In the South Bay, an always heightened topic of conversation are “off-market” home sales.
If you are unfamiliar with the term “off-market,” it is a home sale transaction that occurs without the property ever going to the MLS, thus the off-market designation.
I have numerous conversations monthly regarding off-market inventory or off-market property sales when speaking to clients, agents, and even friends in various South Bay neighborhoods. It is interesting to see the psychological impact on buyers, sellers, and agents having insider information on a property…or not having that insider information.
Furthermore, it is even more fascinating to see how both sides of the picture is painted. Oftentimes, I hear one of the following…
Seller: “I sold my home for a higher value and way less stress due to the exclusivity of it being off-market.”
Buyer: “We found the property off-market with no competition and bought the property for less than what it was worth.”
It is hard for both parties to be right.
The last time I wrote a piece on my thoughts regarding off-market transactions was over five years ago. In the near feature, I will consider writing about this topic again to adjust for changing times and my evolving thoughts on off-market deals.
Generally, I have a negative opinion about off-market home sales and believe that MLS sales result in the best results for buyers and sellers alike. My thoughts are that off-market transactions are only suitable for 1% of home sales here in the South Bay.
I will save the discussion, my opinions, and the negative/positive aspects of non-MLS sales for another day.
For this week, I am going to cover a few off-market sales to pull back the curtain for some readers who may not know of these types of transactions, or readers who are aware but without access to data or specific addresses.
Below you will find:
1. Information on how many off-market sales occurred last month.
2. An off-market sale I recently completed for a client.
3. Two off-market sales to examine.
Let’s get into it!
Sales Data on Off-Market Transactions
While no one has access to all off-market inventory (or even a majority), title companies record just about every deed, including off-market sales.
As a result, there is data, and even specific addresses, we can use to follow the transaction trends and analyze specific addresses that have traded hands.
Let’s start with some big numbers.
The Beach Cities, specifically El Segundo to Redondo Beach, saw a total of 27 residential sales that sold off-market in the month of September.
Compare that to about 130 MLS Beach Cities home sales in September.
When it comes to the Palos Verdes Peninsula, the residential market saw a total of 13 sales off-market in the month of September.
That is compared to about 55 sales on the Palos Verdes hill that were taken to the MLS in September.
As you can see that is about 17% of total transactions in the Beach Cities and about 19% of total transaction in the Palos Verdes marketplace in September. Sometimes that number is vastly lower and sometimes it is slightly higher.
For readers interested in these type of statistics, I can dive even deeper and provide a short report each month on the blog. Please let me know, and we will consider posting more often.
Recently Off-Market Sale for a Client
Recently, I completed a transaction for a client off-market on The Strand in Hermosa Beach. Now that the escrow is closed, I can talk openly about it.
My client owned a Strand property on a lot and half with one of Hermosa’s original homes, along with a second unit in back. Not only was it a historical waterfront property oozing loads of charm, but it also included approved Coastal Commission plans to build a new construction modern home.
We listed the property on the MLS back in April of 2022, as interest rates were beginning to jump higher, and The Strand was starting to see sales slow down significantly. So the timing was not ideal.
44 The Strand, Hermosa Beach
5 beds, 3 baths, 2,300 sq. ft., 3,607 sq. ft. lot
Asking Price $7,300,000
In discussions with my seller, I advised that the property was worth in the six million range and my recommended asking price was $6.9 million.
My client, in no rush or need to sell, decided to list at $7.3 million.
Unfortunately, the timing was not right in the shifting real estate landscape, and we let the listing expire in November of 2022.
During the listing period, we verbally negotiated with many parties and even saw a couple of written offers…all too low, however.
That said, throughout 2023, buyers continued to communicate with us until ultimately, one came to the table in September with an offer that was eventually inked at $6.5 million.
We closed last week.
While I am not a fan of off-market sales and truly believe the MLS finds the best and highest price, we went forward with the buyers since we had previously gone to the MLS and the open market had seen the property entirely. And, this was a buyer with early interest while on the MLS who eventually stepped up to the table after our listing expired.
