A secret, second market for high-end homes

An off-market deal in this Mission Bay building still netted the sellers 4% over asking: $1.25 million.

Off-market sales have always been a part of the San Francisco marketplace. Some sellers, especially on the higher end, simply prefer the privacy of a so-called “pocket listing” to the exposure of listing on the MLS. But recently, more and more sellers have been passing up the opportunity of marketing their properties to as many potential buyers as possible in favor of a more subdued marketing approach. In fact, according to Vanguard Properties, these off-market deals now make up over a quarter of all sales in San Francisco.

“Off-market sales are on the rise, and there are substantially more this year than in years past,” said Vanguard agent Michael Bellings. “It’s coming to the point where there is such a presence for ‘off-market’ deals that a second market is essentially being created.” Bellings says that most of these properties are selling at the highest end of the market, where sellers are more concerned with knowing who is touring the property (especially when personal items are still in the home) than getting the largest number of buyers through the door.

Bellings adds that just because the properties aren’t getting the full marketing muscle of the MLS, that doesn’t mean that buyers are getting a discounted deal. “Often times the asking price is more of a ‘buy it now’ price when listed off-market,” he explained. “So it’s more about finding a buyer who is willing to pay the desired price, which is typically market value or very close to it.”

For example, Bellings recently represented the buyer in the condo in the slideshow above in an off-market deal. The sellers of the Mission Bay two-bedroom, two-bath had difficult schedules, lived in the unit and had two cats, so they decided they would rather go the off-market route to limit the number of showings they would need to have. They asked $1.2 million for the nearly 1,400-square-foot unit, knowing that they could likely get more if they were willing to stage and move out. Bellings approached the listing agent, who is in his office, and his buyers toured the unit only twice. They offered 4% over the listing price ($1.25 million) and the deal was done, with both parties feeling satisfied that they had gotten a good deal without the aggravation of staging, multiple showings or a bidding war.

And, with San Francisco’s famously limited inventory, there are a lot more high-end buyers out there with money to spend but nothing to buy, as well as sellers who don’t see the point of painting, moving furniture out, staging and sometimes relocating while the house is listed. Bellings says that agents have begun accumulating a stable of buyers and then playing matchmaker with their more private sellers. “When you have a very motivated buyer and hyper-demand combined, you’ll be able to find buyers more easily for your pocket listings,” he said. “With qualified buyers with a lot of money, willing to pay more than anyone, but who don’t want a bidding war, the ‘off-market’ avenues flourish.”

Emily Landes is a writer and editor who is obsessed with all things real estate.

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