The rise of the off-market listing


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Facts are stubborn, but statistics are more pliable.

Mark Twain


May 2, 2015241

The rise of the off-market listing

How it’s defined and what it means for real estate

I receive at least 20 emails each week trumpeting “off market listing” in the subject line from an investor, seller, broker or some other third party (more on that third-party part later). The promised investment return, bargain basement price and other claims might be questionable, but the increasing number of off-market properties isn’t.

For those who aren’t familiar with the term, most people view a property as off-market when it’s not publicly for sale on the MLS or other common for-sale real estate websites.

But the term off-market is a misnomer — if it’s off the market, then why is it for sale? In reality, most off-market properties are simply not on the local MLS, but they are very much on the market.

This increase is a natural result of a couple forces at work simultaneously.

Agent motive

The listing agent might feel they can sell a hot property without putting it on the MLS — saving their seller the buyer agent commission, or pocketing it themselves. These types are often called “pocket listings” because the agent has them in their pocket and is keeping it to themselves.

Tightened inventory

Brokers will tell you that off-market or “pocket listings” are on the rise in most markets, and that you always see an increase in these properties when inventory is tight. Both of which are true.

But more is at play here than basic inventory dynamics or agents hoping for a double dip — which brings us to the third and biggest reason.

MLS is no longer the (only) market

The simple reality is just a few years ago, for all purposes, if a property wasn’t on the MLS, it meant it wasn’t really “on the market.”

The analogy I use is the stock market. If I want to invest in a blue chip tech company, I can research everything I need to know about any company on the Nasdaq, then buy the stock. But if a company is smaller, and not on the exchange, someone at that company better be superb at getting the word out because the pond of investors is much smaller.

It was the same in real estate in years past.

If a property wasn’t in the MLS, and you weren’t a marketing major, it didn’t look pretty out there. MLS equaled agents. And that meant buyers. So you listed with an agent because not doing so almost guaranteed longer marketing, more work and a lower sales price. It’s simple and undeniably true. If you wanted eyeballs on your home, you needed the MLS.

That’s no longer the case. There are plenty of websites that garner as many real-life views by potential buyers as your local MLS has agents with potential buyers. In fact, a lot of those views are from smart buyer’s agents who have learned that just cruising the MLS each week is no longer sufficient to find the right property for their buyer. In addition, many of these new online marketplaces are niche-focused — geared to the buyer looking for just the kind of property you’re selling.

Savvy investors are another reason for this continued shift. Many investors who know their markets can now market properties for free to those buyers and even straight to area agents. And they can share some of that increased profit in the form of concessions or extras to the buyer, giving more motive for buyers to purchase those “off market” properties.

Buyers and sellers are now in the driver’s seat. Some might be bad drivers, and they might have a fender bender or two, but it’s still their car to take out. They can, if they take the time to educate themselves, access an array of information on how to sell or buy a home. In addition, many more buyers today are doing their research online long before talking to an agent — meaning shorter shopping periods and more focused showings for all involved.

It also means an increase in caveat emptor (buyer beware) is needed by the public. Some sellers aren’t just trying to save commission — some are preying on buyers who don’t know the questions to ask, how to shop for fair financing or the very real need for inspections before investing in the biggest purchase of their life.

Author note: The truth is, even if in a different compensation structure — most consumers need a professional to help them stay out of those fender benders.

Exclusive representative, consultant, investment professional — whatever term, many of these in the off (shadow) market ultimately are unlicensed parties who live online and largely out of reach of most state regulators. (Shameless plug alert! — This is also why there is a need for more standardized, transparent platforms for all parties involved to do business and buyers and sellers to be protected, even if they are not using the MLS or an agent.)

Despite these risks, the tide isn’t going to change. There will continue to be an increasing number of off-market (not on MLS) properties competing parallel to the “traditional” market. Buyers and their agents will have to fish from both streams if they want to catch what they are looking for consistently.

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