A Changing Landscape
Times have changed in the world of San Carlos real estate. In the not-so-distant past, the publicity surrounding a home going up for sale would have been similar to a ticker-tape parade down Laurel Street. The sign being installed on the front lawn was a seller’s announcement to the world that the upcoming weekend would bring the masses to their neighborhood. Open houses were major events.
Times have changed. Don’t get me wrong, open houses are still very well attended and our volume of sales has been very good this year. However, the MLS is not telling the full story on the San Carlos housing market. Perhaps more than ever, homes are changing hands in off-market transactions.
What is an off-market transaction?
An off-market transaction is where a property changes hands without having the benefit of being publicized through normal public channels such as our home MLS. These types of transactions usually occur when one realtor gets what is called a “pocket listing”. A pocket listing occurs when the seller asks that the property not be advertised on the MLS. It is then up to the realtor to match up that particular property with one of the realtor’s buyers or that realtor will reach out to other realtors who frequently do business in the area to see if they may have a buyer match for the property.
Why are these types of transactions becoming more common?
There are a variety of reasons for this new type of market:
(1) The Economy. While at times it may seem like San Carlos is immune from the general malaise of the economy, there are people in San Carlos who are struggling. Some can no longer afford their home. Some need the benefit of a short sale to rescue them from their mortgage. Many do not want their friends and neighbors to know. The possibility of not having to look at the sign in their front yard and have the home sold without having half of San Carlos through their home is appealing on many levels. Thus, the off-market transaction becomes a viable option.
(2) Marital Dissolutions. A marital dissolution is another trigger for an off-market transaction. Aside from the obvious benefits, an off-market transaction can help stop questions that family’s kids may receive at school or soccer practice. Some sellers are opting for the off-market transaction as a means to an easier transition through the dissolution and their new home. The amount of marital dissolutions tends to creep higher in a poor economy which is yet another reason why we are seeing the off-market transactions appear more frequently.
(3) Privacy. “Privacy” is the best way I can categorize this final group. Some people simply do not like strangers in their home. Additionally, San Carlos went through a well-publicized string incidents where homes that were listed on the MLS had items stolen. While that problem seems to have been taken care of, it’s nonetheless a concern and makes some sellers anxious about the process.
Why off-market transactions benefit sellers
Simply put, sellers interested in off-market transactions usually fall into one of the categories above. If they are able to complete their off-market transaction they generally avoid the headache of one or all of those categories. Most sellers should also understand that often times, not fully exposing their home to the market will most likely mean taking a possible hit on the final purchase price when compared against the true market value of the home.
Why off-market transactions benefit buyers
While our market is far from the frenzy of 2005, our inventory is still extremely tight and has been that way for all of 2011. Anyone who has been looking in San Carlos for any length of time can attest to the frustration surrounding the inventory levels. An off-market property may present a unique opportunity to obtain a great home. Additionally, buyers in this situation may be able to purchase that home for slightly less than the market rate. Buyers should expect some type of discount for purchasing the property off-market.
A word of caution with off-market transactions
No matter if you are the buyer or seller, whenever an off-market property is involved you need to be sure you know what the true market value of the property is prior to making or accepting an offer. This can be difficult since there will never be any type of market feedback. Knowing the data points on the comps probably is not enough. Knowing the variables behind those recent comparable sales is the critical piece of information that you will need to make an informed decision.