You will find some sellers who prefer to have a "exclusive" listing with an agent for a short time. Those listings can be anything from $1-4 million and will usually be priced a little high. These listings are often a way to test the market. The listing agent will market locally to get a sense of interest. If the interest level is high enough, the property may go on the MLS to generate more interest and overbids. If the interest level is low, it's usually an indication of overpricing and a price reduction can be made before putting in on the MLS. Keeping it off the MLS means being able to hide pricing mistakes.
While you can work with an agent who has access to many off-market listings, you should still do the appropriate analysis on the price of the home to make sure you're making a reasonable offer. The only difference between off-market and on-market should be the hassle factor for the seller. It shouldn't be a chance to overcharge a buyer. There have been sales in all the price ranges in Los Altos this year so it shouldn't be hard to price something off-market.
As for legality, yes, it's legal. A valid listing agreement in place with an authorization to exclude from the MLS is all it takes.
I know you posted this in April, but if you're still reading, I just wanted to chime in.
I have handled and still do handle off-market listings. These are listings where the owners specifically do not want the hassles of publicizing that their homes are for sale to their neighbors or to individuals driving by. In one of these situations, for example, one of the sellers had a serious medical condition and the stress of door knocking and buyers trying to see the home at all hours would have been too much for the sellers to bear, so they are attempting to sell "quietly"--without being on the MLS. On the other hand, I also have a list of perfectly qualified buyers who have been beaten out of sales in the multiple offer arena, and, frankly, do not want to go back there again to buy a home.
While the others have mentioned "Sellers who want too much" and "Buyers who want to pay too little", we solve this problem by obtaining an appraisal to determine the price of the home, and then work from there with both parties to find a suitable price, terms and conditions.
My program is so successful that, for example, I sold a home "privately" on Lisa Lane in Los Altos in February of this year, and both the Sellers and Buyers remarked that this was the easiest and most stress free sale of their lives. The Sellers got EXACTLY what they wanted for a price ($1.65 million), the Buyers paid exactly what was within their budget, and the Sellers sold their home for a sum total of 2 percent of the sales price--about 4 percent savings to them. Everything happened exactly as it would for a regular sale, but there were no open houses, no hassles, and no problems.
So if you are still looking for a home in Los Altos, I currently have two available in the Oak Elementary School area. Give me a call and let's see if we can find something for you!
Grace Morioka, SRES
Area Pro Realty
Tel (408) 426-1616
Refer to Optimizedprime's answer. It is all to true - the best way to sell our home for the most money is to have it on the market and exposed to the largest amount of qualified buyers. If you have concerns about people visiting your home at open houses who might not be serious buyers your agent can very easily show your home by appointment only and screen the qualified buyers from the rest. That brings it back to Optimized's post - sellers who are satisfied with not exposing their home to the market likely want too much for their home.
Pocket listings are not listings at all. They are handshake agreements between a seller and an agent. As an agent, the seller can sell their home to whomever and use another agent at any time since there is not listing contract. Off-market listings are listings that have a signed agreement between the seller and the listing agent yet the seller wishes that the listing is with held from the MLS. Either way, not the best way to get the most for your home if they were a serious seller.
Additionally, there are very few agents who do nothing but sell homes off market. Usually, the few homes sold off market are luxury homes and there simply aren't that many sales of those homes in a given year let alone enough for someone to really be a specialist.
Take a chance and see what he has in his pocket. I'm not saying it isn't possible that he has or knows of something that is perfect for you - just don't count on it and be weary of someone who tells you they are a specialist yet can't share with you what or how many listings they have.
"I've compiled a list of sellers who don't really need to sell and have unrealistic price expectations but if you have all cash and will buy without seeing the inside they will part with it for a mere 25% over market price".
In other words, the seller tried to sell (using MLS), didn't get any takers at the asking price, so they pulled it off MLS.
Of course if YOU simply knocked on every door in town and offered 25% over market price you'd probably create quite an "off-MLS" list yourself...
