Do private real estate listings sell for less than those publicly marketed?

In today’s fast-paced real estate market, sellers have more options than ever when it comes to marketing their properties. One increasingly popular choice, particularly among sellers looking for privacy or convenience, is to sell off-market, using "pocket listings" or private networks rather than publicly listing their home on the MLS (Multiple Listing Service). But does this approach come at a cost? Let's dive into what recent data reveals.

What Are Off-Market and Pocket Listings?

First, let’s clarify terms. "Off-market" or "pocket listings" are homes marketed privately rather than publicly through the MLS. Agents typically offer these listings directly to a select group of buyers or through internal networks within their brokerage.

The Hidden Costs of Going Off-Market

Recent studies provide compelling evidence that off-market listings typically sell for less than homes publicly marketed on the MLS. Zillow’s research found that nationwide, homes sold privately averaged around 1.5% less in sale price. The impact was even more pronounced in California, where sellers saw an average price penalty of about 3.7%, translating to roughly $30,000 less on a typical home.

This reduced sale price primarily stems from lower buyer competition. Public listings on the MLS reach thousands of potential buyers, creating a competitive environment that often drives up sale prices through bidding wars. Off-market listings, with their limited exposure, generally don’t benefit from this dynamic.

Time on Market: The Misconception of Speed

A common misconception is that pocket listings sell faster due to their targeted approach. In reality, these listings frequently take longer to sell because fewer buyers see the property. Data shows that only a small percentage of private listings sell without eventually hitting the MLS, and homes initially marketed privately but later publicly listed usually sell faster once broadly exposed.

Who Benefits from Private Listings?

Despite their drawbacks, private listings can still make sense in specific circumstances:

• Privacy: Celebrities or high-profile individuals might prefer confidentiality.

• Convenience: Sellers who wish to avoid extensive showings or open houses.

• Immediate Buyers: Sellers who already have a specific buyer in mind.

However, sellers choosing privacy or convenience should be aware they're often sacrificing a significant chunk of their potential sale proceeds.

Transparency and Fairness in the Market

The real estate industry emphasizes transparency and fairness. The National Association of REALTORS® introduced the Clear Cooperation Policy in 2020, mandating broader market exposure to ensure all buyers have equal opportunities. Off-market listings inherently limit buyer access, raising concerns about equity and fairness.

The Bottom Line for Sellers

For most homeowners, especially in competitive markets like California, publicly listing your home on the MLS remains the most financially advantageous choice. The broad exposure typically results in higher sale prices, quicker sales, and better overall outcomes. While off-market deals might seem appealing for privacy or convenience, the data consistently shows they typically cost sellers significantly in terms of final sale price.

In short, if maximizing your home's sale price is your primary goal, full public exposure is undoubtedly your best strategy.