SOLD before listed! Shadow sales, a new trend and problem!?

Real Estate Agent with Thompson Company, REALTORS® MD594797

"Impatient Buyers Target Homes Before They Go on Sale" by Jim Buchta, (MCT) - "House hunters frustrated with the market's supply of homes have shifted their search from the streets to underground. More buyers are targeting homes that haven't yet hit the market, a trend agents say will grow as inventory shrinks and the mismatch of what's available and what's desired continues." (full story)

This story, highlighted by RISMedia, immediately caught my attention. Just a few months ago I wrote a blog "Have Buyer, Need House: Where Did the Inventory Go?" describing the dilemma of shrinking inventory in certain areas and price ranges and waiting for the right listing to come along. Our pot did boil not too long after. My buyers and I jumped on a listing as soon as it hit the market, literally wrote an offer in the middle of the night, thus being the first ones in and beating out 2 other offers.

Very recently, a condo listing of mine was solicited by interested buyers long before I officially entered it into the MLS and an offer was presented as soon as I did. It's a small community with little to no active inventory, word traveled fast and good ol' fashioned networking procured the contract.

It's no coincidence, however, the last sale in that same community was such a "back-pocket deal" as described in the article. The buyer was waiting for a new listing and wasted no time as soon as he learned about it got the Intel! That condo never even hit the market! And therein lies a major problem with those shadow sales, something that the article failed to mention: APPRAISALS!

I had to learn the hard way, "behind the scenes" sales, or shadow sales, are not qualified comps! It does not matter if both, buyer's and listing agent, understand the dynamic of that particular market. Pleading the case lead nowhere and all appeals were rejected. Under no circumstances were the lender and appraiser willing to consider that sale as a comp!

The end of the story: a sale that will close below its market value in our opinion and a subdivision that will continue to be classified stigmatized as a declining development - never mind that buyers are waiting in the trenches, ready to pounce on any new listing like prey! Case in point, the next condo to hit the market in said development, under contract in 2 days as well!

Shadow sales - they may become the new trend and as such, a new problem!

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Thompson Company, REALTORS

16910 Oak Hill Rd, Silver Spring, MD 20905
o: (301) 384-9177 c: (240)593-2860

Andrea is a REALTOR® based in Silver Spring, MD, who has enjoyed assisting buyers and sellers in Montgomery and Howard County, MD (and beyond) for 16+ years now. She always answers the phone with a smile, enjoys running, hiking, and traveling, speaks German, reads a lot, blogs a little, and drinks too much coffee. 


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 Andrea Bedard, Thompson Company, REALTORS: from Just Listed to Just SOLD


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Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

When markets heat up they inventory does shrink and the seller is in the driver's seat.

Apr 28, 2012 10:23 AM #1
Martha Brown
Long & Foster Real Estate, Inc., Annapolis MD 21403 - Annapolis, MD
Your Homes Around Annapolis Agent

Interesting that the appraiser would not accept that condo as a comp. I just had one that did. Seems appraisers are a unique and different as agents are. We all have rules and boundaries to stay within but make are own decisions within those rules and boundaries.

Apr 28, 2012 11:16 AM #2
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

Very true Tim, but not quite related to what I was discussing in my blog.

Hi Martha, to say that this was the most frustrating experience does not even begin to describe it! We appealed, we argued, we questioned but got rejected time and time again. We also discussed the possibility of ordering a 2nd appraisal but seller is fed up! We are fortunate that the buyer made the very generous offer of waiving his closing help and paying all transfer & recordation taxes to make it work.

IMHO, that comp should have been included especially considering the market dynamic in that neighborhood.

Apr 28, 2012 11:27 AM #3
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Interesting, Andrea.  I've sold a number of houses before I put them in the MLS.  I often up a "Coming Soon" sign in front of a house a few weeks before it's ready to be listed.  It's amazing how often I get a call on those.  Not quite your shadow inventory though.  Have a great weekend! 

Apr 28, 2012 11:40 AM #4
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

Mike, what you are doing I would call "putting the spotlight on", quite the opposite of shadow sales. There were no signs for us (condo restrictions) but the good ol' networking worked like a charm. All was well until the appraisal .. I still don't get why but having tried everything possible it looks like it is what it is.

I'm going to take a wild guess here .. whether or not those kind of comps are permitted seems to be open to personal interpretation or the luck of the draw. See Martha's comment! Just what we needed!

Apr 28, 2012 12:12 PM #5
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I wonder if all your area appraisers would not use it.  I read that post the other day and asked a couple of appraisers in my area if they used non MLS comps that were cash deals with no known appraisal and they all said... why of course as long as the sale is recorded at the court house and there are no red flags (like a quit claim and not a warranty deed) or seller and buyer with same last name where they are not sure it's an arms length transaction and have no way to know for sure.

Apr 28, 2012 02:05 PM #6
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

Hi Tammy, I highly doubt it! See Martha's comment - I'm really starting to believe that it's just our "luck". It's incredibly frustrating when all appeals go nowhere and questions are left unanswered. There has not been any indication that there is a red flag. The one and only "explanation" remains that no appraisal was used on the shadow sale.

In the end, though, it's the buyer's choice which lender he wants to go with. We can ask to consider a different lender but can't require him to. My seller had two options left: declare the contract null and void or work it out with the buyer as best possible. He chose the latter. I can't help but feel that they are getting screwed but it's not my decision to make.

I appreciate you checking on it and letting me know!

Apr 28, 2012 02:37 PM #7
Jessica Holtzman
Keller Williams Realty, Inc. - Moorestown, NJ
Real Estate Agent in Southern New Jersey, CDPE

I love when that happens... I wish it would happen more... I was never a realtor during the time when everything was selling like this... so I would love to see it!

Apr 28, 2012 03:53 PM #8
Eric Crane -- Your Full Service, Discount Fee Realtor®
DPR Realty LLC - Gilbert, AZ
Greater Metro Phoenix Arizona

Hi, Andrea -- great article -- we are seeing some of the same in our market, as inventory has been reduced.  have a great week, Eric

May 01, 2012 09:38 AM #9
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

Most of all,  I see 'sold before processing' with Short Sales. A listing agent know about coming soon Short Sale or regular  listing. Shall you open Craiglist of your area and you'll see all those 'coming soon' or 'pocket' listings.

Oct 14, 2013 05:03 PM #10
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Andrea Bedard

M.A.; REALTOR® Silver Spring, MD and beyond
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