A year ago, the San Francisco real estate market was wrapping up a year that saw luxury properties on the market in high demand. Fast forward to the end of 2022, and it’s the off-market luxury properties that clocked record-breaking prices. Wondering why?
What Is an Off-Market Sale?
First, let’s address what an off-market sale is for the purposes of this post. It’s where your agent taps into their collective network through word of mouth or sometimes online network forums like Top Agent Network to find, show and obtain an offer from a prospective buyer without that property ever showing up officially online, on a local multiple listing service, or a Zillow-type aggregator website that feeds from them. Often, it is where the listing agent (or buyer’s agent if you have a high profile buyer looking for something specific and unique) picks up the phone, old school-style, and calls agents they believe are likely to have a match for that property or a listing. Dialing for dollars, we call it in the industry.
Why List Off-Market?
There’s no single reason motivating sellers to list a property off-market. Privacy can be the incentive for many – listing off-market ensures that the only buyers through the door have been approved and verified. For others, it’s a litmus test of sorts, a chance to dip a toe in the water to gauge price and interest. Some list off-market to avoid the stress of properly preparing a home for sale, which can often be the equivalent of a mini-remodel involving renovating bathrooms and kitchens, updating lighting, floors, and outdoor spaces, a fresh coat of paint, staging, and usually moving out completely.
What about Those SF Sales in 2022?!
As we’ve just covered, reasons for listing a property off-market can vary. But in San Francisco over the past year, the off-market scenario in the luxury sector was likely a response to rounds of interest rate hikes, tech layoffs, and volatility in the stock market. In spite of it all, the high-end market in San Francisco originally dipped then held relatively steady – with the top three annual sales clocking in between $29.5 and $34.5 million, all off-market:
- 2790 Broadway: a 12,000-sq ft Pacific Heights mansion, sold for $34.5 million
- 3450 21st Street: a Liberty Hill mansion owned by Mark Zuckerberg and sold for $31 million
- 3355 Pacific Avenue: a 1926 mansion spanning 9,081 sq ft, sold for $29.5 million
The three highest on-market properties in San Francisco sold for $17 million, $19 million, and $29 million. And in an interesting twist, most of these properties share similar architecture and specs (minus the $29 million sale of two penthouse condos) which suggests their off-market counterparts did not leave a lot of “money on the table,” despite their lack of public exposure.
Thinking Off-Market in 2023?
There’s no hard and fast rule whether as a seller, you make more money or ‘leave money on the table’ with an off-market sale. It all depends on timing, current market conditions, buyer sentiment and property specific details that don’t fit any specific rules. But in the case of last year’s record off-market sales, it makes sense for a market that is trying to shift away from a strong seller’s market. “I don’t want the world to know I’m currently selling (privacy), I don’t want to damage the reputation of the property by having it accrue days on market with no takers (not sure how the open market will value my property), but if I can get my price I’ll let it go (at the right price, I’m a seller).” Motivations for being the buyer if a property is not officially listed is usually pretty straightforward — that home fits your criteria and you can’t find a property you like as much on the open market either because of low inventory or it’s a very unique home with few that can match or rival it. As a real estate player, it pays to have the agent representing you who has spent their career cultivating good relationships with other agents so all options on and off market are widely available to you. In this respect, experience does matter.