The Pitfalls of Off-Market Home Sales: Why Open Market Listings Prevail

By MICHAEL EDLEN | Special to the Palisadian-Post

Selling a home is a significant decision, and homeowners often explore various avenues to achieve their desired outcomes. One such approach is off-market sales, where a property is sold discreetly without being listed on the open market.

While this may seem appealing for privacy or convenience, it’s essential to consider the numerous disadvantages that sellers may face when opting for this route.

While privacy is often cited as a reason for off-market sales, sellers must weigh this against the potential the cost of potential opportunities. Maintaining privacy can result in missing out on competitive offers and a quicker sale.

In this article, we will explore why selling a home off market may not be the best choice for homeowners and why relatively few decide to agree to a “pocket listing.”

Limited Exposure, Fewer Buyers

One of the most significant drawbacks of off-market sales is limited exposure. When a property is not listed on the open market, it misses out on the vast audience of potential buyers actively searching for homes. This limited exposure can lead to fewer inquiries and offers.

Imagine the homeowner in our competitive real estate market who decides to sell off market. The seller decides to go off market, thinking it will be quicker and more discreet.

However, months may pass without any offers close enough to what they had expected, prolonging the sale process. They fail to tap into the full pool of motivated buyers, potentially resulting in the property languishing on the market, leading to frustration and uncertainty for the seller.

Impact on Property Valuation

The lack of competition that characterizes off-market sales can adversely affect the property’s valuation. Without multiple offers driving up the price, sellers may not realize the full market value of their home. When a property is not professionally prepared and exposed to the open market, it’s challenging to assess its true market value accurately.

For example, a homeowner lists their property off market and receives an offer. However, without other competing offers to drive up the price, they settle for a lower amount than they could have negotiated on the open market. Sellers risk undervaluing their homes and missing out on potentially higher offers.

Limited Negotiation Power

Selling a home off market can put sellers at a disadvantage during negotiations. Buyers would be aware of the limited exposure and use it as leverage to negotiate lower prices or more favorable terms, especially when there are no other buyers the seller might have had in a backup position.

A seller receives an offer from a buyer who knows the property is off market. The buyer may push for concessions during escrow inspections or a lower price, knowing that the seller most likely has fewer alternative offers to consider.

Risk of Undervaluing the Property

A homeowner sells their property off market to avoid the inconvenience of open houses or showings. Of course, if the property would be listed on the open market, showings could be scheduled at times convenient to the owner. The seller who prioritizes privacy and sells their home off market may achieve their strict privacy goals, but at the cost of not realizing the full financial potential of their property.

Conclusion

Limited exposure, reduced negotiation power and the risk of undervaluation are just some of the potential pitfalls that sellers may encounter with an off-market sale. In many cases, the benefits of listing a home on the open market, including competitive offers and a fair market valuation, outweigh the desire for privacy.

Homeowners should carefully weigh their options and consult with more than one experienced real estate professional before choosing the off-market route, ensuring they make a more fully informed decision that aligns with their goals and financial interests.

Michael Edlen has successfully represented more than 1,200 sellers. Only five of them preferred to sell as “pocket listings.” If you are thinking of selling your home or buying another, contact Edlen at 310-600-7422 or michael@edlenteam.com for a complimentary consultation.