Ep 6. What Off-Market Really Means
In this episode Michelle takes a deep dive into the off-market section of the property market, as well as what to watch out for when dealing with selling agents.
Here’s what you’ll learn from today’s episode:
What are off-market sales
Why properties are sold off-market
How you can find off-market sales
How you can get the best deal
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
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VIEW TRANSCRIPT
Hi and welcome to another episode of Buy Your Side, the property podcast to help you buy better. My name is Michelle, and today I wanted to deep dive into the off-market section of the property market. What are off-market sales? Why are properties sold like this? How can you find them? And how can you get the best deal for you?
Now let's start off with what does off-market actually mean? An off-market listing is actually a property that is selling or has sold without any advertising whatsoever. So you wouldn't find these properties on real estate.com.au or Domain or even the agents' own website, and there won't be billboards out the front of the property of course. They also won't be sent to auction. They would be sold through what they call a private treaty situation. So instead, agents work with their own networks to sell the property privately, or it would be the owner of the property putting it up for sale directly to another buyer. As a buyer, you won't often know that these properties are available to you unless you've got a relationship with a selling agent who has these off markets, or you perchance find a vendor who is willing to sell. The other option would be to work with a buyer's agent who obviously has the strong industry connections to help uncover these off-markets. Now let's understand why people sell off-markets first, because there are a myriad of reasons why people would sell off-markets. It may be what traditionally is sort of, you know, the high profile seller who values their privacy. But it's also quite often a busy family who just don't have time to be cleaning the house for regular showings or the kids', you know, sports commitments and things like that. Or perhaps it's a divorcing couple who may need a quick result. It is also a misconception that off markets are only found in the high end portion of the market. It is actually quite common to find off markets in the first home buyer section of the market, I regularly buy off-markets across the board. So just because you are a person buying your first property doesn't mean you shouldn't be able to find off-markets.
So why do some selling agents recommend off market as a tactic? Some selling agents may prefer to sell off market as they already have buyer's agents or qualified buyers in their extensive network of contacts looking for a property. In these cases, a sale can be really straightforward, and things like property styling, photography, open-homes aren't needed. Agents who love doing deals who are volume driven would be encouraging potential vendors to work that way. The other reason why some selling agents may recommend selling off-market is to secure a vendor by promising them a really high sales price, and this is what they actually call 'buying a listing' (and just by way of disclosure, this is actually illegal). But some agents do this. So when someone's looking to sell their property, they'll say, "yes, Mrs B, I can definitely sell this property for this price", knowing full well that it's really unrealistic and not in-line with all the other sales in the area. But they may recommend selling it off market first, because what they do is after showing some buyers through, they then go back to the seller and say, "Oh, I'm so sorry Mrs B, but you know, the market has changed. I don't think this price is achievable anymore". But of course, the vendor by that stage has already been locked in with an agency agreement. So it's unethical, but unfortunately it's a tactic that they still use today. Another reason why an agent may be preferring to sell off market is because a property has been listed a number of times for sale with potentially unrealistic expectations on price. Or perhaps it's in a difficult location, and so listing and as an off-market creates that air of exclusivity and particularly in hot markets, can attract new buyers.
So now that you know the difference between the different kinds of off-market, let's work on how to find them. So the first thing you need to do is to really create good relationships with the selling agents in the area that you are looking to buy. So make sure you're on their mailing list, put their names in your contacts on your phone, give them a text message and call them on a regular basis to say, "Hey, I'm still here. I'm still looking. Have you got something to sell me?". Because if you're a qualified buyer and if you are what they think a 'hot buyer', they will actually help you find the property that you want, and because selling agents are in the market consistently and they may have been having conversations with vendors over the years and potentially have not been ready to sell at that point in time, if they can present them with a hot buyer, they will actually be able to find you those off- markets.
The other way to do it is, of course, use a buyer's agent like myself. As a buyer's agent this is what I do. I have those long standing connections. I source off market properties through agents, but also by contacting vendors directly. We leaflet drop and, you know, just make sure that everybody knows that we're looking for a particular kind of property for a particular kind of buyer. So that brings me onto you doing that yourself as well. You could actually write a letter, photocopy it a million times, and leaflet it and put it in people's post boxes in those areas that you are looking to buy. There is a downside to that, though, because, of course, as soon as a vendor or an owner potentially gets a letter like that in their postbox, they may well get unrealistic expectations as to what they think their property is worth, because of course, every owner thinks their property is worth more than everybody else's. And when the shoe’s on the other foot, when you're a buyer, obviously you're trying to get the best deal possible. But that's not to say you've got to be in it to win it, and you may well get lucky.
When it comes to getting a best deal for an off-market, I think the best thing to do is to really understand the situation before you start talking dollars, and that is when you're talking to the real estate agent or even to the vendor, you have to really understand their motivation for selling. So asking questions like: have the vendors already bought elsewhere? Why are they selling? Do they have an ideal price in mind? You know, because there may well be the price guide that they're giving, but the realistic price for which they'll sell may not be in the same vicinity at all. So understanding the answers to those questions before you consider making any offers is very important. That brings me to understanding the real estate agent's motivations next, because if it is a genuine off market, they will take all offers to the vendor. However, if this off-market period turns out to be a two week preamble where the agents decides whether to go ahead with a full online campaign on one of the big portals, you know, and they've already booked in the photographs, and the styling to be done, they are probably just looking for a very big offer that the vendor would be, you know, extremely happy with. It would be their dream price. But if they have already booked in those things and spent the money on doing the full advertising campaign, it may not be the right time for you to make an offer. So make sure that you also understand the real estate agent's motivation in all of this, because some people do get a bit starry eyed by having that exclusivity that the pre-market/off-market access. But it is very important that you look at things in the cold light of day and really strategize about what you're going to do next.
So finally, I hope that's helped you understand what markets are and how you can find them. But always remember whether a property is on or off-market, you always have to assess them the right way. So ensure that it's in the right location for you, that it has the right attributes that you are looking for, that it has the right amount of internal light, that is nice and quiet and private, because whether it's on or off-market is not going to make any difference once you've got those keys and you start living in it.
I hope that's really helped you today. But if you have any questions for any other subjects at all, do drop me a line at hello@buyyourside.com.au. Thank you for listening.