A hidden ‘treasure’ of American homes is being bought and sold on a secret real estate market – where contracts are traded before ‘For Sale’ signs even appear.
Experts say the number of properties being sold this way is on the rise as nervous homeowners seek to avoid having their homes languish on Zillow for months.
The trend is driven by an uncertain open market, which has been hammered by rising mortgage rates and falling house prices in recent weeks.
Luxury estate agent Scott Ehrens, of Palm Springs, said: ‘The market has been so hot for two years that there’s no reason for sellers to get out of the market because they knew they could get a good price.
“But it’s definitely becoming more of a thing now that sellers and real estate agents are afraid to put houses up for sale and they’re not selling right away.”
Jen Naye Hermann and her husband Matt, both 35, were exhausted from the constant bidding wars when they sought help from a real estate buying agent.
The Hermanns had a budget of $800,000 and were looking for somewhere on the North Shore. They are pictured with their dream home
The so-called “secret” market involves buyers researching their dream properties and contacting owners directly – via cold calls, handwritten notes or even social media posts – to see if they are ready to sell.
Alternatively, they can enlist the help of a buying agent – specialist estate agents who typically charge a fee of up to 5% of the purchase price of the property.
Often these agents have insider knowledge of the area and know which owners might be interested in selling.
The trend benefits sellers who are increasingly concerned about their home’s so-called “digital footprint,” which shows how long their property has been on the market. When homes have been listed for too long, many homeowners feel pressured to lower the asking price.
Meanwhile, for buyers, it can help them avoid aggressive – and costly – bidding wars for properties.
That was the incentive for Jen Naye Hermann and her husband Matt, both 35. The couple had started house hunting in 2022 but were quickly exhausted by constant bidding wars.
They were looking to escape downtown Chicago in favor of a more relaxed post-pandemic North Shore lifestyle as they could work full-time remotely.
Luxury real estate agent Scott Ehrens, of Palm Springs, said a declining real estate market is making homeowners nervous about selling through open channels
They had a budget of $800,000 and were looking for a home big enough for their two children – Archie, one, and Emmie, four.
“We must have looked at about 20 properties, but nothing was right,” Jen said.
“Working with a buying agent, we managed to find a four-bedroom house that hadn’t been for sale since the 1990s.
“The agent received a commission of around 2.5%, but it was worth it for us. It meant we didn’t have to compete with other buyers.
For decades, buying off the market has been a well-established path for America’s wealthiest.
Ehrens said wealthy sellers often don’t want a lot of people walking around their house to view them.
“In some of these homes, the art of the house is more valuable than the property itself,” he told Dailymail.com.
But now more middle-income families are co-opting the trend as they become disillusioned with the turbulent free market.
The property market has boomed during the pandemic as the lockdown has left homeowners wanting bigger homes with more outdoor space. Redfin figures show the average house price rose 26% in the year to May 2021.
However, in recent months a “correction” has started to take place, with house prices suffering their biggest annual decline since 2012.
Higher borrowing costs stifled buyer activity, which in turn discouraged sellers from listing their homes, which further weighed on inventories.
Drake Johnson, 27, and his wife Shelby, 32, were looking for a home during the peak of the market last year when they decided to look off-market
The couple bought a property in North Carolina for $100,000 after learning it was going to be foreclosed
Drake Johnson, 27, and his wife Shelby, 32, were looking for a home during the peak of the market in 2021 when they decided to consider alternative channels.
Drake, a real estate agent from North Carolina, began looking for homes that were going to be foreclosed in his area.
From there, he called the owners and asked if he could take the properties away from them.
“A lot of people hung up on me,” Drake told Dailymail.com. “But we ended up finding someone who sold it to us for $100,000.
“The property was a mess when we bought it. But we renovated everything and now we couldn’t be happier.
Drake has also found dozens of properties for his clients by buying off-market.
“I did direct mail, mass texting, mass calling and Facebook ads to find these off-market homes,” he said.
The Johnsons spent more than a year demolishing the property and renovating it. Pictured: the kitchen now
‘The property was a mess when we bought it. But we renovated everything and now we couldn’t be happier,’ Drake said
Home prices have suffered their biggest annual decline since 2012, according to data from brokerage Redfin
Similarly, Ashley Farrell says she found client properties by contacting potential sellers on Instagram and even posting handwritten notes to them.
“I was once sitting with a buyer who opened up Google Earth, pointed to a house and said ‘this is my dream house,'” she said.
“It wasn’t on the market and hadn’t been since the 80s. But now he’s the proud owner – all thanks to a handwritten note.
But other experts urge caution before buying a home this way.
Property expert Michael Winkler, owner of Sell Home Today, said: “Off-market channels are a bit like a hidden treasure trove of properties that only a select few have access to.
“But when you buy a house this way, you’re basically taking a bit of a risk because you might not have access to all the information that you would have if you were buying a house listed on the public market.
“Without the same level of transparency and information that you would have when buying a publicly traded home, the level of uncertainty is definitely higher.”
Origin: | This article originally belongs to Dailymail.co.uk