Are Off Market Properties the Holy Grail?
There is a lot of talks around off market properties and whether or not that’s the holy grail that a property investor should aspire to on their next purchase. So it does beg the question on what exactly is an off market property? As the name suggests, it’s a property that is sold, it transacted. It changes the name from one person to the next without hitting the general market, it doesn’t go on to the online portal and for all intent and purpose, even the neighbour might not know that the property is sold until a removal truck comes in and the old owner leaves and the new owner comes in. It is sort of a good way to buy property because it can help minimise the level of competition but to be able to buy an off market property, there is a number one thing that you need to be and that’s connected. If they are not actually going on the market, how do you actually find out about them? That is why a lot of Buyers Agent get access to off market properties because the real estate agents in the area that they work with know that they are professional buyers, they’ve got buyers that don’t muck around and they just want to get the transaction done. So a lot of Buyers Agents actually get them where else the general buyers would find it quite difficult unless they get in touch with those agents, make themselves known and give them a really easy opportunity to make it available to them.
So I guess the next question is why would someone actually sell off market? And the first one is they can save some money because if there is no board out the front, there is no auction campaign, the real estate agent can say to them that they can save a lot of money on marketing if we connect the buyer up really quickly. Another reason is if there is privacy involved for example if the person is high profile or if they a celebrity or a sportsman and they don’t want people traipsing through their house, they might just want that level of privacy that comes from selling a property off market. The other thing is if someone is looking for a quick transaction they might not want the six-week campaign where they lead up to the auction, four weeks and the anxiety that comes from going to auction so they might just want it to happen really quickly. So connecting a willing seller and a willing buyer through an off market transaction can happen quite fast. And then of course if there are any unusual circumstances, for example, someone wants to sell the property but they haven’t found something else and they might want to rent it back for 6 – 12 months, that might be facilitated well through an off market transaction.
So they all sound pretty good right? But I would say you still need to beware because you don’t want to buy the property that is mutton dressed up as lamb.
I’ve seen so many properties that are offered to me off market, I’ve gone through them and I actually rejected them. It’s always interesting to see they then come on to the market through a normal sale campaign. Now, there is this air of exclusivity that comes from buying off market and you can easily be seduced by that and you need to be able to still decipher as a property investor, what makes for a great investment property and what is just sort of investment stock as well. So beware of the exclusive offer that dressed up as something more than it’s not. So I reject a lot of off market properties.
Equally, you got to make sure that the vendor is going to sell because they might just be testing a wish price. They might talk to a real estate agent and say, “If you get me x amount of dollars which is a significant premium above the market, then I’ll sell.” So you got to be very careful of the wish price as well.
The questions that you want to ask is, why is it being offered? Why are they selling this property off market and really dig down to understand the vendor’s motivation. Secondly, you want to know if it’s being offered to you exclusively because if it’s going to market and you go to an auction, you get to see the transparency that comes with it and who you are up against. But if it’s off market and you are pitting against two others, you don’t know who they are. That often is not to your best advantage because the benefit of off market is the lack of competition. Ask the agent do they have a signed authority and by then I mean do they actually have the listing or is it just sort of shopping it around to see the interest because you could waste a fair bit of your time only to get to the eleventh hour and realised that the agent really doesn’t have the authority to sell anyway. In the case, for me as a buyers agent, I’m always asking if there is another buyers agent involved as well? Because then I get to suss out my competition. And another really easy way to ask to clear out whether or not they have the authority is the paperwork available? Has the vendor gone to the trouble to prepare the contracts and the disclosure document that comes with it so that we know that they are actually genuine sellers.
So my conclusion with off market properties is very simple. They can be very good sources of opportunities to buy your next investment properties but they are not easy to come across and often not easy to navigate so it does make sense to use a professional who does get offer these opportunities but they also have the ability to decipher them and filter them to make sure that they are a really good deal. The question or not whether off market properties are the holy grail, I would say that there is huge advantages in getting off market properties but not all off market properties make for a great investment.