Private Listings Shift Sales Dynamics, Potentially Increasing Transaction Costs for Hawaii Real Estate Owners
The Hawaii real estate market is increasingly influenced by private listings, a trend that emphasizes the critical role of agent relationships in high-value transactions. While these off-market sales can offer discretion, they also risk reducing transparency and potentially increasing the complexity and cost of transactions for both buyers and sellers if not managed strategically.
The Shift Towards Private Sales
Hawaii's competitive real estate landscape is seeing a rise in private sales, where properties are marketed and sold exclusively through agent networks without public listing. This approach, often highlighted by top-producing agents, allows for a more controlled and discreet transaction process. However, it means that properties not within these established networks may struggle to achieve broad market exposure, potentially impacting their ultimate sale price and the ease of transaction. This shift is not limited to ultra-luxury properties but is becoming a more common strategy across various segments of the market.[^1]
Who's Affected
Real Estate Owners (Property Owners, Developers, Landlords): For property owners looking to sell, reliance on private listings means that strong relationships with well-connected real estate agents are paramount. If a property owner is not actively engaged within these networks, they risk their property not being seen by a significant pool of potential buyers. This could lead to longer listing times, a need for price adjustments to incentivize off-market interest, and potentially lower final sale prices compared to properties that benefit from open market exposure. Developers relying on quick sales of inventory or individual landlords selling off units may find their exit strategies complicated if their brokerage lacks robust private deal-making capabilities.
Investors (Real Estate Investors, Portfolio Managers): Investors may find opportunities in private listings to acquire properties before they hit the open market, potentially at a negotiated price. However, this trend poses significant challenges in accurately assessing market value. The absence of public comparable sales data (comps) makes due diligence more complex and reliant on the broker's valuation. Investors need to ensure their agents have strong local market knowledge and can provide reliable data to justify offer prices. Furthermore, understanding the demand dynamics – true buyer interest versus a limited pool of bidders – becomes crucial for making sound investment decisions and avoiding overpayment. This can disproportionately impact investors who do not have deep, pre-existing relationships with brokerage firms actively dominating the private listing space.
Second-Order Effects
The increasing reliance on private listings can create a bifurcated market. Top agents with strong networks gain significant leverage, potentially commanding higher commissions or influencing pricing more dramatically. For owners outside these networks, the path to market can become more arduous, possibly requiring deeper discounts to attract any attention. This can lead to a situation where market data becomes less reliable, making it harder for all participants, including appraisers and lenders, to accurately gauge property values. Ultimately, this can trickle down to affect broader market liquidity and the accessibility of real estate for average buyers.
What to Do
These trends suggest an ongoing evolution in how Hawaii real estate transactions are conducted, with a growing emphasis on relationships over broad market exposure. As this market dynamic continues, all participants should be aware of its implications.
For Real Estate Owners:
- Action: Focus on building or leveraging relationships with real estate agents who have a proven track record of private sales and strong local networks. Inquire about their network access and marketing strategies for off-market properties.
- Watch: Monitor the listing duration and the number of showings for properties sold privately versus those sold on the open market within your specific neighborhood. If private sales appear significantly slower or at lower price points, it indicates a need to re-evaluate your agent selection or marketing approach.
For Investors:
- Action: Prioritize due diligence and ensure your chosen brokerage can provide comprehensive comparative market analyses, even for private listings. Seek agents who can demonstrate access to a wide pool of potential buyers or sellers, not just a closed network.
- Watch: Track the average time on market and discount from asking price for both private and public sales in your target investment areas. If private sales consistently show longer durations or larger discounts without clear justification, this may signal a less efficient market or an over-reliance on few connections.
