Buying real estate property can be done in several ways. Most people go the conventional way of looking at market listings while others purchase properties via off-market sales. While most of us are familiar with sales listings, some of us might be wondering what does “off-market” mean in real estate?
What Does Off-Market Mean in the Real Estate Industry?
The term “off-market” has two different meanings in the real estate industry. First, it could mean that a certain property is not for sale. If one was to use a home-browsing website and see a house marked as “off market,” that means that based on the available data on the platform, the property is currently not for sale.
Second, perhaps you’ve heard some of your friends or colleagues talk about buying a house off-market or some agents talking about a very promising off-market listing. This means that the property is being silently sold outside of the usual multiple-listing services, or MLS, that most folks use. A property that’s up for sale without being listed is then considered an off-market house.
For the sake of clarity, we will be discussing the latter context more than the former in this article. And besides, there’s really not much to say about a house that’s not up for sale, listed or not. So let’s get right to it.
Defining Off-Market Properties
What does off-market mean and how does it affect both the buyer and the seller?
While we have already given a summary of what off-market properties are, let’s talk about it some more.
As previously stated, an off-market house is a property for sale that is not listed publicly on the market. With these types of transactions, sellers usually advertise houses to a small and select group of individuals who might be interested in purchasing the properties. They typically negotiate and deal directly with the buyer without going public with it.
Off-market transactions happen a lot more frequently than most buyers realize. According to the 2021 Home Buyer and Seller Generational Trends Report of the National Association of Realtors (NAR), 11% of sellers are able to find buyers for properties without using the different MLS platforms. Of course, the stats will vary depending on the region but generally, off-market real estate transactions take place in counties, cities, and neighborhoods where the market is hot.
Buyers who are interested in finding out which markets are hot can go on any website made for real estate investors and homebuyers. One such website is Mashvisor, a real estate investment analytics platform designed to help investors locate the right properties that align with their goals. Its Real Estate Heatmap allows investors to locate the most profitable markets to invest in.
Mashvisor also offers a constantly-updated real estate agent directory that lets buyers connect with local reputable agents to work with. Using these tools, buyers can easily spot the hot markets and start connecting with local agents to spot any great off-market deals. The sooner you’re connected with the right people, the sooner you can find a good unlisted but for-sale property.
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Why Do Some Sellers Sell Off-Market?
Other than the question, “what does off-market mean in real estate,” one of the most frequently asked questions about it is, “why do sellers go the off-market route?”
Generally, property owners have different reasons why they choose to sell off the market. Here are the most common reasons:
- A seller may desire privacy and don’t want any part of the sale or transaction to become public knowledge. It may have to do with a life event they don’t want others to know such as a financial struggle or a divorce. This method allows them to move on to the next phase of their lives as quickly as possible.
- Off-market transactions are speedier compared to buying from listings and dealing with too many people to make the sale.
- Some sellers are in no rush to sell. This may seem contrary to the previous point but this is true for a lot of off-market sellers. Going the silent route reduces the stresses and pressures of selling a house. This also allows the investor and buyer to take their time going over the property before making an offer.
- Sometimes sellers just don’t want too much foot traffic from strangers and nosy people through their homes.
- In the case of rental homes, homeowners don’t want to let their tenants know that the property is up for grabs.
- There are instances when sellers want to get a feel of the market and gauge buyer interest. It is also a great time for them to figure out good pricing for the property. It helps them avoid public price reductions once the properties have been listed. Such properties are sometimes labeled as “Coming Soon” on MLS platforms.
- It also helps sellers avoid long “days on market.” Typically, once a property has been placed on a public listing, potential buyers also consider how long the property has been on the market. In most cases, when a property sits on that list for quite some time, people will start wondering what’s wrong with it. Selling off the market saves sellers from the negative rep that comes with going stale, especially if it’s a high-end property in a fast-selling market.
- Sometimes, a seller will ask his or her agent to just go directly to specific clients or share it with a small group of area agents, limiting the number of people who have access to the information. This private-marketing method is also known as a pocket listing.
- The anonymity that it provides high-profile owners makes it an attractive way for them to sell their properties.
The Upsides and Downsides of Off-Market Sales
We’ve already answered, “what does off-market mean in real estate?” We’ve also covered some of the most common reasons why folks choose to take this sales approach. Now let’s talk about its advantages and disadvantages.
Like most marketing and sales strategies, off-market transactions aren’t perfect. They offer some great benefits to both the seller and the buyer but they also have certain setbacks.
For sellers, the clear advantage off-market sales have is the speed at which the transaction is completed. Off-market transactions put greater emphasis on making the actual sale and less on the price.
Sellers can also put more terms and conditions. Low-key sales are often subject to greater conditions such as bigger down payments and shorter settlement periods, among others.
