposure and limited competition can make off-market selling very challenging. You must be extraordinarily savvy or have an experienced realtor like those at Transition Realty to attract sufficient attention and even shrewder to get maximum value for your property.
Contact our experienced agents at Transition Realty today to learn more about the advantages and disadvantages of selling your home off-market.
About Transition Realty
Transition Realty owner Steve Lehmeyer specializes in helping people manage real estate transactions in the Minneapolis/St. Paul area. His experience in the Minnesota real estate market spans 20 years. Steve and his team work with clients to buy & sell single-family homes, townhouses, condos, lake homes, and investment property. Download a free home search app for your smartphone or search the MLS at TransitionRealty.com.