Is it a good or bad idea? Is it better, or worse, to buy property off-market?
As our property prices continue to strengthen, and mortgage interest rates relentlessly rise, buying a property is falling further and further out of reach for many Australians.
So it’s no wonder that many buyers and investors are looking for a ‘bargain’ or a ‘great deal’.
Many property agents are offering off-market properties to buyers, with promises of exclusive access or competitive prices.
When a property is for sale, but it is not publicly listed and is not marketed for sale online, this is called an ‘off-market’ property.
This is different to a pre-sale of a property where buyers are given ‘first access’ to a new property before it’s officially listed online.
It seems beneficial to be able to buy properties before they are open to the general market that the average buyer wasn’t able to see.
But is buying an off-market property really a good idea?
Or an uneducated financial move?
First, let’s look at how and why they happen.
Why do off-market opportunities occur?
At times there are genuine reasons why some sellers request an “off-market” sale.
Some of the ones I have heard include:
- Needing to save money on marketing and advertising costs – while it might do this, the lack of open competition often lowers the selling price
- Privacy – especially not wanting neighbours or family to know about the property sale until it has sold
- Financial pressure and the need for a quick sale
- Divorce, death or change in personal circumstances and the need for a quick but private sale
- Nervous about auctions or lots of potential buyers tramping through their property.
So, how does it work?
When a selling agent lists a new property it takes about two weeks before it hits the internet.
During this time photographs are taken, floor plans are drawn, the seller must approve the marketing and all this must be loaded online.
Generally, a selling agent will ring around his or her list of clients to find out if anyone is interested in the property.
They’ll then hold ‘private’ viewings for their client database only, meaning everyone who attends is likely a serious and interested buyer.
If a buyer is interested and it reaches a price the seller is happy with they’ll go ahead and sell off-market.
If the property doesn’t get enough interest, the buyer might decide to move to list the market online for everyone to access.
How can buyers find out about these off-market opportunities?
This is a tough one to do when you are just a “normal” property investor or home buyer.
You’ll need to constantly contact real estate agents in the area and enquire about whether any properties are available or are coming up that haven’t been publicly listed.
But your best bet to access these off-market opportunities is through an experienced buyers’ agent who can keep an eye and ear out for properties that meet your specific requirements.
The team at Metropole were involved in over a quarter of a billion dollars worth of property transactions in the last year alone.
That puts us on the speed dial of most selling agents in the areas where we are active in Sydney, Brisbane, and Melbourne property markets.
So while it may be difficult for you to get the call, you can still benefit from this special treatment by having the team at Metropole on your side – let us stack the odds in your favour.
But… is it actually better to buy off-market?
The promise of an exclusive deal is certainly appealing, but is it actually better for a buyer to buy off-market?
The truth is, buying a property off-market doesn’t mean that you’re guaranteed a better deal.
Think about it.
A seller is not going to sell a property for less than they could on the open market unless there are special conditions involved.
They will be guided on the market value of their property by recent comparable sales as well as on the advice from the sales agent and the level of interest to determine how much their property is worth and then they will negotiate from there.
As a purchaser, one benefit of buying off-market is that there is less competition.
And it’s a competition that can drive prices above market value, so you may be able to save yourself from spending too much and overcapitalising by getting too swept up in a bidding war.
Buying off-market also means you have some more negotiation power on the price and terms of the sale as well as a less stressful process.
But it does not mean you’ll get a bargain.
In fact, at Metropole, many of the off-market opportunities we have seen are actually overpriced.
You see…many agents list the properties they have for sale by “buying the listing”.
In other words, they entice the seller with an inflated price to get the listing and then slowly condition them to the real market price.
This means that many of the opportunities we are often offered are not suitable for us, but that’s okay.
That’s the way the property market works.
A final word for investors…
Rather than trying to hunt down a bargain, investors should focus on only buying investment-grade properties in A-grade suburbs.
A-grade homes and investment-grade properties in discretionary and aspirational locations are currently outperforming other types of property and are likely to continue to do so as affordability bites and affects the lower end of the market as prices keep rising.
But whatever stage of your property-buying journey you’re at the most important thing is getting good advice from experienced people.
Build a great team around you – a good mortgage broker, a conveyancer and even a buyer’s agent or wealth advisor – and your property purchase is more likely to be a successful one.
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