On the other hand, buyers who are able to find properties off the market enjoy some level of exclusivity since there’s zero to no competition in the off-market. In fact, it is quite common in silent listings when a buyer has no one to compete with for a property. This exclusivity gives them the chance to negotiate and get a more favorable deal.
Plus, off-market properties increase the number of houses available to buyers. They give buyers a wider range of options sans the competition.
And since the seller’s goal is to make the sale as fast as he or she can, the chances of the buyer’s offer getting accepted – even if it’s below the market value – is great, especially if the seller is in a distressed position.
Now while there are certain positives to off-market real estate transactions, both potential sellers and buyers should also note that a few things can also put them at a disadvantage. An off-market sale may be a lot faster but it doesn’t always produce the most ideal outcome.
For sellers, the possibility of selling the house at below fair market value is greater, depending on how bad he or she needs to close the deal in as short a time as possible. There is a greater tendency for would-be homebuyers to lowball and believe us, there are lots of them out there.
Perhaps some sellers think that if they take this road, they can save a significant amount of cash. After all, they don’t need to pay any pricey advertising and listing fees. However, the amount of supposed savings pale in comparison to the tens of thousands they are losing if they went public with it. Listing publicly creates competition and some investors and buyers are willing to go way above and beyond the fair market value, especially in a hot market.
On the buyers’ side, it may take them a while to find the property that fits their criteria. The key to spotting the best off-market deals is through relationships. It’s all about who you know in this particular market and it takes time to establish meaningful relationships and networks.
Finding and Buying Off-Market Properties
After answering “what does off-market mean” in the industry and discussing its pros and cons, the question now is how does one find and buy homes outside public listings? If you’re a potential real estate investor or homebuyer, here are a few tips on how to buy off-market homes:
1. Build Relationships
Relationships. Relationship. Relationships.
More than just getting the answer to the question “what does off-market mean,” in the end, finding the right property is all about relationships.
Most industry insiders and those who have already bought off-market properties can attest to the fact that relationships play a key role in spotting the for-sale-but-unlisted house that’s right for you
Where off-market properties are concerned, it’s all about who you know. If you’re considering a specific location, start connecting with the locals in the area. Get to know some of them. If you have friends or family there, ask them to introduce you to people and start cultivating genuine relationships with them. Maintain those relationships, especially if you live out of town. As they say, out of sight, out of mind. Be sure to check in with them from time to time. These are the people that could open doors for you so take care of those relationships.
2. Call Local Area Agents
Once you already have a location in mind, another thing that will prove very helpful in connecting with local real estate agents as they are the ones who are intimately familiar with the market. Generally, they are fully aware of what’s available and what’s coming soon, especially those with greater connections. These are the ones that can give you the intel that you’re looking for.
If you don’t have any specific locations in mind but are seriously considering going off-market, you might want to do a bit of research first to find out which markets are hot and profitable. Go online and check out the Mashvisor Property Marketplace to help narrow down your choices. This tool allows users to not just tap into a vast supply of off-market properties but its filters also help narrow down the listings to the ones that match their criteria. Its investment property calculator makes the process of analyzing data a lot easier.
3. Make Your Presence Felt
Get on people’s radars. Once you connect with the right people, make sure you get on their list of buyers so you are informed when a property is up for a silent sale.
In some hot markets, potential investors and buyers come a-knocking asking people if they know of any properties for sale. It may be a bit straightforward – not to mention borderline creepy – but, hey, it works for a lot of them. Buyers are able to generate good leads from walking door to door.
If you want another way to catch sellers’ attention, you can try out a direct mail marketing approach. You can send cards that state your intent along with your contact details. Lots of sellers might want to hear your offer, especially if you can make a cash payment.
4. Always Be On the Lookout for Properties That Fit Your Criteria
Lastly, be very observant. Some buyers have successfully purchased off-market properties just by taking notice of a few things such as properties with poor reviews on Yelp or ones with deferred maintenance. These types of properties are ripe for new ownership and management. Sometimes, their owners are just looking for a way out. You might be the answer to their prayers.
The property owner could also be toying around with the idea of selling it for quite some time now. Perhaps a friendly conversation can help warm him or her up to the idea of finally selling it.
The Bottom Line
So what does off-market mean in real estate? It means finding great deals on properties without the usual amount of competition over publicly-listed houses. It means faster transactions. It means quieter transitions. It means endless profitable opportunities for those who know how to find them. It means all of those things and more.
The important thing with off-market transactions is investors and buyers should still perform their due diligence to see if they are really making a wise decision or not. With websites like Mashvisor making the process of locating a property and calculating its profitability, investors increase their chances of making a profit on their investment.
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