Author: Rainy Hake, Executive Vice President, Alain Pinel Realtors
To say that the real estate market in the Bay Area is “competitive” would be an understatement. Inventory is at historic lows and as the economy in the area remains strong, demand is high. In this environment, it seems that every seller, every buyer, and every agent has a story about multiple offers. However, we’re also seeing another trend – an increase in “off-market” transactions and the buzz around them, especially on the Peninsula It is more important than ever for buyers and sellers to understand these transactions and how it should be affecting how they interact with the market.
What is an off-market listing?
An off-market listing is when a home is for sale, but the seller and broker decide not to put it on the Multiple Listing Service (MLS) – which is the data and information sharing system and network among all the participating brokers. Instead, the owner or agent attempts to sell the property by privately marketing and distributing information within his or her network.
There are obvious dangers in this strategy that potential sellers should be aware of. By selling a home off-market, you are placing all your trust in a single agent to distribute and market your property. You have no guarantees in the exposure your property will get and no way to know if you have received fair market value for your property. In a market flooded with buyers experiencing a shortage of inventory, it would seem mass exposure is ideal. With the MLS, you have an organized, regulated way to distribute reliable data to brokers and achieve mass exposure, while not leaving any money on the table.
Strategically some sellers may choose to market their home off-market in the short term as a “coming soon” in order to wet the public’s palette without turning on the crucial “days on market” ticking clock until the property is ready for primetime. However, in a seller’s market where demand is out pacing supply, a potential false start can be potentially damaging in procuring the highest possible selling price.
There are of course some non-financial reasons that people might want to sell their home off-market – the most clear one being privacy. In an area like the Peninsula, which is filled with high-end homes and high-profile individuals, the desire to keep some matters quiet is understandable. Also, selling a home can often be a very personal decision – perhaps you’re leaving the area but have not told your employers, or a divorce or financial hardship has suddenly created a need to sell your home. A for sale sign in front of your house brings questions. With luxury homes, there is the added desire to not have people walking through your home unless there is a true intention to purchase.
However, these do not explain why we’re seeing an increase in the past few months. While there has been an increase in wealth due to the booming tech industry, the rise in off-market sales we have seen cannot all be attributed to big Silicon Valley CEOs. There are financial reasons for selling your home off-market as well. In a market in which buyers are hungry for inventory and perhaps have had a few failed multiple-offer situations, they might be willing to pay a higher price to have access to an exclusive property. Additionally, some sellers might not be actively trying to sell their home, but would if the price is right. By having it for sale off-market, they can test the waters with a higher price and see if anyone bites.
What do off-market listings mean for sellers?
Whether you chose to sell your house on the MLS or off-market, the most important thing to understand is that there are risks involved on both sides. Exposure is key to selling your home – whether it’s on the MLS or off-market. If you do choose to list your property off-market, it is crucial that you work with a brokerage and agent that you trust to expose your property to the proper buyers. Before you choose an agent at a small boutique firm for an off-market listing, you have to consider their network.
What do off-market listings mean for buyers?
For buyers, it is more crucial than ever to start working with an agent. In this age of technology, we have begun to see empowered consumers – they are independently doing their own research and looking at data on Trulia, Zillow, and other listing portal sites. However, with such a large number of off-market listings, these sites are not able to represent an accurate picture of what is going on in the market. With such low inventory, only looking on the MLS or other sites may not be the best strategy to expose you to all the homes that you might be interested in. In order to be exposed to the most homes, it is imperative to start working with an agent who has a large network and truly can communicate what is happening in your market.
At Alain Pinel Realtors, we have 31 offices around the San Francisco Bay Area. We have the largest and widest footprint of any independent brokerage in the Bay Area. The extensive network that our agents offer and the relationships they have is unmatched by any of our competitors. When it comes to off-market listings, whether exposing a property to the proper agents and buyers, or helping buyers find the properties that others haven’t shown them – our agents have a massive advantage – a network of 1,400 agents that they trust plus an international partnership with Leading Real Estate Companies of the World®. In this hot market, working with a REALTOR® is more important than ever – a firm like Alain Pinel Realtors and its vast network can help bring insight and knowledge into what is truly going on in your market.
Rainy Hake currently serves as the Executive Vice President of Alain Pinel Realtors where she plays a role in managing the strategic direction of the company, and also oversees the Marketing, Technology, Training and Strategy departments. She has over 15 years of experience in the real estate industry and holds and MBA from the University of Oxford.