by Carly Susic, Melbourne Property Advocate
You’ll often hear buyers’ advocates boasting about their access to off market properties. But what is an off market property, really? Does having an advocate really give you an advantage in the market?
Read on for our detailed guide to off market properties in Melbourne.
What is an off market property?
This means that the property is for sale, but is not known to the wider public. The vendor has instructed an agent to sell the property, but it is not listed on sites like realestate.com.au and there is likely no ‘For Sale’ sign on the nature strip.
As a buyer, you might feel lucky that you have access to an off market property. It feels like you have a special avantage—access to a property that other buyers you’re competing against don’t know about. And while that can be true, it’s always important to focus on finding the right house for you—whether that is off market or otherwise.
How an off market property sale works
We have good relationships with agents, so they will call us about off market properties. Knowing that we have access to relevant buyers, agents will offer us as advocates an opportunity to exclusively buy that property. Agents will call us and say:
- “Have you got anyone looking for this kind of property?”
- “Do you still have that buyer interested?”
Agents know that advocates represent serious buyers. So they tend to focus on presenting off markets to advocates before making this offer to members of the general public.
Depending on the relationship and the sales plan for the property, the agent might offer it to one advocate only. Especially if they know the advocate has the ideal buyer, or the property is the ideal choice for the buyer. Some agents might offer this as an off market to a few advocates at the same time.
Sometimes it is the advocate doing the outreach. We actively liaise with agents, to ensure we’re aware of properties coming to market that might suit our clients. So it may be us contacting the agent as part of our search.
If we think it’s worthy of inspection from our client, we will arrange that also. And if the client is willing to place an acceptable offer, we will follow our usual due diligence approach, then contracts will be issued and the property is sold.
This is what we call an exclusive, or true off market property, but there are other variations to mention.
Several buyers may be contacted at once
For example, my buyer recently missed out on a property in a block of eight units. Weeks later, a similar property in that block went on the market. So the agent contacted all buyers who’d missed out at the first auction. Given their interest in the previous property, it was an easy logical move for the agent to find highly relevant buyers.
So in a scenario like this, the property is still off market, but you are not the only buyer and there is no exclusive access. You will be competing against a smaller pool of potential buyers, but given they all missed out at the previous auction, they are also likely to be interested.
Agents conduct an email blast
Another, broader variation of an off market property is the email blast. Agents have large email databases of buyers that have been through properties with them over the years. So instead of listing the property online and putting up the for-sale board, they will blast an email out to their database of advocates and buyers.
As a buyer, this ensures you still get access to an off market listing, but as the email blast tends to be broad, you will be up against other advocates and buyers if you are interested in the property.
Some agents stage a two-part sales campaign
Agents may recommend starting with an off market sale before moving to a listing. This gives them an opportunity to test the market with one or a few quality buyers, and have the chance for a quick off market sale. If that doesn’t work out, they will move to officially putting the property on the market with a traditional four-week campaign.
Benefits of off market properties for agents
For an agent, selling off market can mean less time and hassle to sell the property. All any home needs is one good buyer. If that can be achieved quickly without the rigmarole of a four-week sales campaign, then agents may take this option. Selling a home is hard work, especially staging several open houses, dealing with stressed-out vendors and haggling with interested buyers. With an off market property, agents can sidestep the typical process and get right to the sale.
Benefits of off market properties for buyers
As I’ve mentioned, an off market property gives buyers access to a home that no (or just a few) other buyers are aware of. This gives buyers a chance to make a speedy purchase and eliminate the competition they might be bidding against at auction. And it feels great to know that you got in ahead of the others so there can be a bit of an ego boost too.
Benefits of off market sales for vendors
Some (not all) vendors like off market sales as well. Perhaps they don’t want people to know they’re selling their home, and they value discretion. They certainly don’t want a huge For Sale sign in the front yard, for the entire neighborhood to see. A divorcee might not want their ex to know they’re selling. Celebrities in particular are keen on off market sales as they value their privacy so much.
Sometimes vendors just want a quick sale as a matter of urgency. Or they have tried to sell a home before and found the whole thing nerve-wracking. Auctions in particular are highly stressful for vendors. An off market property sale allows vendors to avoid all that and get straight to the sale.
An off market property is usually higher than a listed quoted price
Often the off market property price can be a bit higher than the price if the home were listed for auction.
For example, a house might be quoted as $1.3-1.4 million when it’s off market. Then if it goes on the market, you may see it listed as $1.2-$1.3 million. Agents can’t underquote, but they may choose to list the property at the lower end of the range to attract buyers.
With this in mind, it is not unusual to see overpriced off market properties. Sometimes the vendor is stubborn and wants an above-market price due to sentimental reasons. (For example, when people are selling their childhood home. They can only agree to part with it for top dollar.) Or they may not actually be motivated sellers. Perhaps they are only allowing buyers to view without committing to the cost of a marketing campaign if they get their unrealistic dream price.
As a buyers’ advocate,we evaluate the value of the property and ensure you do not get caught up in the excitement of grabbing an exclusive and end up paying over market for the property.
A lack of competition can be problematic
Yes, it feels great to be the only one ‘in the know’. But it can also cause buyers to overstep. Auctions are highly transparent. You know how many other bidders you are up against and you know when they start to hit their financial limit. But with an off market, there are no market indications as to the true value of the property. So you need to keep this in mind in your negotiations and avoid overpaying for a property.
Off market property sales are more common in slower markets
In a quiet market, there are fewer buyers so it’s often easier for agents to find just one buyer. Agents can offer them exclusive access and hope they’ll jump at the opportunity. This can save agents who aren’t confident the property will sell at auction. Whereas in a strong market, agents can send the property to auction predicting that five or more active bidders will compete and the price will potentially soar above the reserve.
Be wary when looking at an off market property
Don’t get caught up in the excitement of gaining exclusive access to an off market property. You must always do your due diligence by:
- arranging a private building inspection
- evaluating the property—is it right for your needs?
- considering value—is the property overpriced?
- estimating resale potential—is the property compromised so that future buyers will be turned off?
Only if you are satisfied with those answers should you proceed to negotiate with the agent on price. Just because it’s an exclusive off market, does not mean the vendor will accept any price.
Off market property tips: in summary
- an off market property means that it is not available to the general public—no online listings, no For Sale board in the front yard
- buyers’ advocates generally get more access to off market properties due to our relationships with agents
- agents will contact advocates to pitch off market opportunities, and advocates will ask agents what they have coming up
- agents may stage a two-phase campaign, with off market first, then after one or two weeks, list the property if it can’t be sold beforehand
- off market properties can be overpriced, so research the market carefully
- an exclusive off market means you are the only buyer with access
- whereas agents may offer a group of buyers, or blast their email list—these are also off market, but you have competition with other buyers
- vendors like off market sales because they avoid stressful auctions, the discretion and other reasons
- be wary of overpriced off market properties
- don’t get caught up in the excitement of getting an exclusive off market property—always do your due diligence
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