With the coronavirus pandemic changing so many aspects of our daily lives, many people speeding up the decision to buy a home. Maybe you've been scrolling real estate listings for months, maybe you're expecting a baby soon or maybe you're itching for a change of scenery — whatever the reason, interest rates have fallen and it might be the right decision for you.
But along with all the pros, there can be drawbacks to buying a new house right now. One of them may be that you're searching for your dream home in a region with low inventory. Are your searches only coming up with one or two listings online? No apartments listed with more than one bedroom? That's where unlisted homes can come into play.
What is an unlisted home?
Unlisted homes, also known as off-market homes, are houses and apartments that have not been listed on multiple listing services (MLS) where real estate agencies and brokerages advertise. They can be homes where the owner hasn't decided to sell yet, homes that have been listed before but didn't sell or even homes of celebrities who don't want to signal where they're living or that they're thinking of selling.
Unlisted properties may be more common in areas where it's a sellers' market, where there are more buyers than sellers or there's less real estate inventory available.
Beth Benalloul, who has been a New York City-based real estate broker with The Corcoran Group for the last 15 years, is no stranger to unlisted properties. She told TMRW, "I do potentially have sellers who say to me, 'We don't want to list it on the market but if you have somebody, bring them to us.' Oftentimes, either it's a high profile person and they don't want anyone to know their apartment's on the market and/or they don't want the listing to get stale, you know, by sitting on the market for a long time. So basically they want you to try to find a buyer without it actually being publicized."
Benalloul recommends buyers look into unlisted properties "if, in fact, they're not finding what they want on the market and/or they've spotted like a certain home or a certain piece of land that they really want. There definitely can be deals made that way. And potentially, if a person's not marketing the property, you probably will have less competition. So you're not going to be bid out by other bidders."
How do you find an unlisted home?
Benalloul suggests reaching out to homeowners the old-fashioned way, by sending letters and mailings to as many homeowners that you want to reach out to. "Somebody will be looking for something perhaps in a particular neighborhood or in a certain school district, and I think that the first step is to write the person a letter and see if it's something that they're interested in selling. Sometimes it's somebody who wasn't really even considering selling and once they've been approached, they do go forward with it.
"I would start with either a letter or an email and then, depending on the response, I would then pick up the phone and call. I've even had people ask to have meetings, to meet for a coffee or meet for a drink to discuss it."
J.D. “Jay” Rinehart, Jr., a second-generation realtor in Rock Hill, South Carolina, told TMRW that "sending an email out is probably the lowest response rate that you will get." He recommends "talking to people on the telephone and literally knocking on doors, hanging door hangers on a door and then saying, 'Hey, we are looking at buying a house ... in your neighborhood, would you consider selling?'"
But no matter the method, Benalloul advises to "try to give a little bit of personal information about (yourself) ... I would definitely try to give a profile of my family or myself. And then the other thing is, it could almost be like a love letter to the house, like why you want that house, why you have been watching that house, how you see yourself living there, because I think that when you're writing a letter directly to an owner, you definitely want to make it a little bit more personal and less transactional."
What is the process of buying an unlisted home like?
When approaching an unlisted home, the main difference is not knowing how much a seller might want to sell the property for. "I would steer clear of discussing numbers until you really have an open dialogue with the person," Benalloul said.
She added, "The only drawback I see is that, when a property goes on the market, I think the fair market value is determined by multiple people seeing it and making offers. And I think what can happen in a situation where the property's not on the market, is that you don't really know what the value is."
Rinehart says that while a homeowner may be willing to sell, they may not know at what price, so "you're either going to pay a professional like an appraiser to set the value, or you're going to work with a professional realtor and allow them to help you in that process of setting the range of values that you and the seller could consider."
Otherwise, buying an unlisted home is, for the most part, similar to buying a listed property.
"If you don't have a professional, then you're doing all of this by yourself. So you have to have the time to go meet the inspector, you have to have the inspectors' information so that you know what to do," Rinehart said. "You also have to be able to read the inspection reports, and then order any repairs and negotiating your repairs with the seller. It becomes a lot more intense if you are going to do this without a professional."
What are the misconceptions of an unlisted home?
Buying an unlisted home doesn't have to mean you have to forgo any professional help whatsoever just because it's not listed by real estate agents, realtors or brokers. "There's a lot of misconceptions that you're going to get a better deal if you do not have a professional involved," Rinehart said. "And that's just untrue."
"It's very emotional with people when they buy a property, especially if it's not like an investment property and it's where they're going to live," Benalloul said. "Certain things can sway you, so I think you just also have to be cautious that you are going into it with eyes open because, if not, you can end up overpaying for something."