Yes, this happens in SF. Some people inherited or built their house, owe nothing on it, and want to sell it onward to another family (not an investor, REIT, etc). One of our friends bought a house this way - off market.

Some people also don't do offer dates so they accept the first good offer that comes along - we just bought a house in SF this way for 50k over asking. The sellers were moving across the country, had lots of equity, so their concern was getting the sale wrapped up ASAP.

FWIW our realtor was also going to show us an off-market property from a friend who renovated houses. This friend is self-funded so his concern is getting a good return even before the reno is complete so he can buy the next fixer-upper. I assume this is because he can't control when those houses come up for sale so he needs to buy them when they're available. That can present cash flow and financing problems for a small operator.

Because you can only sell the house once. So given an appropriate asking price, the first acceptable offer is as good as the next 10. (If your realtor is any good, the price will be close to the true market value anyway, or priced appropriately considering trade-offs, like closing quickly.)

If you can get that offer without the hassle of showing the house to a thousand strangers, and having random people stopping and peeping through your window, then why not?

Another common occurrence is accepting an offer below certain known loan limits. If you know you want to get approx the local limit for a jumbo loan, then accepting a price slightly over that limit comes at the cost of fewer potential buyers, or offers that have to back out because they couldn't get financing approved. So the rational choice might be accepting the lower offer, instead of slightly higher with more hassle/risk.

There are quite a few reasons:

1) Speed - it's possible that the money is needed ASAP (for instance, to put into a disappearing business opportunity or help pay for the house they are moving into.)

2) Simplicity - A lot of people hate complexity. They're willing to pay a premium for simplicity.

3) Lack of work/investment - A lot of pocket sales don't involve the same amount of fixing up the house as you would have to do to put it on the wider market. Less investment of cash and effort.

4) Ignorance - Their agent tells them they have an offer above asking. They say yes not knowing whether it was ever one the MLS.

That's just a few, there are others.

Some rational sellers are willing to accept a slightly lower price in order to close quickly and avoid the hassle of open houses.