Everything you need to know about Off-Market Investment Properties

Silent sales or “off-market” or unlisted properties are the “Holy Grail” that many property investors are looking for.

Sure they can be an excellent opportunity for buyers, but understanding how and why they are even available and how to navigate through this section of the market can be a daunting process for property investors.

To help, here is your complete guide, with everything you need to know about off-market investment properties.

What does off-market mean in real estate?

Before we get into everything you need to know about off-market investment properties, you need to know exactly what an off-market investment property is and what off-market means in real estate.

There are two types of off-market transactions:

1. When a buyer gets the opportunity to inspect and make an offer on a property before it is listed for sale or publicly advertised.
2. A true off-market opportunity where a seller doesn’t want to make the sale of their property public knowledge. These are off-market properties which are simply properties which are for sale but which haven’t been publicly listed or advertised online.

Why do some sellers want to sell off-market?

Discretion, finances, nerves.

There are a variety of reasons that a vendor or seller would opt to sell their property off-market.

But I have found that generally vendors opt to sell their property off-market for one of these 8 reasons:

1. To save on marketing and advertising costs – while selling off market and not paying the usual marketing levies might save the seller some money, on the flip side, the lack of open competition could also lower the selling price they achieve.
2. Some vendors don’t like real estate agents and think they are overpaid for doing very little. Why pay someone else when they could do it themselves? If they can sell it quickly to a friend, family member or anyone else who saves them time and money, they will – but they usually do so at a reduced price as these sellers are generally emotionally involved and not good negotiators.
3. The need for privacy, including not wanting the neighbours or family to know until the move happens (such as in exclusive suburbs or when there is a high-profile seller).
4. Financial pressure and the need for a quick sale. These vendors don’t have the time for a full 4-6 week selling campaign, so they ask their agent to find them a quick buyer. It’s more about getting a quick guaranteed result than getting the highest possible price.
5. A change in personal circumstances such as a divorce or death which creates the need for a quick but private sale.
6. Vendor nerves – some sellers are uncomfortable with auctions and/or the idea of a lot of potential buyers walking through their home.
7. It’s a tenanted property, and the tenants have made access to the property difficult for potential buyers. Or the sale of a property where tenants may not have kept the property in a presentable condition.
8. A period when there are low auction clearance rates – this creates a higher risk and uncertainty for vendors so some may prefer to do an off-market listing.

Why do these off-market opportunities occur?

Off-market sales were traditionally used for high-end properties whose owners wanted a discrete sale or purchase.

But when markets slow down (as happened recently thanks to the coronavirus pandemic) you’ll find more of the first type of off-market properties (essentially pre-market sales where you can get in before the crowd) become popular across many real estate markets as sellers look to save money on advertising fees and also move through the sale quickly and quietly.

Meanwhile, given the Australian property market has now improved, true off-market properties continue to be extremely rare and limited to very high-net-worth buyers and sellers.

Who buys off market properties?

If you ask an agent what it’s like dealing with the average property buyer, they will often say that the majority of people are tyre kickers, are not ready, don’t know what they really want, are not pre-approved for finance or just cannot make a decision.

This means that if an agent needs to make a quick sale, taking these off market properties to the average buyer will be a lot of hassle with no guarantee of a sale.

So agents tend to approach professional buyers’ agents that have bought a number of properties from them before.

They know that these professionals can recognise a deal when they see one, have a list of potential buyers on their books and let the numbers rather than their emotions) make their decision for them.

Generally, the process goes something like this.

A selling agent lists a new property, but there is a two-week timeframe before it goes online.

During this two-week window, photographs are taken and floor plans are drawn up – a seller then has to approve the material, plus marketing material, before it is loaded onto the internet.

But that’s not all that happens.

Selling agents then start ringing around their clients to let them know if this excellent new property they have on their books.

First, they start with their ‘A grade’ clients, then their ‘B grade’ clients, then they ring anyone else who they think may be interested in the great new property they’ve just listed for sale.

The selling agent then tells other selling agents in their office and they do the same.

If none of their clients want to buy the property, it then gets formally listed online.

How to find off-market real estate

As off-market properties are not publicly advertised you can’t easily find them unless you’re regularly in touch with real estate agents in the area and in their phone book favourites.

Now I realise there are some off-market listing websites attempt to advise you of off market or “unlisted properties” – but think about it – if they’re available on the website these properties are really off market – are they?

Another way to find out about off-market properties is to network.

You could ask your friends, family, mortgage broker or anyone else you know if they have information on off-market opportunities.

In general, word of mouth is a powerful tool, but in this case, doesn’t really work very well.

Unfortunately, the reality is that if you’re a regular property investor or home buyer, getting on a selling agents client list or finding out about these off-market properties yourself is very difficult.

It’s really a “secret men’s club”.

While many investors would like access to off-market property listings, it’s very rare for the average investor to be given access.

But the good news is that while an investor may only deal with a couple of selling agents in their lifetime, the team at Metropole has dealt with hundreds, in fact, thousands, of selling agents over the years.

Our buyers’ agents have very strong and lengthy relationships with nearly every selling agent in the “investment grade” suburbs throughout Sydney, Brisbane and Melbourne markets.

This puts us on speed dial for when one of these properties comes up for pre-sale, or even if a true off-market opportunity presents itself.

So while it may be difficult for the average property investor to find off-market properties, by partnering with the team at Metropole we can take that big challenge out of the process for you.

My suggestion is to pay a professional…

Just like some vendors will try and save $10-20,000 on a professional agent and marketing campaign yet lose $50,000 on not getting the price their property is really worth, many buyers will try and save $10-20,000 on doing it themselves when a professional buyers’ agent could get them a much better property or at a much better price.

If you buy property once every few years and a buyers’ agent does it every day and has all the industry contacts, who do you think will buy better?

Sometimes you’ve got to spend a dollar to make two.

When you get the professional buyers’ agent team at Metropole on your side to level the playing field it’s not only give you access to off market properties, but it also helps protect you from making the typical mistakes many beginning investors make give you more certainty and better results.

Is off-market real estate a good deal?

It’s important to realise that most pre-market and off-market opportunities aren’t actually great deals.

Why?

Because many agents end up getting their new business (listing the properties they have for sale) by “buying” the listing.

This means that they entice the seller to use their services by “quoting” an inflated price, then after securing the listing they can slowly condition them to the real market price.

This then means that many of these opportunities pre-market or off-market are initially listed at inflated prices before lowering to market level prices when they officially ‘go-live’ online sometime later.

It’s tricky, but that’s the way the property market works.