My client had tested the market, received many verbal and written offers to gauge its market value, and was patient enough to wait for a buyer willing to pay an acceptable price.
And, that buyer was originally found while the property was listed on the MLS, only to consummate the deal a year later.
In my mind it was a success, and a fair deal to both parties.
Most importantly, I did not lose sleep at night as we understood market value and demand after our half year stint on the MLS.
Looking at Two Off-Market Sales
As you read above, there were 40 properties I could have highlighted for this section. To narrow it down, I decided to focus specifically on one beach city and one Palos Verdes sale.
I could write a blog each week and still not cover all of the off-market activity, but hopefully this gives you a nice taste of what goes on off the MLS.
2305 Ralston Lane, Redondo Beach
3 beds, 2 baths, 1,092 sq. ft., 7,409 sq. ft. lot
Asking: $1,303,000 (recently reduced to $1.286M)
This property is interesting because it was acquired off-market by the publicly traded proptech company, Opendoor.
This home was purchased on September 1st of 2023 for $1,202,000 according to assessor records. After just six weeks, the property was listed on the MLS asking $1,303,000.
That is a $101,000 mark-up for a home that looks to have gotten the “lipstick on a pig” treatment – paint, carpet, and some cleaning.
It has now been listed for over two weeks and no deal has been made just yet.
And while $101,000 is a nice day at the office for coordinating paint, carpet, and cleaners, it is easy to see why this company’s stock price is nearly $0.
If the price is slightly negotiated down, a buyers agent fee is paid, and holding/fix-up costs…not to mention, expensive executive salaries, wall street administrative expenses, the high cost of capital, etc., I think it is easy to see why the company is losing money hand over fist.
And this property will likely be a loser, or at the very least an extremely poor ROI.
Next up is a Valmonte property in Palos Verdes Estates.
4108 Via Solano, Palos Verdes Estates
4 beds, 3 baths, 2,413 sq. ft., 18,936 sq. ft. lot
Sold: $3,273,500 (August 2023)
Situated on one of the larger lots in Valmonte, this home quietly traded off-market in August for just under $3.3 million.
This property’s closest recent comp would be an MLS sale in “The Grove” of Valmonte below:
3215 Via La Selva
4 beds, 3 baths, 2,748 sq. ft., 12,427 sq. ft. lot
Sold: $3,222,610 (August of 2023)
The trade-offs here are that one house is larger, but the other has a significantly bigger lot.
But ultimately, it traded around where comps said it should. If the seller believed they were saving on commissions, time, and headaches – then they were likely happy with the deal.
On the flip side, if this home posted on the open market MLS with its massive almost half-acre lot which includes a sport court, pool, and the ultimate south-facing backyard and a one-level home…there are definitely some pundits that would guess this one could sell for a heck of a lot more.
Further, we must consider that its new construction neighbor is making a deal in under two weeks asking $5.3 million on a much smaller lot.
4036 Via Solano
5 beds, 5 baths, 3,925 sq. ft., 13,802 sq. ft. lot
In Escrow: $5,300,000
One could argue the off-market Solano sale is at retail land value as a home of the same size and caliber of this new construction could be built for around $2 million and fetch even higher with its larger lot.
But, I guess we will never know.
Final Thoughts
So, there you have it! Above is a small glimpse into the off-market business like I have never written before.
Hopefully, you learned some interesting statistics on how many sales actually occur, as well as how I approach a sale for a personal client.
Additionally, I think highlighting a few addresses that trade from time-to-time is a nice exercise for our readers.
If you would like a blog on off-market transactions more often, or even a monthly and/or quarterly report like I do with median prices and affordability, then please comment, DM, or send me an email.
The more votes we get, the better the chance you will see this again.
Hope you had a great Halloween and don’t forget to set back those clocks this weekend!
Cheers.