Sometimes in real estate things are not what they seem, such as a home being off the market. Also known as off-market listings, selling off the market, or pocket listings, off the market means that a home might be available for an investor willing to make the right offer.
In many real estate markets today, there’s more demand for homes than there is supply, making good property difficult to find. Buying and selling off market is a technique that real estate investors use to find good deals in a tight housing market.
Key takeaways
- Off the market is a term used on the multiple listing service (MLS) and for a property for sale that is not on the MLS.
- Advantages to owners and investors selling off the market include not disrupting the tenant when a rental property is sold, saving money on the sales commission, and keeping the sale confidential for personal or business reasons.
- Benefits to buying a property off the market include less competition from other investors, having the time to conduct thorough due diligence, and working with the seller to negotiate a better deal.
What is off the market in real estate?
The phrase “off the market” in real estate can mean a couple of different things, with both situations offering potential opportunity for real estate investors.
First, off the market can mean that a property was taken off of the multiple listing service (MLS) without being sold. On the other hand, a home listed on the MLS as “pending” or “contingent” means that a deal is in the works.
Second, off the market in real estate can also mean that it might be available for sale without being marketed to the general public on the MLS. Sometimes sellers with a rental home sell off the market to minimize disrupting tenants, while other times selling off the market is a strategy used to save money on the sales commission.
Does off the market mean not for sale?
There’s a saying in real estate that everything is for sale if the right offer comes along, and that may be true for property that is off the market.
If a home was originally listed for sale on the MLS and is now off the market, it could mean that the owner is having second thoughts about selling the home. Or, the listing might be in the hands of an inexperienced real estate agent and the seller is simply getting frustrated by the lack of activity from potential buyers.
Other times, a seller may decide to temporarily take the home off the market when they have company in town for the holidays, or if repairs to the property need to be made. The property is still for sale, just not at the present time.
Why some owners sell off the market
Owners and investors who choose to strategically sell off the market and bypass the MLS usually do so for several reasons:
- Minimize disrupting the tenant in a rental property so that the property continues to generate rental income until the transaction closes.
- Save money on the sales commission by only paying a fee to an agent who brings in a ready, willing, and able buyer.
- Keep the sale confidential, such as when an owner is suffering a financial hardship such as a pre foreclosure or pending bankruptcy.
- Avoid having to deal with tasks like making repairs, staging a home, scheduling showings, and hold open houses that the general public can attend.
- Selling off the market is a way to “test the waters” to see if a qualified buyer can be found before jumping through the hoops of listing the home on the MLS.
- An off the market listing may also generate a higher selling price from a buyer who is motivated to close the deal before other investors find out about the property.
Why investors look to buy off market property
Homes for sale off the market may provide several opportunities for both sellers and buyers, although there are also some drawbacks to consider.
Benefits of buying off market properties
Investors purchasing an off market home may be able to get a better sales price without having to worry about competitive offers coming in or a bidding war suddenly erupting. With less competition, there can be more time to perform detailed due diligence to help avoid unpleasant surprises after the transaction closes.
Putting together a deal can sometimes go more smoothly when there are no intermediaries involved.
When a buyer is able to negotiate directly with a seller, it may be easier to put together a purchase agreement that is a win-win for both parties. For example, a seller may agree to rent-back the home until a new place can be found, or a buyer may agree to a quick closing in exchange for a slightly lower purchase price.
Buying an off the market home may also offer opportunities that are much harder to find with a traditional listing.
Sellers who are facing financial hardship may jump at the first decent offer that comes along in order to get rid of the property. Other times, an owner selling off the market may not know what the home is really worth, allowing an investor to grab the property at an attractive price.
Drawbacks to off market properties
Homes sold off the market may not always have below-market price points. Sometimes, investors become so motivated to close the deal before another buyer comes along that they forget to perform a comparative market analysis.
Finding off the market homes for sale can also be expensive and time consuming.
Some investors spend thousands of dollars purchasing mailing lists to send postcards and emails to, or pay membership fees to companies that promise to find off market listings.
Others hire a real estate bird dog to go from one neighborhood to the next looking for signs of property in distress, such as overgrown front yards or homes with peeling paint or broken windows.
Working with an investor-friendly real estate agent or knocking on doors are two other ways investors look for off market listings.
While all of these methods may eventually pay off in the long run, there is a better way to find off the market homes for sale.
A better way to find off market listings
Instead of waiting for an off market seller to respond or someone to bring a deal to them, some investors decide to get proactive by going online and searching for rental property to buy in some of the best real estate markets across the country.
In less than 6 years, buyers and sellers have completed more than $4 billion in single-family rental transactions on the Roofstock Marketplace. Roofstock makes investing in real estate nearly as easy as buying stocks and bonds, by helping investors to make decisions using key insights, proprietary data, and technology.
After deciding how much to spend and put down, and whether a property will be purchased with financing or cash, Roofstock helps investors find the right rental property with four easy steps:
- Search the Roofstock Investment Property Marketplace using custom filters such as price, location, neighborhood rating, cap rate, cash only, or price reduced.
- Analyze potential investments in over two dozen different states by reviewing property details with pictures, due diligence documents like title reports, tenant details such as payment history and the current lease (when available), and local property management options.
- Make an offer and negotiate with the seller entirely online, including potentially getting pre-approved for an investment property loan to help make an offer stronger compared to similar offers without proof of funds.
- Close on the transaction and take title to the home.
If the property is already rented, rental income begins the day escrow closes.
Wrapping up
Off the market homes provide investors with several potential benefits compared to traditional real estate listings.
Because there is less competition, a buyer can take the time to conduct due diligence and work with the seller to put together a deal that makes sense for everyone involved. For owners and investors, selling a rental home off the market can help avoid disrupting the tenant by not having to inconvenience the tenant with showings or dealing with the general public.
