Motivated home buyers skip the bidding wars
Ryan Mathys spent weeks prospecting.
He drove up and down the little avenue in Solana Beach, taking notes and knocking on doors. He scoured public records. He blanketed the seaside neighborhood in northern San Diego County with inquiries.
All the detective work had a dollars-and-cents purpose: to find homes the owners would be willing to sell.
Southern California housing prices are rising sharply, and there’s a shortage of houses available for sale.
So agents like Mathys are resorting to reconnaissance and back-channel networks to find homes that haven’t yet hit the market. They’re cold-calling homeowners with offers and targeting specific neighborhoods with direct mail. Some come bearing bizarre gifts in return for a listing. One agent offered a seller the use of his exotic car; one of his clients offered free dogs.
And they’re chasing so-called pocket listings, homes privately marketed among those in the know. The low-profile nature of the listings makes them hard to quantify. But agents and other real estate experts say they’ve become common in the booming Southland market, where the median home price shot up nearly 25% in the last year.
Mathys — a 10-year veteran who, with his partner Tracie Kersten, specializes in high-end San Diego properties — said he’d never before seen the market this tight or felt the need to get this creative.
His hunt in Solana Beach began this year when Marc Snyder, a technology executive from the East Coast, called him looking for a future retirement home. Snyder, 46, was selective. He fell hard for a particular house on a narrow street. He made an offer but lost out to an all-cash buyer.
So Mathys sent a letter to every home on the ocean-view side of the street to see if someone else was interested in selling. He outlined his client’s personal story and qualifications. Mathys knocked on doors. He searched property records for the names of homeowners and reached out through social media and email.
He finally persuaded the owner of a three-bedroom, two-bathroom ranch home with a panoramic view of the Pacific. Snyder offered $2.15 million for the home, which is set for closing soon. He plans to remodel. The price means a hefty commission for Mathys. (Agents for the buyer and seller typically split a percentage of the sale price.)
Mathys finds his approach worthwhile. “You feel more proactive than sitting there waiting for the next one to come up — and then watching 10 other people swarm all over it,” he said. “It gives you a little bit more of a feeling of control in this market, where buyers don’t have that much control.”
Sellers, by contrast, need only hint at a desire to sell, and a line will form.
“They are spreading the word through whisper campaigns or pocket listings, through the broker network and the Web,” said Nick Segal, a real estate agent who estimates that 30% of the deals at his Partners Trust firm are secured without a listing. “You say, ‘I have got something coming on the market; it’s quiet.’”
Many of the low-profile deals involve investors, who have swarmed Southern California in recent months, closing deals quickly with cash. Whether agents rake in big commissions or go hungry depends on their savvy and network of contacts.
“It is a market where the strong survive,” said Michael Gray, a real estate agent in La Cañada Flintridge.
Pocket listings have been common for some time among celebrities, primarily because of privacy concerns. Now they’re proliferating across the economic spectrum because of the mismatch between supply and demand.
Some sellers want to keep a low profile because of a divorce or a job loss. In other cases, the home may need some work or be undergoing repairs. Marketing it quietly can be a way to test the waters or to secure a hassle-free sale from an investor. Some sellers simply don’t want a lot of strangers traipsing through their homes.
Michael Kerwin, 65, sold his Altadena home this month without ever listing the two-bedroom, one-bathroom bungalow. His agent, Addora Beall, found an investor who snapped up the property within days for more than the asking price. The all-cash purchase closed in seven days, faster than it would have with a buyer who needed a mortgage.
“I could have waited for more money. But I told her the price I wanted to get ... and she got just a little bit more,” Kerwin said in a phone interview from Amarillo, Texas, on his way to Pittsburgh to live with his new bride. “I was a motivated seller ... but I didn’t think it would happen quite this fast.”
Agents representing investors often waive their half of the commission to sweeten the pot for the seller’s agent.
Ron Tanzman, an agent with Rodeo Realty in Calabasas, routinely gives up his cut to secure a deal for investors, who pay him separately. He has taken more extreme measures, such as offering a recent seller the use of his sports car — a 2012 Audi R8 Spyder, a model that starts around $130,000 — for up to a year as part of the deal. That deal is still pending.
He advises motivated buyers to use similar attention-grabbing gimmicks. One of them, a pet store manager, has offered two free dogs of a seller’s choice. (It hasn’t worked yet; he’s still in the market for a home.)
For buyers, the attraction of off-market sales is obvious. They allow for a more leisurely negotiation without the anxiety of competitive bidding. Many buyers are willing to pay more than asking price for the opportunity.
Martin Tirtasana faced a competitive market last year when trying to find a fixer-upper. He then turned to an agent, Michael Izquierdo, who connected him with the seller of a five-bedroom, two-bathroom duplex in El Sereno. Negotiating directly with the seller, Tirtasana came away feeling he paid a fair price.
“That really helped to get a good deal on it,” he said. “There was no bidding war.”
Izquierdo, the agent who put that deal together, runs a pocket listing website that shows off homes using YouTube video tours set to up-tempo music. Many clients use his site to test-market their homes, gauging reaction to a price, before listing them in the Multiple Listing Service. Others are house-flipping investors, who might want to unload a property before completing renovations intended for retail buyers.
In a market with tight inventory, focusing on pocket listings is simply a way of staying competitive, Izquierdo said. His brokers pounded the pavement hard for listings, working contacts and knocking on doors, he said. And he has no problem listing a property the traditional way.
For Mathys, the agent who found the home in Solana Beach, finding unlisted homes is just a reality of the job right now.
For another client, a doctor whose daughter was attending UC San Diego, Mathys did an analysis of the surrounding area and found 415 properties within walking distance. He sent postcards to all of them, then went through expired listings and contacted the owners of those homes.
He found two leads from that hunt, one of which he thinks will pay off.
“It’s kind of a sign of how crazy things have gotten,” he said.