What are off-market properties, how do they come about and what opportunities can they present for you as a buyer?
Buyers ask about them. Agents get them. Buyer’s agents relish them.
In this fast-paced, aggressive and competitive market we find ourselves in (particularly in the eastern seaboard capital cities, where auctions are commonplace), any opportunity to avoid competition is a dream for buyers.
The obvious question is – why would a seller in a market this hot decide to go down this path? What would prompt a seller to offer their property to a handful of buyers without any effort to market the property to a wider audience and reap the benefits of a competitive market?
There are five reasons why sellers sell their property off-market and it pays for buyers to be able to identify which reason applies when they find themselves putting in an offer for an off-market property.
The first reason is the least exciting for me to be a part of as a buyer’s advocate. We question these types of off-market alerts and don’t bother wasting our time on them.
1. The seller is greedy or delusional (or just plain disinterested in selling) but has told an agent they “would sell” for X price. When the seller isn’t actually motivated to sell and they set an unrealistic, extortionate sale price, this is not something a shrewd buyer should get excited about. The mere fact that the seller doesn’t wish to market the property or spend any money on a marketing campaign should dissuade an agent from taking on the project too. But every now and then, an unmotivated seller might get lucky.
2. The seller has seen a similar property sale (perhaps the neighbouring property or a similar unit) and has been surprised by not only the result, but the strength of the underbidder’s tenacity. The sale has given them food for thought and they’ve decided to capitalise on the nearby competitive situation and capture that emotional underbidder while their emotions are still running high. It is not uncommon for us as advocates to buy into the same block of units for the same price we missed the initial property for, and sometimes for a little less. These listings can be advantageous for both parties and can sometimes give way to a slight buyer discount based on the fact that the seller hasn’t had to pay any marketing fees.
3. The sellers may be going through a difficult personal situation, or may just have an aversion to any locals, friends or family members knowing they are selling. Such situations can include divorce, death, money troubles or may just be a product of a very private person’s desire to keep their business to themselves. Provided the agent is discreet and the seller’s motivation is genuine, these types of sales are not uncommon.
4. The sellers may have some quirky requirements which are hard to match when dealing with the mainstream buyer market. Examples may be lease-back arrangements where the seller is building a property, requires capital to continue the construction process and still needs a roof over their head during this time. Or perhaps the seller requires time to find their next property and doesn't want to move into temporary accommodation. Sometimes children’s exam times or illnesses in the family can mean a normal 30-, 60-, 90-day settlement term is not easy for them to meet. All kinds of reasons for a campaign to sit out of the box can lead a seller to privately list and allow the agent to find the right buyer who can be more adaptable. In these cases, buyer’s advocates generally have contact with motivated buyers and investors who are amendable to such quirky situations.
5. The last, but most common reason for off-market sales relates to lack of time for a proper sales campaign. Those who choose to downsize or upgrade their home without selling their existing home first can place themselves in a position of disadvantage if they don’t think through the logical time frame for a good sales campaign. In Melbourne and Sydney, where auctions are rife, a seller needs to give themselves enough time to carry out all of the following:
- Tidy the house for sale. This includes gardens, repainting, repairs, de-cluttering etc.
- Get some local agents through and interview them thoroughly. Whether the number is one, two, three or more, this deserves full attention and shouldn’t be rushed
- Take the agent’s advice and apply some further works to the property in preparation for the photos. This may include stylist input and hire furniture
- Photography and selection of photos, copywriting and coordination of inspection and auction dates
This process probably takes about four weeks. Once the campaign hits the internet, a typical auction campaign will take a further four weeks (give or take a few days). Sellers are then up to the sixty-day mark, and the sale has yet to take place.
By offering a buyer a 30-, 60- or 90-day term, the maximum period between the decision to sell and the date of settlement is 150 days. But buyers rarely give themselves 150 days when they make an excited offer on their next home. This gives way to either a shortened campaign or often no option for a campaign whatsoever.
It is for this reason that the introduction, of a buyer’s advocate, to the property in an off-market can sound appealing to a seller who has placed themselves in the unfortunate position of requiring a fast sale. This is why we always advise our purchaser clients to try for a 150-day settlement period when negotiating for their next home prior to selling their current home. As a buyer’s advocate, these purchases are often the exciting ones for our buyers but sadly for vendors they could have been avoided with a bit of planning.
Cate Bakos left a career in chemistry to go into the property industry back in 2003. Her experience as a listing agent and mortgage broker put her in good stead to work with buyers and to shape investor experiences.
In 2013 Cate was a finalist for the Telstra Business Woman of the Year and a finalist for the REIV Buyer's Agent of the Year
Cate left her former employer and directorship in 2014 to launch Cate Bakos Property; a boutique Victorian based Buyers Advocacy business catering to her loyal clients. To find out more about Cate Bakos Property, visit www.catebakos.com.au.