What Does “Off-Market” Mean in Real Estate?
Real estate inventory remains low across most U.S. markets, which is why you may need to take a different approach to finding your next investment property. One option at your disposal is to take advantage of off-market listings, which are homes that are available for sale but aren’t directly listed on a multiple listing service. Purchasing one of these properties must be done through a real estate agent. While buyer demand remains high, there are many reasons why sellers choose to create an off-market listing. Here’s a more in-depth look at what off-market means.
What Are Off-market Properties?
Off-market properties are ones that are for sale but aren’t listed on a multiple listing service, which means that the listing can’t easily be found on real estate listing websites. The MLS doesn’t contain every property that’s currently up for sale. The National Association of Realtors estimates that 11% of properties are sold without having been listed. These listings tend to occur in areas that have high competition.
Reasons Sellers Keep Properties Off the Market
Sellers choose to forego listing their property for several reasons. For instance, if a home is currently progressing through the foreclosure process, a seller might not want to list the property to avoid alerting current tenants that the home is for sale. The most common reason for a home to be an off-market property is because it can be used as a pocket listing.
This type of listing is made with the help of a real estate agent who will market the property privately. In this situation, real estate agents can share the listing with other agents or with potential buyers and investors.
There are also times when an off-market listing will be made because the seller won’t be available for showings even though the property was already listed on an MLS. The listing agent will then temporarily take the home off the market until the seller’s available or someone purchases the home.
How to Locate Off-market Properties
If you’re trying to find off-market properties to invest in, there are several steps you can take to find these properties. First, focus on contacting local real estate agents. These professionals have a good idea of which properties are about to be listed on the market or are using an off-market listing. A well-connected agent can provide you with details about homes and neighborhoods to consider.
It’s also possible to find these properties with off-marketing listing services, which can be pocket listing services or auction websites. You can choose to receive email notifications from these services that alert you to new properties.
Another option that sellers use involves alternative listings. For instance, bank-owned properties and foreclosures are considered off-market properties. You can find these homes at bank websites and real estate auctions. Many of them, however, won’t be in great condition.
Pros and Cons of Buying Off-market Properties
There are many advantages and a few disadvantages that come with investing in off-market homes. One benefit is that you won’t be in a rush to purchase a property since there isn’t much competition to contend with. You’ll also benefit from more unique deals that aren’t directly looking to have a bidding war. For instance, a homeowner might want more privacy when selling their home.
Gaining access to off-market listings means that you’ll have more properties at your disposal while also effectively decreasing the competition. Since these transactions are private, they are usually smoother, which should keep stress levels low.
Despite the many advantages of buying an off-market property, there are several issues to keep in mind, which include:
- Closing can take longer – Sellers don’t need to move quickly with off-market listings, which can be a problem if you want to close in a short period of time.
- Fair market value is more difficult to estimate – MLS listings allow for easy comparisons between other properties of similar values and square footage. Identifying the fair market value for an off-market listing is difficult when there aren’t many other listings to compare it to.
- Fees – It’s common for off-market listings and pocket listing services to charge membership fees.
If you want to invest in a property that allows you to build your wealth and leave a legacy, searching through off-market listings allows you to identify a great investment opportunity without needing to deal with high amounts of competition from other buyers.