The New York TimesSeptember 20, 2013No open houses, no advertising and not a single online photo. And yet a $27 million town house on the Upper East Side and an $850,000 two-bedroom co-op in Lower Manhattan had no problem finding buyers in the past six months. Neither home was listed on the open market.
Off-market deals, known as whisper listings, have long been the purview of the ultra-high-end market. Certain properties, often with price tags of $20 million or more, are shopped with a shroud of mystery among a small circle of well-connected agents instead of being put on the market for the world to see.
Now this hush-hush approach has spread to many price points, including apartments below $1 million, as sellers realize the advantage they have, thanks to the lack of apartments available for sale in Manhattan.
“Sellers feel cocky. Sellers feel like they have the ball,” said Brian K. Lewis, an associate broker at Halstead Property who in the last six months has taken on seven whisper listings from clients who do not want to list their apartments, but are willing to entertain offers. These range from a two-bedroom for $1.295 million on the Upper West Side to a downtown loft for $12 million. “In an improving economy with no inventory, they have the asset people want.”
The number of apartments for sale in Manhattan at the end of August was at its lowest level in at least 13 years, according to Miller Samuel, the appraisal firm. The shortage has forced real estate agents to use aggressive tactics to drum up inventory, from trolling through expired listings in the hopes of reviving a dead deal to sending letters to owners in choice buildings to try to persuade them to sell.
No one knows how many properties are sold through a well-placed word, but off-market tactics appear to be on the rise in major markets where there is a scarcity of inventory, including San Francisco, Los Angeles and Miami.
“There’s more of it now than ever before,” said Shaun Osher, the chief executive of the brokerage firm CORE in New York, noting he has a database of about 50 apartments owned by people willing to sell given the right circumstances. “We as brokers know everything is always for sale at a price.”
Plenty of circumstances arise in which it makes sense to keep a listing out of the limelight, ranging from celebrities who don’t want to read about their property transactions in the tabloids to sellers who would rather not upset tenants prematurely. Some sellers hope to avoid the hassle involved in getting a property in shape to show. Others don’t want a lot of people traipsing through.
In March, for example, a five-bedroom town house at 12 East 76th Street on the Upper East Side sold for $27 million in a whisper sale without any wear and tear to the carpets. The place traded after just three viewings.
Yet most brokerage firms are of two minds about off-market deals. On the buy-side, they are largely for it. After all, quietly gaining access to an off-market listing means less competition in a market where open houses often provoke a stampede. Uncovering a whisper sale — by say, chatting up the doorman — for a client unable to find something on the open market ultimately benefits that buyer.
On the sell-side, brokerage firms tend to discourage whisper listings. For one, the secretive nature of whisper listings means some brokers will inevitably be shut out of a possible deal. Moreover, sellers hoping for a quick full-price sale through a whisper listing, they say, limit the buyer pool and thus, their chance of getting the highest possible price.
“The seller is always going to be best served by making sure the property is exposed to the widest possible marketplace,” said Frederick Peters, the president of Warburg Realty.
In addition, a whisper campaign can be a tall order. “It’s sort of like saying, achieve this great price and do all of this but don’t tell anybody about it,” said Hall F. Willkie, the president of Brown Harris Stevens.
Finally, if discretion doesn’t move the merchandise, brokers can end up doing a lot of work for nothing.
In a whisper campaign, the broker frequently has no signed contract with the seller, a scenario commonly referred to as a “pocket listing.” When there is a contract, it often mandates a quiet sale. If the broker finds a buyer, he or she often collects both sides of the commission.
Whatever the arrangement, brokers must go with what the client wants. “It’s really up to the seller in terms of how they want a real estate broker to represent them,” said Neil Garfinkel, the broker counsel to the Real Estate Board of New York. The association requires members to share listings within 24 hours after obtaining an exclusive listing, “unless the seller instructs them otherwise,” according to the bylaws.
For some sellers, an off-market deal is often worth any loss they may take, especially if the target price is met. “It could save you some aggravation,” said Pamela Liebman, the chief executive of Corcoran. Ms. Liebman sold her two-bedroom Miami home in an off-market deal earlier this year after receiving a call from an agent with whom she had previously worked who had a buyer who wanted it badly.
