Buying a house as a function of whom you know

In attending a meeting of one of Fort Hill's dueling neighborhood associations, eeka learns that there are two ways to buy a house - and one is a lot cheaper:

... The system in which people use real estate agents, or even craigslist, is distinctly separate from the system in which people sell homes through word of mouth without any sort of advertising. Several neighbors last night mentioned having purchased single-family homes for half of the price of mine during the same time period. These purchases seem to have been made from either known individuals or through informal connections, but without any sort of formal listing. ...