When the Grey Lady, aka The New York Times, writes about "off-market" listings, you know that they're a) big news, and b) old news. And in a sign that the mainstream news media really gets real estate, the Grey Lady's September 20 article For Your Ears Only contains only one fundamental error: the "scenario commonly referred to as a 'pocket listing'" isn't when "the [seller's] broker has no signed contract with the seller", but refers instead to a listing the agent keeps in his or her pocket, without telling the real estate community at large, or perhaps any member of the real estate community. An "off-market" listing may or may not be a pocket listing. But a listing without a signed listing contract isn't much of a listing.
But I do like the Grey Lady's name for an "off-market" listing—"whisper" listing—a lot better than off-market, because off-market listings are almost always on the market, just a much smaller market than a listing on the Multiple Listing Service. Often the listing agent's entire office knows about the off-MLS listing, or perhaps all the listing agent's real estate friends, or sometimes every local agent who bothers to read his or her email. An off-market listing isn't off the market, but it's on a greatly reduced (some might say "selective") market, not the regional, national or global market the MLS offers. That's why I prefer the phrase "off-MLS" listing.
So just how common are off-MLS listings? It depends on who you talk to. I've heard anything from 25 percent to zero. Let's try to quantify the size of the off-MLS market by comparing the number of single-family residence sales in four local cities during the period March 20 through September 20, 2013 according to data aggregator RealQuest, to the number of sales on the MLS during the same period. We'll pick four cities that give us a fairly good cross-section of the local real estate market.
For those of you keeping score at home, RealQuest and our local MLS use different terminology to describe what we're measuring: a RealQuest "sale" is an MLS "closed sale". In other words, to get RealQuest's sales 3/20/13 through 9/20/13 to match up to the MLS's sales during the same period, you have to search the MLS by "sale closing date", not "sale date". I should also point out that not every sale in RealQuest is a sale. Occasionally they're simply transfers into a trust, or buy-outs of one partial owner by another, or something else that doesn't qualify as a market transaction. However, after slogging through way more RealQuest records than I should have, these appear to be infrequent enough to not significantly skew results. With that arcane technical issue out of the way, let's look at the surprising results.
city RealQuest SFR sales MLS SFR sales # of off-MLS sales % of off-MLS sales
East Palo Alto 62 55 7 11
Cupertino 217 192 25 9
Palo Alto 299 237 62 21
Atherton 66 58 8 12
(Sorry for the lousy formatting. One of these days I'll learn how to do tables in HTML.)
As you can see, off-MLS sales were at a minimum a significant portion of SFR sales for every city here during this period, and in the case of Palo Alto, notorious for its off-MLS sales, the notoriety is justified. The relatively high percentage of Atherton sales doesn't surprise me, since one of the three off-MLS sales I've had since 2012 was in Atherton—the other two were in, yes, that hotbed, Palo Alto.
What does surprise me is the frequency of off-MLS sales in Cupertino, especially since the idea seems to be a complete surprise to the Cupertino agents I've talked to.
I should note that off-MLS sales aren't peculiar to this market, but it may be that they're higher than normal, especially when they're one in five sales, as in Palo Alto. It would be interesting to establish a baseline by comparing these percentages with those of, say, 2009.
The obvious question is: should you work only with an agent who claims to know every off-MLS listing in your target area? First of all, I don't think that even the most clued-in agent knows every off-MLS listing. An off-MLS listing can be an open secret to virtually every agent in that particular city, lacking only an MLS entry, a for-sale sign and publicized open houses, or it can be one agent quietly cultivating one coy homeowner, or anything in between. I think the real lesson here is to use an agent who's known and respected in the agent community, because that agent is far more likely to get access to inside information whenever he or she needs it.
Finally, what's in it for the seller of an off-MLS listing? How do they know they aren't leaving money on the table? They don't, which is why their signatures are on a form warning them of the downside of not properly exposing their property to the market. But you can rest assured that the typical off-MLS property sells at a premium to allay the seller's justifiable concerns. Not coincidentally, it's not uncommon for a seller to test the market by offering the property off-MLS initially at a premium price. If it doesn't sell, the home is either quietly withdrawn or put on the MLS.
But I'm not sure I understand why this phenomenon is so popular in Palo Alto. Yes, we have some well-known people who value their privacy, and some very wealthy people with collections they don't want the world to know about. And, yes, the homes of well-known people sometimes tell us more about them than they might like. But what I don't understand is why this has filtered down to the Ma and Pa level, just plain folks with nothing to hide except maybe fifty years of clutter, who seemingly have nothing to gain and much to lose from an off-MLS sale. How much hassle is it, in an area where homes typically sell in ten days or less, to have a week of showings and a Saturday and Sunday open house?
It seems to me that an extra $100k or so might be well worth getting caught in the shower by an agent who didn't call ahead.
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