Offmarket sales: Are they really all they’re cracked up to be?
How to spot a genuine off-market and put your best foot forward.
Off-market sales have been on buyers' lips for some time.
If you’re looking for property you might’ve felt the sting of missing out at auction to bidders with seemingly bottomless pockets. Maybe it’s been months of trawling the online listings, going to opens and auctions.
You’re beyond over it. You just want to buy something and get your life back. You’ll buy anything. So long as this is over.
I’m exaggerating a little here, but FOMO is real, folks.
Enter the off-market sale. An enigma in property buying. The promise of a bargain perhaps. Or a property few have seen and therefore less competition.
Agents are fielding calls from buyers desperate to uncover this rare and precious gem known as an off-market sale.
But before we go any further, let’s back up a little and define what an off-market sale is.
An off-market sale is one which is not publicly advertised to the open market.
It relies on the real estate agent contacting buyers privately to introduce the property, rather that advertising broadly to attract potential buyers.
Off-market sales have often been associated with vendors desperate to sell on a tight timeframe and therefore they’ve a reputation as opportunities for a bargain price.
In this instance, an off-market sale can be that rare gem and you may well nab yourself a price below market value if no other buyers come along in time. (Note: You won’t ever truly know because the property wasn’t sold under open market conditions).
During the COVID-19 lockdown in Melbourne in 2020, many off-market transactions took place, motivated mainly by vendors who had already bought and needed to sell. Fast. This is the main reason behind most (I'd suggest 90%) of off-market sales.
Reason 1: Vendors with a looming deadline.
Buyers who, despite drastic predictions of a property market price crash, held their nerve and stayed in the market bought well off-market in the lockdown months. Vendors’ settlement deadlines loomed and they feared that the market was declining.
COVID-19 aside, a closing deadline is a main driver to sell offline - where time has run out to prepare a property for sale and run a full public campaign.
Consider sellers who've bought a property under settlement terms of less than 120 days and they need to sell their home and settle before that time to avoid bridging finance.
That leaves them 12 weeks to prepare their property (typically involving painting, repairs, landscaping, decluttering etc), get photos, floorplans and copy written to go online, 4-6 weeks of open for inspections before auction day itself. And that's before factoring in the settlement terms left for interested buyers!
You see where I'm going with this. These sellers are up against it, to say the least. So this is where the off-market becomes an option.
In a rising market such as the one we’re in now where demand is exceeding supply, off-market sales are dropping back to their normal levels (which is about 20%) as vendors of quality properties (wisely) prefer to see their property sold under auction where competitive bidding can drive the price higher above reserve.
So we’ve talked about the off-market sale driven by the vendor’s timeline.
Why else might a vendor sell off market?
There are a multitude of reasons why a vendor may wish to sell off-market and it’s worth knowing what they are so you can spot them and use them to your advantage.
Reason 2: Vendors with privacy concerns
Some vendors are private and don’t wish to publish their home for all and sundry to see. They may feel uncomfortable about buyers from all over town coming through open for inspections, opening their cupboards and drawers. They may not wish for others to know how much their property is worth.
Reason 3: Vendors who can't present their property in its best light
Some vendors may not want to do the work to prepare it for marketing or opening their home for public inspections or perhaps their property has tenants who are making it difficult to open the home and present it well.
Reason 4: Other random reasons
And then there's those random reasons that a vendor uses their discretion to not list publicly.
Recently, a lovely 4 bedroom Victorian weatherboard home on a generous block in Melbourne’s inner north was offered off-market because the vendor specifically wanted it to be bought by a local family. They weren’t motivated by the additional money a competitive auction might return. The agent called local families on their database and initiated a boardroom auction. The home sold for $115,000 over the vendor’s reserve and they were delighted to see it go to a young local family upsizing from their townhouse. So in less than two weeks from the vendor contacting the local agent the home was offered off-market and sold. The pool of potential buyers was small but the quality was high enough to generate a strong selling price. There’s every chance this property could have sold for an even higher price under auction conditions due to its style, location and land size but at the end of the day it was the vendor’s motivation to keep the home in local hands that keep it off-market.
Because off-market sales are offered ‘on the quiet’ it’s up to the agent to drum up interest.
Most agents will have a ready list of buyers that they will take a property to. That’s where building a relationship with your local agent helps to keep you front of mind for these opportunities.
What should you beware of in an off-market sale?
Beware the vendor who’s not legitimate.
It can happen that a vendor is ‘feeling out’ the market to see if they want to put their property on the market or not.
Posing as an off-market is a risk-free option with little skin in the game.
Indicators that an off-market may not be genuine can be:
- There’s no Contract of Sale or S32 Vendor’s Statement nor timeline to get one
- There’s no advertising material available such as floorplans and professional photography
Absence of the above flags that the vendor is yet to spend any money on readying to sell. If they are yet to fork out for legal services to prepare the sale documentation and haven’t invested in marketing then they have no skin in the game, so to speak.
Agents are pretty good at sniffing this out, and there could be genuine reasons why the above isn’t available, so it is wise to ask the agent for more information if you’re concerned.
Be prepared to move fast
If you’ve come across an off-market listing that meets your criteria, you need to act fast to do all the due diligence so you’re ready to put in your offer. You should never skip building and pest inspections, legal review or council planning diligence so you do have to be prepared to drop everything and make these your priority for a couple of days.
Making an offer conditional is of course an option, but remember you could be up against an unconditional offer which the vendor is likely to – all other things being equal - accept over yours.
I’ve said it before, but I’ll say it again: always have your credit assessed finance pre-approval ready to go.
A final word…
Always remember: Agents are engaged by the vendor to get the best price possible.
Even in off-market sales, you’ll still need to prepare to face competition against other interested buyers and will likely still need to be prepared to pay the highest price to secure the property (unless the vendor has a particular term that they will put ahead of price such as a long settlement period or higher deposit).
We keep in regular contact with local agents so we’re the first in line to hear about off-market sales. When we have an active brief in an agent’s area we contact them several times a week. An agent looks good to their vendors when they have a ready database of quality buyers for their off-market listings and we put our briefs in front of them often.
We’re skilled in uncovering the vendor’s motivations for selling and spotting vendors who aren’t genuine. We uncover any terms that might be important to the vendor and help to seal the deal.
Our ability to value a property based on comparable sales and market indications means we’ll put you in the best position to secure the property at the best price and terms possible, without overpaying.
Get in touch to discuss how we can help you get you into a property faster - you can pick a 30 minute obligation-free chat with Narelle by clicking the button at the top margin of our website.