Why I don't sell a home before it publicly lists
I call it the dark side of the industry - owners persuaded to sell their home before it is put on the market. Somehow people have been convinced that this is a good thing. Agents actually brag about selling a house before it hits the market. I don't do it and I don't think it is good for home owners. Who actually benefits when a home is sold before it is listed publicly? Let's break it down and see where the benefit lies when a home is sold before entering the market.
Does the seller benefit by selling their home before hitting the market?
It should be glaringly obvious that the seller does not benefit financially to sell their home before exposing it to the entire pool of buyers in the market. It may sound exciting - even brag-worthy. The truth is, the only benefit is that the seller doesn't have to clean the house and be displaced for showings. There is no financial benefit at all. Since the entire pool of buyers was not aware of the home, the seller cannot be sure that he got the highest and best offer. There are a lot of qualified buyers out there, many willing to pay over asking price and some offering better terms than others. In my opinion, the seller loses the most in this situation. When I represent a seller, I will not allow the home to be sold until maximum exposure is given to the property.
Does the buyer benefit by purchasing a home before it hits the market?
This one is a bit tricky. I do believe that in some cases a buyer can benefit by finding a home that has not hit the market yet. It is often difficult for some buyers to purchase a home when a home sells in a matter of hours - for over asking price - to cash buyers. Some buyers can't compete with that. In those cases, if a buyer has an opportunity to purchase a home before the competition, then they should. I have often scoured neighborhoods looking for unlisted homes for my buyers. However, there are other times where this is not the case. Often, buyers are better off letting the market show the seller that the price is off target. A well-timed offer to a desperate seller can put the buyer in the driver's seat of a great home purchase.
Does the agent benefit by bringing their buyer to their seller client before the home hits the market?
Yes. This is exactly why I don't do it. It goes against the agent's responsibility to the client. I've always been told to follow the money. My investigation into this practice has revealed that the agent benefits the most in this situation. My source tells me that a particular large brokerage chain actually pays their agents a higher rate to bring their own buyers to their listings. In doing this, the agent is profiting more than if they had exposed the listing to the market. Not only that, they are collecting commission fees for services barely rendered. And bragging about it. This is the dark side to the industry. Granted, it is possible for a broker to have a listing client and a buyer client that mutually fit together. It is possible that after maximum exposure, the best situation for both buyer and seller is within a single brokerage. It does happen, but it should be handled carefully.