Over the past 12 months, we’ve started to see a lot more interest in both buying and selling property off-market.
What is an Off Market Sale?
An off-market sale is effectively a transaction that takes place without the property being listed on one of the major real estate portals. In the truest sense, an off-market sale could be said to be one where there is no sales agent involved at all and where a buyer approaches a vendor directly or vice versa.
However, in recent times, an off-market sale is more so a ‘pre-listing, whereby a sales agent will contact their list of active buyers and try to broker a deal before the property lists on a real estate portal.
This was popular in the early stages of COVID when vendors were unsure as to whether it was worth paying the hefty listing fees at a time when many were not confident in the property market and buyers were few and far between.
Since that point, we’ve continued to see a number of off-market sales take place, but it has increasingly been because of the state of the property market.
With record low interest rates and a host of government incentives on offer over the past six months, buyers have needed to act quickly and decisively to secure a property thanks to a lack of listings. As such, many deals are being struck before they ever see the light of day to the broader public.
When Should You Consider Selling Off-Market?
The most obvious question to ask when we look at off-market sales is why would the vendor want to sell their property without listing it? The reason comes down to why the individual is wanting to sell and also the type of property.
Generally speaking, selling a property off-market in the current environment usually involves having a sales agent make direct contact with a number of interested buyers.
The advantage of this to the vendor is most often speed, but it might come at a price. If the vendor knows the price he wants and there is a buyer ready to go, then both parties win and the transaction can happen quickly.
If a vendor needs to sell a property quickly for personal or financial reasons, an off-market sale might be a quick option to make that happen.
However, it should be noted that this is probably not the way to sell your property if you are looking for top dollar. For the most part, if you have a property that is appealing to owner-occupiers and in an area that is seeing strong demand, then normally a process like an auction will give you the best result. This is why auctions are very common for in-demand areas in places like the Eastern Suburbs of Sydney.
At auction, the property is advertised widely with the goal being, to attract as many potential bidders as possible. When you get a number of interested parties and in particular owner-occupiers, you stand the best chance of increasing the sales price either at auction or even by private treaty.
On the flip side, a vendor might choose to sell their property off-market and still get top dollar. A good example of this might be a block with development potential. For the most part, a developer will know the exact price a property is worth and they can’t pay more than that, simply because that would prevent them from getting finance. Development finance is often based on the profit margin that is available in the deal itself.
In the example of a development block, it actually makes a lot of sense to contact developers directly and broker a deal off-market.
Similarly, a property that is in very poor condition that needs a significant renovation, might only appeal to investors and would also be a candidate for an off-market sale. Most owner-occupiers want a property that is move-in ready and don’t want to spend tens of thousands of dollars on top of the purchase price.
When Should You Consider Buying Off-Market?
Looking to buy off-market is a good strategy if you’re an investor or a savvy owner-occupier.
Buying off-market is more likely to get you a better price simply because you’re facing less competition. However, that’s not to say there is no competition.
Even if a property is being sold by an agent as a pre-listing, it’s very likely they are speaking to multiple interested buyers.
The only way you can reduce your competition is by buying a property in the true sense of an off-market transaction and speak with a homeowner directly. This might mean writing them a letter or even dropping a note in their mailbox.
If you don’t want to go that far, the least you should be doing is getting on the mailing list of the leading real estate agents in the area you are looking to buy. They will often send out details of their upcoming listings. If you know your budget and can act fast, it’s often possible to buy a property before anyone else gets to see it.