“I said I would do it as long as they gave me everything I wanted,” Ms. Liebman said. Her terms included a dollar-per-foot asking price that she said was a record for the building and a five-month option to lease the property back while renovating a new, larger Miami home.
“I wanted time to finish my renovation and I didn’t want to be in between apartments,” she said.
Such under-the-radar deals also can be advantageous for buyers, even if they end up paying a bit more. “When you get to the building and there are 15 people waiting in the lobby and you go up and another 12 people are in the apartment, you begin to think, ‘O.K., I’m never going to be able to find an apartment,’ ” said Jennifer Abrams, who works in the fashion industry in Manhattan.
Ms. Abrams searched for a large one-bedroom in Chelsea and the Flatiron for more than a year, only to be outbid when she finally fell in love with a place listed for $1.6 million at 49 East 21st Street, a boutique condo building.
After resigning herself to renting for another year, she received a call from her agent, Michael Rubin of CORE.
Mr. Rubin had just sold an apartment that needed a gut renovation to a client who would be moving from a one-bedroom at the Yves Chelsea, a glassy condo building at 166 West 18th Street — where Ms. Abrams had previously rented and had expressed interest in buying.
Though Mr. Rubin’s client wasn’t planning on listing the place until his new one was finished, he had told Mr. Rubin he would entertain offers from flexible buyers who could wait to move in until his renovation was completed — however long that might be.
“I was O.K. with kind of hanging loose,” said Ms. Abrams, who saw the apartment in April and quickly signed a contract. “It was my way of mitigating the stress.”
In some ways, going off the market in search of apartments for clients is “a throwback,” said Dottie Herman, the chief executive of Douglas Elliman. Before the advent of online services, brokers knocked on doors and cold-called owners to find new business, she said.
After the entry of online listing services, she said, “they didn’t do that extra work. They didn’t have to.”
But new technology is facilitating off-market deals. In 2006, Zillow.com introduced “Make Me Move,” which lets homeowners name a price that would compel them to sell. There are 60,000 such listings on the site, with more than 1,000 homes added each week, according to the site.
Yapmo, a Chicago mobile software company that started in January, allows brokers within a given firm to virtually whisper about listings through a mobile app so they can engage directly about properties before they hit the market, without sifting through mounds of e-mail.
Since adopting the software in January, @properties, a Chicago-based brokerage firm, has had an average of 41 properties per month go into contract before being put on the market, or roughly 5 percent of overall transactions.
In today’s tight market, quiet listings are also born out of the concerns of sellers worried about relocating in a climate of scarce listings.
“A lot of owners want to sell but they don’t know where they’re going next,” said Raymond Dillulio, an agent with Douglas Elliman who is handling the whisper listing of a $23 million Greek Revival town house on Washington Square Park. Such clients, he said, feel more comfortable “rolling it out quietly” to see what they can get. “They don’t want to be pressured,” he said.
Just last week, Nanette Shaw, who founded the Shaw Team at Coldwell Banker Bellmarc with her business partner Isa Goldberg, closed an off-market deal at Chatham Towers at 170 Park Row in Lower Manhattan. While showing a home in the building last March, they had been approached by the son of an elderly woman who had lived in a two-bedroom apartment there for 44 years.
“He explained that he would like to sell his mother’s apartment so that she could, at some point, when she’s ready, move to Bronxville, closer to him and his family,” Ms. Goldberg said.
Keeping the listing quiet allowed them to be sensitive to the mother’s schedule and avoid the huge job of de-cluttering an apartment with decades of personal items. Ms. Goldberg and Ms. Shaw listed the place for $850,000 in Bellmarc’s internal database in March and put the word out to brokers with clients who had expressed interest in two-bedrooms in the building. They showed it three times and quickly received an offer for the full asking price. Another buyer offered $50,000 more. The initial buyer, represented by Pascal Blacque-Belair at Douglas Elliman, matched that offer and closed last week.
“I think they paid a fair price,” Mr. Blacque-Belair said. “Who knows — had it been listed and they had gone into a bidding war with multiple buyers they may not have gotten it.
“It was a quiet kind of bidding war,” he said.