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Houses that sell before hitting the MLS

Posted by youngdeb (My Page) on
Tue, Jul 17, 12 at 3:51

I am hoping some of the realtors can give me some insight here.

I have always been confused by the situation where a house goes under contract before it even hits the MLS. What is the advantage to the homeowner there, other than not having to go through tons of showings? If a house is that "hot", wouldn't it be economically beneficial to give it at least a couple of weeks of public exposure to see whether you can get some lift in your price? Why would you not want to get the word out on your house to the maximum number of potential buyers?

I see it a lot here in my neighborhood - it's the kind of neighborhood that people stay in and move up rather than out, and real estate discussions are still fairly common.

Love to hear insights on this...

Thanks!


Follow-Up Postings:

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RE: Houses that sell before hitting the MLS

We have friends who recently did this. Their realtor (or possibly a colleague) had a buyer that was a good match for the house. It wasn't so much that it was a hot property, there was just a suitable buyer.

Bidding wars don't happen around here, so it was unlikely that just because there was one buyer there would be many.


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RE: Houses that sell before hitting the MLS

I did this with my house too. Had several interested parties while I was interviewing realtors. My neighborhood then was such that it had a private school at the entrance and when it was setup it was with a guarantee that all children in our neighborhood would have automatic admission. Plus it was an easy walk to school so it was highly sought after by those parents with children in the school who had siblings on a waiting list or just wanted their children to walk to school.

I got 10K over what my listing price would be without the hassle of having to deal with lots of showings and also I only paid the buyers agent commission so in the end I got more than if I listed on MLS as a bidding war any higher would have been tough with the appraisal.

Plus somebody willing to buy before even on MLS is a very serious buyer so chances of it falling through is much less. I was a little worried about the appraisal with the higher amount as my listing price was on the higher end to start with so picked the buyers with the best offer and more than 20% down so the appraisal wouldn't be an issue.

BTW just because it doesn't go on the MLS doesn't mean you don't have a bidding war.


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RE: Houses that sell before hitting the MLS

"If a house is that "hot", wouldn't it be economically beneficial to give it at least a couple of weeks of public exposure to see whether you can get some lift in your price?"

An executed contract is worth more than the possible higher sale price to many sellers.


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RE: Houses that sell before hitting the MLS

We sold a house and bought a house this way. As a seller with 2 small kids at the time (and a slightly messy DH) there was real value to not having to show the house. We knew what our house was worth and got that price. I had already painted and spruced up the place. Also we only paid half the commission.

We just bought a house this way. The sellers were just begining to consider selling. They placed a high value on their privacy. By taking our slightly above market offer they avoided the showing hasle and did not have to spend any time or money getting the house ready for sale. We accepted the cosmetic stuff as is and have repainted everything, changed some old/corroded faucets, etc. All things that take time, effort and money.


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RE: Houses that sell before hitting the MLS

lyfia, I don't understand your post... the buyers' down payment has nothing to do with the appraisal. ??

We sold our last house without an MLS listing. The realtor who sold it had been showing me houses in another town, and when we found one she happened to have the perfect buyer for our existing home. One commission, one showing, very good price. It def worked to our advantage. We lived (and still do) in a small town where there is a fairly limited pool of people who need or want a large house (6000+ square feet).


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RE: Houses that sell before hitting the MLS

Great question.
There are exceptions to the rule, BUT many times the selling house is underpriced, and the realtor MAY be a swindler-all about the commission. I have known a few instances like that.

The last one was when my nephew wanted to buy a starter home and was willing to pay 5-10k more, on a 150k house. The listing agent kept stalling telling his realtor that the house cannot be shown yet until such and such date, then POW! it was sold to her buyers. Mind you, NOBODY was allowed to see the house. My nephews realtor had been calling daily.
It was really dirty that he didn't even get a chance to see it, and come to find out the house WAS worth more than what the owners got for it. The agent was a PIG! and did not protect the sellers interest. Realtors like that give the RE industry a bad name.

If a house sells so quickly, there is something that isn't right. Most of the time it's the price.


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RE: Houses that sell before hitting the MLS

I think notto's story echos my suspicious reaction to these stories, which all include getting a "great price." The question I would ask is how do you know it was a great price? If a house goes on the MLS for a few weeks to get more eyeballs on the property (since almost everyone shops for houses online to some extent), surely you increase the chances of finding potential buyers. You will never know, of course, but logic dictates that if it sold quickly with a potential buyer pool of 1, it could go for more money with a larger potential buyer pool.

