Okay, got it. Fair. But why not put it out to public tender anyway? The more interested parties, the higher the amount, regardless of the risk, no? I still can’t quite get my head around it 
More off-topic, but interesting nonetheless, there’s a ton of game theory built in auction strategies, what you wrote reminded me of the Vickrey auction, which is more of an academically “perfect” way to find the price of something, but ultimately can fail in the real world.
Courtesy of The Undercover Economist - I am not that much of a homo universalis, but I try to be!
I think the main reason why this “off-market” non-sense is still so common it’s because it is in the best interest of brokers. It gives them more leverage to secure commissions and make sure that they aren’t disintermediated by online platforms. They can also take more advantage from the asymmetry of information.
Off-market is rarely in the best interest of the seller imo. Maybe if you are obsessed with privacy or very special objects with a very small pool of potential buyers.
In other countries with more liquid real-estate market accessible to larger share of the population you typically have 1 or 2 online platforms where everything is listed. Commissions are lower and the market is more efficient.
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It’s all about scarcity.
Let’s say a 10-luxury apartment project is going to market, and the market price for each apartment is CHF 3.5 million. There is demand, but there’s a limitation on how much the market can absorb in a given time window.
If the developer isn’t able to sell all of them quickly, and people are exposed more and more to the same project advertisements online, some of the apartments will be negatively impacted in the market.
People will start to question why these apartments weren’t sold. This will reduce the reputation of the project, the developer, and the broker.
I saw a property that was priced incorrectly and after more than a six of months, the closing price was 30% less than the asking price (and less than the market price).
Also, it seems that people tend to buy faster if it’s “off-market” rather than on the online market. People on the online market seem to take a lot of time to do their due diligence and evaluation.
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