Buying a Home Off Market: Key Disadvantages and Advantages

Off-market properties are homes or plots of land that are for sale but do not appear on the multiple listing service (MLS). MLS listings are legal, open market properties that a listing agent or team of real estate agents show to potential buyers.

The National Association of Realtors (NAR) illustrated in its 2019 trend report that off-market homes composed ten percent of property sales. Although off-market listings make up a small percentage of real estate listings, potential property owners and real estate investors might shift their focus to off-market deals if they find themselves facing high prices on MLS and increasing demand in the current home market. By doing this due diligence, potential home buyers might find less competition or a possibly lower sale price in a hot housing market.

Homeowners might choose to keep their property off the multiple listing service, or MLS, on account of privacy concerns or as part of a strategy for garnering the highest possible price. Consider these three reasons a seller might choose to keep their real estate off market:

1. 1. Generate or gauge interest: Some homeowners choose the off-market route to gauge the potential interest or market value they could receive from a future home sale. As market sales skyrocket above asking price, they might post a “coming soon” listing to judge if they should add their property to traditional MLS real estate listings or pursue an off-market sale.
2. 2. Keep the bidding group small: Some off-market homes fall into the category of “pocket listings” or “office exclusives.” In these scenarios, sellers choose singular brokers, or brokerages, to control the property listings and keep the sale out of public records. Knowledge of the selling property travels by word of mouth only to a small and select group of serious buyers. With a smaller bidding pool, sellers can mitigate cutthroat bidding wars that are common at real estate auctions or auction websites.
3. 3. Maintain privacy: High-profile homeowners might want to keep the selling of their home private from the prying eyes of their neighbors or the general public. Home sellers must deal with the time-consuming hassle of open houses and showings. Additionally, if an unfortunate, life-changing event triggered the initial selling process, showings might hold even less appeal for a homeowner wishing to maintain their privacy.

Buying a home off market has both disadvantages and advantages. Finding off-market real estate deals requires significant time, patience, and cash flow. Another downside is that some off-market homes are often distressed properties in short-sale or foreclosure stages. You will then battle with the ethical dilemma of finding a great deal at the cost of someone else’s misfortune.

Among the pros of buying an off-market home is that you can significantly broaden your search for investment opportunities by researching outside of the public advertising of MLS listings. Instead of relying on real estate agents to find investment properties that meet your criteria, you can sign up for direct mail marketing that will send you targeted advertisements. You will also have more flexibility and a wider selection of homes to choose from since the strict timetable aspects of traditional bidding are a non-issue.

All you need is a MasterClass Annual Membership and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market.