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Should You Sell Your Home Off-Market?
In today’s real estate market, sellers are often presented with different strategies for selling their homes. One of the most debated topics is whether to list a home on the open market or to sell it off-market through private channels. While there may be rare instances where an off-market sale makes sense, the reality is that exposing your home to the full market is the best way to ensure a fair, competitive, and profitable transaction.
The Risk of Fair Housing Issues in Off-Market Sales
Selling a home off-market can create unintended fair housing concerns. The Fair Housing Act exists to ensure that all buyers have an equal opportunity to purchase a home, regardless of race, religion, gender, familial status, or other protected characteristics. When a home is sold privately, the pool of potential buyers is inherently limited, which could lead to discriminatory practices—intentional or not. Open market listings ensure that every qualified buyer has the opportunity to compete, making the transaction transparent and equitable.
Competition Drives Higher Prices
One of the most compelling reasons to list on the open market is the power of competition. Real estate is fundamentally a supply-and-demand-driven industry, and competition among buyers is the most reliable way to achieve the highest possible sale price and favorable terms for a seller.
Consider recent data from metro King County: 30% of homes sold over the asking price. In Seattle, where the median home price is $945,000, those homes sold for a median of 4% over list price—translating to an additional $37,800 in a seller’s pocket. On the Eastside, where the median home price is $1,600,000, that number jumps to a 5% median premium, equating to an extra $80,000. These numbers illustrate the clear financial advantage of market exposure. The more buyers who see a home, the greater the likelihood of multiple offers, which naturally drives prices upward. Further, when buyers compete, they compete with strong terms not just on price. Things like faster closing, free rent back, earnest money delivered up front, can all be negotiated given the proper market exposure.
Why Do Some Buyers Want Off-Market Sales?
When a buyer is pushing for an off-market transaction, it’s worth questioning why. Often, buyers seeking off-market deals are looking to sidestep competition in order to secure a home for less than they’d pay in a bidding war. In some cases, they may even be investors looking to purchase a property below market value to maximize their own return. While these buyers may frame their offer as a benefit to the seller—offering convenience and a quick close—the reality is that they are often the primary beneficiaries of such transactions.
Are There Ever Valid Reasons to Sell Off-Market?
There are a few instances where an off-market sale may be appropriate. High-profile sellers who require discretion, homeowners dealing with sensitive personal circumstances, or those who have already pre-negotiated a deal with a trusted party may choose to sell privately. However, for the vast majority of sellers, the goal is to achieve the highest return with the smoothest transaction possible. That can only be accomplished with full market exposure.
Beware of Gimmicks Disguised as Benefits
Some firms may try to sell you on the idea that off-market sales are in your best interest. Be wary of these claims. Often, this is simply a tactic to get their foot in the door—to secure a listing without having to do the full marketing and exposure necessary to achieve the best result for you. If an agent is recommending an off-market sale, ask yourself who stands to benefit the most: you, them, or the buyer?
The Bottom Line: Listing on the Open Market Equals Maximum ROI
If your priority is securing the highest price and ensuring a fair and competitive process, listing your home on the open market is the clear choice. The numbers don’t lie—competition drives higher prices, and transparency ensures fairness. It’s so easy to get caught up in the whirlwind of an off-market offer. And it’s flattering to feel like your home is so appealing that people are knocking on your door before it even debuts. For some, the privacy of an off-market sale offsets the considerable dollars left on the table. But for most of us, those dollars matter. And having multiple interested buyers instead of just one means better terms and more certainty as you head towards the closing table. While off-market sales may have their place in very specific situations, they should not be embraced as a superior alternative. An experienced real estate professional will always prioritize your financial best interests over convenience-driven gimmicks.
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The Downside of Selling Your Home Off Market
Who wouldn’t want the enticement of a full price offer on their home before it even comes to market? At first glance it seems like a compelling opportunity, but it comes at a steep price.
With the shortage of homes today, friends and neighbors are all on the lookout for up-and-coming listings. They aren’t hard to spot amongst the buzz of spruce up activity that often occurs as a home is being prepped for the market. Often the buyer or their broker contact the seller or their broker to request an early showing and you can guess what transpires from there. You and your broker have a list price in mind and the buyer’s offer comes in at that price. What could be better?
Are you leaving money on the table?
For starters, consider that homes in the Seattle-Eastside region are typically selling well above their asking prices. Local market data shows most homes bring in 3-8% above their listed prices during the last several months. This occurs when multiple buyers are competing for the same property…something that doesn’t happen when negotiating off market with a single buyer. Consider a home at Seattle’s median price of $800,000, 3-8% equates to $24,000-$64,000 left on the table.
But that isn’t all there is to consider. In our current highly competitive market, it isn’t unusual for buyers to waive contingencies such as financing and appraisal, pre-inspect or waive the inspection contingency, and often even release their earnest money as non-refundable. This does not often happen in a non-competing situation and leaves you vulnerable to transaction challenges before closing.
In addition, it is often the buyers who can’t effectively compete in an open market that are most motivated to try to get you to sell off market. This benefits the buyer significantly, but eliminates the benefits to you of a strong seller-favored market.
What about iBuyer company offers?
iBuyers are companies that agree to pay a set amount for your home up front and then list it for sale after you move out. They have gained popularity in some markets-Phoenix and Atlanta especially. In 2019, they had 59,000 transactions nationwide or about half of one percent market share of the 5.38 million transactions last year. Amidst COVID and economic concerns, iBuyer market share was down dramatically in 2020 and remains uncertain for 2021.
Nationally, their sweet spot has been predictable subdivision homes priced around $250,000. They have traditionally avoided higher priced markets due to the added risk in pricing. And they have historically avoided Washington State because of our real property transfer tax that adds ~2% to the cost of sale.
While selling to an iBuyer might seem easy and intriguing, it helps to remember these companies are in business to make a profit at your expense. iBuyers charge a 6-10% service fee in addition to factoring in the cost of needed repairs or updates (data shows an average of 2-5% of the sale price). Atypical expenses, like our state’s 2% transfer tax, are also calculated into the net. Add it all up and it is a hefty price to pay for the convenience of not having to go through the sale process.
On other thing to note is that iBuyers also profit by selling the names of homeowners who contact them for a bid, but do not accept that bid (93-98% of inquiries, depending on the company), to real estate agents without an established client base who are willing to pay for leads. These are typically not the most successful real estate brokers in a given marketplace. Not only do sellers who use these brokers often lose out on the benefits of working with a knowledgeable and established Realtor, that broker’s marketing budget is consumed largely by paying for leads instead of prominently marketing your home.
Final thoughts
It’s so easy to get caught up in the whirlwind of an off-market offer. And it’s flattering to feel like your home is so appealing that people are knocking on your door before it even debuts. For some, the privacy of an off-market sale offsets the considerable dollars left on the table. But for most of us, those dollars matter. And having multiple interested buyers instead of just one means better terms and more certainty as you head towards the closing table.
Still have questions? Contact one of our knowledgeable brokers for assistance with how to purchase, sell, or determine the value of any property you are considering.
Find a Home | Sell Your Home | Property Research | Neighborhoods | Market Reports | Our Team
We earn the trust and loyalty of our brokers and clients by doing real estate exceptionally well. The leader in our market, we deliver client-focused service in an authentic, collaborative and transparent manner and with the unmatched knowledge and expertise that comes from decades of experience.
© Copyright 2020 Windermere Mercer Island.