It's worth a bump of several grand in a sale price to put up with a few showings, to me. But if I really didn't want to do that, I might list it in the MLS and tell potential buyers that we would only do showings at an Open House in a few weeks, to limit the impact. If the house is THAT HOT, people would rally, right? But at least you'd expand your buyer pool.

It's just that something about these scenarios doesn't smell right to me.


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RE: Houses that sell before hitting the MLS

There is one realtor in my area who has placed several signs in yards stating that the houses would be listed soon. Do you think this is her way to sell before they are listed on MLS?


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RE: Houses that sell before hitting the MLS

youngdeb said "The question I would ask is how do you know it was a great price?"

You (the seller) do your homework. It is very easy to get lots of information online and do a market comparison to come up with a pretty accurate price. I also always do research by attending lots of open houses.

In our case there was no listing realtor to "swindle" anything. When we sold we represented ourselves and when we bought the sellers represented themselves.

I still keep track of my market (a hard habit to break!!), so if I ever need to move, I should have a pretty good idea of what my house is worth.


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RE: Houses that sell before hitting the MLS

Kswl, having a larger than a 20% down payment meant that even if the house appraised for a little bit less than the contracted amount they could still get a conventional mortgage with 80% without re-negotiating the contracted price. They didn't have an appraisal contingency, but rather a finance contingency that set a max interest rate and that it had to be an 80% loan. So did my other offers, but they had listed 20% down. Knowing that the buyer I choose had 20-30% listedmeant less of a worry about the contract changing since they still listed 80% as the mortgage limit. So they had enough to cover if the appraisal by the bank came up short. I knew it would appraise for my list price, just not sure on the higher amount I was offered.


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RE: Houses that sell before hitting

Youngdeb I agree with Chispa. I didn't have a realtor. Just knew what my market was like and realtors were suggesting lower prices. I didn't use an agent, just paid the buyers agent.

I'm guessing it could go both ways. Depending on the people involved. I don't think I would have gotten more and an extra couple of grand would have been nice, but again keeping paying a mortgage for the extra time of having it on the market would cost too. If you have a buyer then why keep looking if you are happy with what they have to offer.

By not having to involve a realtor on my end I actually netted more than having to list it and also not worrying about appraisals that could become an issue when a bidding war goes out of control. Also if the deal falls through then I've not lost any DOM in the MLS as it would show up as a complete new listing when listed.


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RE: Houses that sell before hitting the MLS

"Kswl, having a larger than a 20% down payment meant that even if the house appraised for a little bit less than the contracted amount they could still get a conventional mortgage with 80% without re-negotiating the contracted price."

If you mean that this indicates the buyers would be able to still get an 80% mortgage if the house did not appraise, you are correct. But there are very few buyers who will pay more than the appraisal price for a house, as it means the buyers have less equity in the property than they planned with their offered contract. How many people want a particular house so much they are willing to pay more than the bank says it is worth? Bidding wars may push a price up beyond the asking amount but the house still has to appraise unless it is a cash sale OR the buyers are willing to purchase it at more than the bank appraisal. Most people who put down 30% or more on a mortgage do so because they want that much equity at the outset.


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RE: Houses that sell before hitting the MLS

Putting a sign in the yard doesn't do much for me...I think most people both window shop and seriously hunt for houses online. The online pictures are the most important marketing tool you have...not a yard sign.

I am more interested in the ones that DO go on the MLS, but are already under contract by that time...usually listed with a realtor. The pocket-listing type scenario. FSBO is a different animal, but even then...for $300 you can get your pics online with those fixed-fee services.

I also find the appraisal process bizarre. So many factors go into a house's value that can't be included in the appraisal process because they're subjective - house layout, house style (tudor/modern/ranch/etc.), interior finishes. If you have one, or better yet more than one, buyer willing to pay a price for a house, why on earth would an appraiser value it for less? Can they take the offer prices into account? If not, they're missing a pretty important data set.

I just find this whole real estate business so fascinatingly illogical.


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RE: Houses that sell before hitting the MLS

No, they really can't take offers into account, it doesn't work that way. An appraisal of any house is a determination of what the average buyer would pay for a house of similar size, quality, condition and location.


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RE: Houses that sell before hitting the MLS

"Putting a sign in the yard doesn't do much for me...I think most people both window shop and seriously hunt for houses online. The online pictures are the most important marketing tool you have...not a yard sign. "

I have purchased all if my personal residences before they hit MLS, and almost all of my investments properties.

For a personal residence I have enough RE contacts about what is 'coming soon' to at least do a drive by.

For investments I will drive through neighborhoods looking for run down places and then have my RE agent keep an eye open with her contacts.