I hate to bring out the negative side of this type of arrangement, but here goes. Some agents (few and far between) obtain listings with the sole desire to sell it themselves, off market. Mary has listed why (the majority of agents) have "pocket" listings. However, in order for some (again, I want to stress a small percentage of agents) to remain in the business, they will take a listing with the goal of "double ending" the deal. They get paid twice and therefore can make this months rent bill (sarcasm added!). They aren't doing what is in the best interests of their sellers and are only looking out to make a quick buck. It is the seedy underside of the business, but it does happen.
Before working with this agent, I would ask him/her how he/she obtains these listings and why is it in the seller's best interests to sell their home in this manner. Remember, exposure to larger buyer pool usually results in a higher sales price or better terms for the seller. Listen closely and if the answer makes sense (i.e. similar to Mary's description), then it might make sense. However, if it sounds shady, it probably is and I suggest that you walk away. Remember, a listing agent has a fiduciary responsibility to work in the best interests of his/her seller. If he/she isn't doing that for the seller, how well will he/she represent you.
I agree with everything that Mary had posted and do as well for my clients. My concern was with the self appointed "specialist" title for off market sales this agent seems to tout. Although most Realtors explore this option for their clients there aren't many off market sales per year, even in the luxury market sectors. It seems a little slick and misleading to me.
Every couple of years, I have buyers who cannot seem to buy from the available inventory listed on the MLS. I will proactively go beyond that list and contact owners or former listing agents of expired and cancelled listings to see if these homes might be a fit. Sometimes I pull up all homes matching certain criteria and hand-write letters to the owners to see if they might be interested in selling. (This is NOT to try to get listings, but rather to try to get homes for my buyers to purchase.) And it works some of the time. It's a lot of effort to get a home for buyers this way, but they really appreciate having options and the sellers are thrilled to make a sale without having to do all the usual staging.
Networking with other agents and offices can be very important, especially in communities like Los Altos, Saratoga and Los Gatos, where the Realtor community is fairly tight. It can help a lot if the other agents know your agent or at least get a sense that your agent is "like them" in terms of being professional and proactive.
You are right to be asking this question. It could be either situation, although the latter is more likely. There is nothing wrong with an agent doing so but the next question should be, "Who represents who?" You will want to know who's going to be on your side or if the agent is going to play for both teams. Also, you should be ready to deal with a seller who might be firm about their price, even if it is out of line with market value. If they truly were motivated to sell, it would be on the market (even luxury homes).
I'm also concerned about the fact that you say he is a "specialist" in off market listings. I'm not sure what that necessarily means beyond he knows about a few opportunities that no one else does. I don't think there is any agent who does a ton of business (enough to call himself a specialist) without marketing a sale or a listing...otherwise, how would he get business in the first place? Maybe he's being a little dramatic or embellishing the truth to get you under his wing.
He might have a great option for you and if your comfortable enough to work with him, go for it.
In reality, they probably don't have a large supply of homes that are 'off market' as most buyers that truly want to sell will not leave their homes off the market for long (often only long enough to prepare them).
As a buyer, there would be a minimal benefit to buying a home in this manner, primarily not competing with other buyers. But a seller will not be looking at selling their home at a deep discount. There may be a small discount, at most, for the convenience of going into contract quickly and not being placed on the open market.
I hope this helps.
Prochnow Realtors, Inc.
Since you're not sure if they're real listings or informal agreements, ask.
It's possible that they are "informal agreements," as you call them. Or perhaps the agent is also a real estate investor who has signed contracts (or knows investors with assignable contracts) to properties that aren't on the MLS. That's fine, too, so long as full disclosure is made.
One question is: If you do buy one of those properties, will it go through the "normal" channels--through the agent's broker, etc. Or will it be handled outside of normal channels--as dealing with buying from an investor would. You'd have more protection with the former, but--again, with full disclosure--there'd be nothing wrong with the latter. You just are owed a full explanation and a full understanding of the situation. And, at this point, it's clear from your question that you don't have it.
So, discuss it with the agent. Find out what those "off market listings" actually are. And find out how, if you wanted to buy one, the whole transaction would be handled.
A lawyer is preferable in any real estate transaction, but would be especially important in a purchase done outside the normal real estate channels.
Hope that helps.