Off-market listings come with all kinds of ethical and legal problems. But technology offers a way to address some of the motivations behind their rise.

Off-market listings have gained significant traction in Massachusetts over the last year. They clearly picked up advocates during the pandemic, as listing scarcity elevated demand and a sense of urgency among buyers. But it is crucial to note how these transactions can prevent sellers from getting the biggest bang for their buck. How can you expose a property to the largest pool of buyers, if they never know it’s for sale? 

The vast majority of homes in Greater Boston are sold by real estate professionals through a Multiple Listing Service called MLS PIN. The database is maintained by brokerages to help their clients buy and sell property, and where search engines like Zillow and Redfin get their listing data (if a listing’s agent allows it).  

All publicly available real estate information is available on the MLS. That is, all except for off-market listings – homes that create a sense of exclusivity when a listing agent only shares details, offers showings and accepts offers among a select group of agents and clients. These homes are not listed for sale publicly and are essentially “secret” listings: If you don’t have access to the listing agent, you may never know it is on the market. 

A Fair Housing Violation? 

One thing has become very evident in the current market: it is not unusual for a particular buyer to offer significantly more than anyone else when in a bidding war with other buyers. Without comprehensive marketing – including listing the property in the MLS – it is much less probable that a competitive bidding situation will be mobilized and that the highest-paying buyer will learn that a home is for sale in the first place, making it quite possible that the property will sell for less than he or she would have been willing to pay. 

This can be equally frustrating for buyers waiting for a home they like to hit the market, only to learn that it was sold privately. It also begs a question that teeters on the edge of a fair housing violation: Which buyers don’t have access to the listing, and why? Fair market value is that price a qualified buyer will pay after the listing has been fully exposed to the market. While off-market home sales may not violate the federal Fair Housing Act, the National Association of Realtors adapted the Clear Cooperation Policy in 2019 to address the problems surrounding them.  

For sellers whose primary concern is confidentiality, or sellers who simply don’t want to invite strangers to enter their homes during a pandemic, keeping a property off MLS may seem like the most appealing option. The heat of the present market has pushed virtually every brokerage to sell properties off market.  

The problem lies in agents who exploit their sellers’ concerns regarding physical showings and convince them that they can achieve the best sale price without preparing public showings or any public marketing. It’s crucial for a listing agent to communicate the potential pitfalls to their seller and ensure the seller fully understands the benefits being waived by not listing the property on the MLS. 

Larry Rideout

Tech Offers Different Path 

Perhaps you’re a discreet seller concerned about indulging every curious buyer interested in taking a peek inside your property. Or maybe your current circumstances don’t leave you with a lot of time to accommodate showings. Rather than choosing the off-market listing approach – where your property isn’t shared beyond a small group of agents and there is no public marketing – it might be in your best interest to reap the benefits of technology instead. Virtual tours are a smart alternative, and can help preserve privacy and limit in-person showings to those who have made serious offers. 

The takeaway? Off-market listings have their shortcomings, and the ideal real estate transaction exposes a property to all real estate professionals and clientele in an effort to obtain the best offer. 

Before a listing agent recommends an off-market listing to a seller, or if a seller requests to take this route, the agent must explain the risks of such arrangement, even (and perhaps, especially) in today’s frenzied market. The caliber of the agent working on a seller’s behalf – his or her integrity, competence and work ethic – will considerably impact the results of the home sale in finances, time, stress and long-term satisfaction.  

Larry Rideout is the chairman and co-owner of Gibson Sotheby’s International Realty.