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RE: Houses that sell before hitting the MLS

Posted by youngdeb (My Page) on Tue, Jul 17, 12 at 17:29

I think notto's story echos my suspicious reaction to these stories, which all include getting a "great price." The question I would ask is how do you know it was a great price? If a house goes on the MLS for a few weeks to get more eyeballs on the property (since almost everyone shops for houses online to some extent), surely you increase the chances of finding potential buyers. You will never know, of course, but logic dictates that if it sold quickly with a potential buyer pool of 1, it could go for more money with a larger potential buyer pool.
It's worth a bump of several grand in a sale price to put up with a few showings, to me. But if I really didn't want to do that, I might list it in the MLS and tell potential buyers that we would only do showings at an Open House in a few weeks, to limit the impact. If the house is THAT HOT, people would rally, right? But at least you'd expand your buyer pool.

It's just that something about these scenarios doesn't smell right to me.

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Let me tell you more about this "pocket listing". While the listing agent would not allow my nephew to see the house, she said that it was being fixed up with some renovation for sale. His realtor kept a close watch because something didn't seem right....Anyway, first thing, the day it was ready for a showing, it was SOLD. The listing agents buyers got a great house with some updates. Probably the house was worth a lot more with updates. I am familiar with that neighborhood. Obviuosly, the seller got ripped off.

FSBOs are a different story. If you underlist your own house then it's your own knowledge and consequences. If a professional rips you off, shame on them.

I sold my house quickly, and for less than I should, but my benefit was that the buyers didn't bother with an inspection and further negotiations. The closing date was perfect. I also saved on a seller agent commission, so BOTH sides did just fine.

My neighbor sold her house quickly and for a a lot less because she was in a hurry to move. Her job paid for some expenses. It was a job transfer.S he knowingly did a low listing, you cannot blame the realtor there.

In my experience, if the house sells in a day, it's listed too low, or there are other circumstances that contribute to the quick sale. IMO, in a normal market a house should sell in 2-3 weeks time.


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RE: Houses that sell before hitting the MLS

Notto... you assume way too much in your assertations. You have NO facts as to why the seller and Realtor decided to market and sell in the way they did. I believe you are just angry because your relative did not get a chance to bid on the home.


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RE: Houses that sell before hitting the MLS

Posted by ncrealestateguy (My Page) on Wed, Jul 18, 12 at 22:11

Notto... you assume way too much in your assertations. You have NO facts as to why the seller and Realtor decided to market and sell in the way they did. I believe you are just angry because your relative did not get a chance to bid on the home.
***************************************************

Trust me, this realtor was/is bad news. She has had many RE violations. She has been fined by the board etc....for being a dirty RE agent.

I know you RE agents stick together, but please don't tell me about realtors. I've worked in the business, and MAJORITY of realtors are greedy and liars. I have lots of stories that didn't afffect me to back up my distrust of majority of realtors. Money and greed brings out the evil in people.


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RE: Houses that sell before hitting the MLS

NC, I'm sorry, but this pocket listing scenario seems to enrich the realtor too much at the possible cost to the owner not to be suspicious.

People are leery of realtors for a reason. Their compensation isn't as aligned with their clients as it seems at first glance. I'm not sure how I'd fix it, but I know that I don't necessarily trust their advice given what I know about their financial motivations.


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RE: Houses that sell before hitting the MLS

I sold my last house before it was listed. I had already gone under contract to purchase my new house, and it was late fall, so I was rushing trying to get the old house ready to sell before the holidays - I expected to have to spend about $5k improving landscaping, replacing carpet, touching up paint, etc., etc. to get it ready to hit the market. In the meantime, my realtor mentioned that she had some buyers she thought would be interested, and asked if I would mind if her buyer's agent brought them through before we went on the market, since the house was tidy and showed well barring the couple of cosmetic things that needed to be improved. Her buyer's agent brought two couples back a few times, and one of them made an offer that ended up at 98% of asking. I took it, enabling me to close on the sale a week and a half after closing on the purchase of my new house.

I was very familiar with the comps in my townhouse complex and what was moving and at what price in the neighborhood as a whole, and so was comfortable with the price I got. While I think I could have probably gotten another $15-20k had I waited until the spring to put it on the market, that additional profit would have been almost wiped out by the cost of carrying the mortgage on the old house for that period of time, and the costs of making the home improvements to get the house ready to list. Because it was such a quick/easy profit for her, my realtor also had her contractor/handyman fix the relatively minor items on the home inspection's punch list at her expense - probably around $1500 had I had to hire someone to do it.

