Meet the savvy real estate buyers who find their dream home in the ‘secret’ market
A hidden ‘treasure trove’ of American homes are bought and sold on a secret real estate market – where contracts are exchanged before ‘For Sale’ signs even go up.
Experts say the number of properties being sold this way is on the rise as nervous owners try to keep their homes from languishing on Zillow for months on end.
The trend is driven by an uncertain open market, which has been plagued in recent weeks by rising mortgage rates and falling real estate prices.
Palm Springs luxury broker Scott Ehrens said: “The market has been so on fire for the past two years that there is no reason for sellers to go off-market because they knew they could get a good price.
“But it’s definitely becoming more of a thing now that sellers and realtors are afraid to put houses up for sale and not sell them right away.”
Jen Naye Hermann and her husband Matt, both 35, were exhausted from the constant bidding wars when they sought the help of a buying agent.
The Hermanns had a $800,000 budget and wanted somewhere on the North Coast. They are pictured with their dream home
The so-called ‘secret’ market entails buyers looking for their dream properties and contacting the owners directly – via cold calls, handwritten notes or even social media messages – to see if they are willing to sell.
Alternatively, they can enlist the help of a buyer’s agent – specialist brokers who usually charge a fee of up to 5 percent of the property’s purchase price.
Often these estate 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 home has been on the market. When homes are on the market for too long, many owners feel pressured to lower the asking price.
Meanwhile, it can help buyers avoid aggressive — and costly — property bidding wars.
This was the driving force for Jen Naye Hermann and her husband Matt, both 35. The couple had started looking for a home in 2022, but were quickly exhausted by ongoing bidding wars.
They attempted to flee downtown Chicago in favor of a more laid-back lifestyle on the post-pandemic North Shore, as they could work remotely full-time.
Luxury broker Scott Ehrens, of Palm Springs, said a cooling real estate market is making owners nervous about selling through open channels
They had a budget of $800,000 and were looking for a house big enough for their two children – Archie, one, and four-year-old Emmie.
“We must have looked at about 20 properties, but nothing was right,” said Jen.
‘Working with a buyer’s agent, we found a four-bedroom house that hadn’t been for sale since the 1990s.
‘The broker received about 2.5 percent commission, but it was so worth it to us. That way we didn’t have to compete with other buyers.’
For decades, buying off-market has been an established route for America’s wealthiest.
Ehrens said wealthy sellers often don’t want many people strolling through their homes for viewings.
“In some of these homes, the art in the house is more valuable than the property itself,” he told Dailymail.com.
But now more and more middle-income families are choosing the trend as they become disillusioned with the turbulent open market.
The real estate market exploded during the pandemic as lockdown forced homeowners to want larger homes with more outdoor space. Figures from Redfin show that the average house price shot up by 26 percent in the year to May 2021.
However, a ‘correction’ has begun in recent months, with house prices experiencing their biggest annual decline since 2012.
Higher borrowing costs have suppressed buyer activity, which in turn has discouraged sellers from putting their homes on the market, putting further pressure on inventory.
Drake Johnson, 27, and his wife Shelby, 32, were house hunting during the market peak last year when they decided to look outside the market
The couple bought a home in North Carolina for $100,000 after learning it was going up for sale
Drake Johnson, 27, and his wife Shelby, 32, were house hunting during the 2021 market spike when they decided to consider alternative channels.
Drake, a North Carolina real estate agent, began researching homes for sale in his area.
From there, he cold-called owners and asked if he could take over the property from them.
“A lot of people hung up,” Drake told Dailymail.com. “But eventually we found someone who sold it to us for $100,000.
“The property was a mess when we bought it. But we renovated it all and now we couldn’t be happier.’
Drake has also found dozens of properties for his clients by buying off-market.
“I’ve done direct mail, mass texts, mass calls and Facebook ads trying to find these homes off-market,” he said.
The Johnsons spent more than a year demolishing and renovating the property. In the photo: the kitchen now
“The property was a mess when we bought it. But we renovated it all and now we couldn’t be happier,” Drake said
Home prices suffered their biggest annual decline since 2012, according to data from real estate firm Redfin
Similarly, Ashley Farrell says she’s found client properties by reaching out to potential sellers on Instagram and even posting handwritten notes to them.
“I once sat with a buyer who pulled up Google Earth, pointed to a house and said, ‘that’s my dream house,’” she said.
“It wasn’t on the market and it hasn’t been since the 1980s. But he’s the proud owner now – all thanks to a handwritten note.’
But other experts urge caution before buying a home this way.
Real estate 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 if you’re buying a house this way, you’re essentially taking on a bit of a risk because you may not have all the information you would if you were buying a house that’s on the public market.”
“Without the same level of transparency and information that you would have when purchasing a listed home, there is certainly more uncertainty.”