What is an Off Market property?
Off-markets. It’s a way of buying property that’s been around a long time however in recent months, awareness and use of this phrase has skyrocketed. Every second person I talk to says they want access to off-markets during these times of short supply. But what really is an off-market property, how do you find them, and are they really all they’re hyped up to be?
The term ‘off-market’ is used to describe a property that isn’t currently advertised for sale. A rather simplistic description which requires some explanation. Strap yourself in. Take the early situation where a vendor has a home they have just become interested in selling. They may alert a real estate agent to the fact, but until they sign a contract to appoint a real estate agent, that agent has no right to claim a commission. Furthermore, the agent cannot offer it for sale until a contract for sale has been properly finalised. Preparing these documents takes time; title searches and Government lease inquiry documents to be sent away for by a solicitor, paperwork drafted for approval, pest and building reports booked in, and if the intention is to advertise it for sale, a declutter and styling to some degree is often brought in, a photographer booked, sales copy written up - there’s a lot to be done and many weeks can pass before you see the polished end result.
Sometimes a property is sold in that preparatory stage before the sale listing goes live online. In the timeframe before the photography and styling (but after the agency agreement is signed and contract of sale is ready, because otherwise the agent would be acting illegally) there’s usually a period where some agents will advertise it to their database. There’s many words for this; their VIP’s, Hot Buyer list, Insider Track… whatevs. It’s the same whatever the name; a list they’ve collected in their software over many open homes and interactions with buyers. The fancier ones automatically assign you a buyer rating based on an algorithm of interactions across the properties you inspect, click on, or add to the planner from various property search platforms. Tech has arrived and you as the buyer are the commodity.
I digress.
Anyway, when a property is sold to the database it’s often touted as an off-market sale.
Total bullshit.
It’s a pre-market sale.
A pre-market sale has been offered to many potential buyers, of which you are one. Perhaps not even by a phone call - it could have been through an automated email from their CRM software offering you their ‘off-market’ properties. I’ve no problem with this, let’s be clear - but it’s certainly not an off-market transaction that you’re getting. Their database is comprised of thousands, often tens or hundreds of thousands of buyer’s email addresses. Hardly minimal competition. What does make these pre-market sales attractive though is that they can be done at speed. By getting in before the photography, videography, styling, and online advertising across various websites, the vendor can often save thousands ($20k+ isn’t unheard of) and secure a quick, binding sale. These costs are borne by the vendor, not the agent. And the agent wins, as they’ve held minimal open homes and answered substantially less phone calls from a raft of serious and not-so-serious potential buyers.
As a buyer then, is it a good idea to buy pre-market? I’d suggest that it’s always a good time to buy the right property for your needs at a price you’re happy with, after conducting and being satisfied with your due diligence. Read that again and let it settle. What isn’t a good idea is to be rushed into a ‘special opportunity’ and overpay out of fear (hello, FOMO) or letting emotion hijack common sense.
Often, if the property isn’t sold in this pre-market time then it’s taken to market and advertised to all and sundry. The vendor and agent now have the benefit of early feedback and take this onboard to launch more successfully to the current market environment.
Not every property will be offered prior to the ‘official’ launch though, so don’t expect that every agent will offer every home in this way. Creating strong momentum and a big sale price often starts with a much anticipated, well-attended first open home, after queues-down-the-street level of hype builds around a new listing. Especially where a property is likely to elicit an emotional response from many suitable buyers and the pretty photos will draw a huge crowd, it’s to the vendors’ advantage to take it to market and through to auction day. That’s their prerogative; it’s their property after all!
A true off-market property, in my experience, are those properties where there’s no publicity. No ‘VIP Viewing Nights’ with sparkling wine and soft music. No social media ‘sneak peeks’. Zero mass emails sent to the database. The number of people who know about the sale you can usually count on one hand. Sometimes these opportunities come from agents, sometimes vendors contact us directly and ask if we’ve a buyer to match their home. In the latter, the vendor has no sales agent and spends nothing on agent commission, which is a very attractive option for those who are happy to work with our buyers and represent themselves together with their solicitor. For off-market sales with an agent it could be there’s a very small buyer pool for that property. Rather than launching to crickets, the agent keeps it off-market until the right buyer comes along and negotiates with the small number of interested parties over time. In other cases, the vendors don’t want it advertised; not even a For Sale board out the front. You’d be surprised how often it happens! Relationship separations, privacy concerns, high-profile parties involved and a multitude of other, personal reasons.
What’s important is that regardless of the approach or style of sale, that you as the buyer are discerning about whether it’s the right option for you. Be aware that not all off-markets are great; in fact, many are off market for a very good reason. They could be waiting for the possessions of a hoarder to be finally cleared out, for the smell of animal to be deep-cleaned once the occupant vacates (think here of a cat lady who needs new carpets), require an uncommonly long settlement timeframe so are delaying the campaign, or the vendor has their head firmly in the clouds.
As a buyer please be aware of the risks. When buying pre-market, agents often expect an unconditional offer will be made in order to stop the sale from progressing to the next stage. Understandably so, as they need to protect the best interests of their client (the vendor!). Consider what’s in your best interest though (engage a buyer’s agent - blatant plug over) and ensure you’re making a fully informed decision with due diligence completed before jumping into the deep end of the pool. Headfirst.
I appreciate it’s a rising market. I know how quickly some properties are selling right now. The risk to you remains, regardless of the what the market is doing. Property is an expensive asset to transact and difficult to undo once you’re committed. More so if you’ve overpaid and the market cools! You may find the valuation doesn’t stack up and guess who funds the shortfall? (Hint: not the bank). Without an open market to demonstrate current value you’re risking the valuation coming up short if you’ve whacked a big offer on the table in order to stop the sale campaign from progressing. The market will not always be as strong as it is today. Don’t pay through the nose for a dud because you’re desperate to buy anything. In the slower times, it’ll be harder to sell and take longer to do so. There’s also the risk of opportunity cost. If you’ve focused your time on this ‘great deal’ in front of you to the detriment of other properties, the ideal place may pass you by.
Next time you see the phrase “off-market” I hope you’re better able to understand if it’s just being used as a marketing tool to you or whether it truly is an off-market property. The better questions then arise to discover whether this is a property worthy of your time and attention, or whether it’s one to pass over and await the better options to come. How to answer those questions is where an experienced eye and calm approach can help separate emotion from logic, and fact from opinion.
Happy house-hunting!