In short, I got a good price (if not top dollar), the peace of mind of getting the house sold quickly and not having to carry two mortgages, and did not have the hassle having to spend my time and money arranging improvements to get the house in "list-ready" condition, while at the same time packing and getting ready for my move. I was very pleased.


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RE: Houses that sell before hitting the MLS

When you say "before hitting the MLS", how do you know, do you have access to MLS? Houses could very well be listed and sold (in a hot market) before ever making it onto realtor.com or other sites like trulia.com.

Also, I think you are wildly underestimating the convenience of having "a sale in hand" vs. a higher sale in the bush. My goodness, if we got a serious offer from someone before having to put our house on the market, I'd make them cookies and help them move in!

Last but not least, there is no law saying you have to sell to the highest bidder. Some people may prefer selling to someone who is a friend-of-a-friend or seems nice or has expressed a love of the backyard gardens that the homeowner spent years cultivating. I bet some of these rapid sales have a personal factor involved.


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RE: Houses that sell before hitting the MLS

I enter the listings on MLS for my office. They are active on Realtor.com within a half hour or less. I don't know about the other sites.


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RE: Houses that sell before hitting the MLS

>> Last but not least, there is no law saying you have to sell to the highest bidder. Some people may prefer selling to someone who is a friend-of-a-friend or seems nice or has expressed a love of the backyard gardens that the homeowner spent years cultivating. I bet some of these rapid sales have a personal factor involved. <<

This is what happened for me when I sold my condo years ago (2006? Time period). We got an acceptable offer from a single girl who reminded me a lot of myself when I first bought the place. Two more folks had looked at the place in between when she looked at it and brought her parents back to look at it. One of them had their agent contact ours to let him know we'd be receiving an offer the next day. But we wanted to sell to this girl so we accepted her offer anyway. The sale was smooth sailing and selling that place was part of the reason we were able to buy the house we finally bought this year.


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RE: Houses that sell before hitting the MLS

Maybe I'm underestimating the value of a "sale in hand" based on my personal experience - the markets I've sold in have been fast markets with low DOM. "Sale in hand" is just over the horizon in those markets, so I don't really worry as much about that.

And of course there's no law saying you have to get the best price (or fastest sale) for your home, but that IS the usual motivation, right? And that is what people normally hire their realtor for, right?

So it sounds like for those people that don't want the bother of listing their house, this is a good option. And maybe I don't get it because I'd rather do the extra work and get the extra dough. Different strokes and all that.

Good discussion.


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RE: Houses that sell before hitting the MLS

Notto,
The fact that every deal you have done with a real estate agent involved an unethical and dishonest and greedy agent is interesting. Just statistical randomness says that the probability of this is small. In my 11 years of doing this work, I have run into maybe two agents that I knew were looking out for themselves as opposed to their clients. You must have worked in a pithole of an office to be able to say that most agents are liars and cheats.


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RE: Houses that sell before hitting the MLS

And of course there's no law saying you have to get the best price (or fastest sale) for your home, but that IS the usual motivation, right?

I don't think it is. While certainly people are looking to get a reasonable market price for their home, most people aren't selling to 'make money'.

They're selling so they can move to a new job or get the kids in a better school district or because they want to live someplace different that has more (or less) space or someone needs to move into a nursing home or any number of other reasons. The longer it takes to make a sale, the longer they have to put their life on hold.

Also, other than really hot markets, there is generally a pretty limited range as to what a home is worth. Maybe that motivated person who is going to give you a few percentage points over your asking price comes through the door. Maybe you have to keep dropping your price for the next six months.


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RE: Houses that sell before hitting the MLS

Try some Cash buyers to sell your property fast for cash so that you can have an hassle free deal.


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RE: Houses that sell before hitting the MLS

Weird thread bump.


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RE: Houses that sell before hitting the MLS

" But there are very few buyers who will pay more than the appraisal price for a house,"

It all depends on the local market, driven by location, location, location.


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RE: Houses that sell before hitting the MLS

This is how my boyfriend sold his house. We were interviewing realtors and before choosing one we had one call and say they had a buyer. They paid more than any of the other agents suggested list price and we were able to only have to show it once and that was it.

It was in a neighborhood where people stay and move up or look to move into due to its location and schools.

Good luck to anyone trying to do it this way. It can save such a headache in the whole process! Interview many realtors. This way they all know your house will be on the market and they may have prospective buyers already lined up.

I have attached some photos as we did stage/decorate it. But hey, maybe we didn't have to. However, I think it helped.

Here is a link that might be useful: Pics of house sold before hitting the market


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