By Cate Bakos, Cate Bakos Property
Just recently we received an enquiry from a prospective client who was asking about our services while he navigates his property search. He wasn’t so phased about assistance with the negotiation, bidding and searching, and just wondered if we’d just assist with sourcing off-markets.
While most prospective clients enquire about the full range of services we deliver over the course of the assignment, a large proportion ask about off-market properties, and why wouldn’t they?
After all, many Buyers Advocates quote their ‘percentage of off-markets’ like a badge of honour. For the inexperienced property buyer, this underground crystal cave would sound very appealing.
Off-markets do indeed have a place, and at times they are fantastic. But they can also be dangerous. Not every off-market is a purchase-worthy option, and for varying reasons.
Understanding the different categories of off-market listings is vital before we can let a client get excited about the property. We’ve blogged about the two broad categories before; situational and optimistic. Nobody really wants to deal with a vendor who’s motivation to sell is based on irrational greed. An optimistic vendor aspiring to get an extortionate price for their property, and who otherwise isn’t interested in selling is not the vendor we prefer to do business with.
Common situations that precipitate a genuine, situational off-market sale include:
- A vendor who has just purchased, (or is intending an imminent purchase) and needs their sale and purchase dates to match in order to meet their financial obligations at settlement, and they have determined that they have insufficient time for an auction or regular sale campaign
- A motivated vendor who is trying to sell a tenanted property that is either difficult to advertise, or doesn’t present well,
- A vendor who has very specific requirements that require unusual terms, (such as an arrangement to continue renting their own property for a period of time after settlement),
- A vendor who wants a particularly anonymous sale for privacy/sensitivity reasons,
- A vendor who is unwilling to have multiple buyers walking through their property for personal reasons.
The first two situations are the most common reasons for a quality, and fairly-priced off-market listing.
In the months preceding the spring market, however, we are less likely to meet vendors who have just purchased.
They are typically in force following a spring market. November, December, January, and May, June are our common months for off-market sellers who have just signed a sale contract.
Active buyers are screaming for off-markets around August and early September, because stock levels are low and they are feeling the drought.
While we’ve categorised the off-markets into two camps, there is one other type that I haven’t touched on. The mirage off-market. The listing that is going to come to market soon, but the clever agents pitch as off-market to see if a willing buyer is prepared to pay a premium for it. The way to identify such a listing is usually by the quoted price. If the agent quotes a range, it’s important to ask if the property is destined for a future campaign or an auction before getting too excited. Many agencies ‘float’ a listing as off-market, only to convert to a campaign if generous offers don’t emerge.
Leading into spring, and with lower listing numbers than past years, most agents are keen to run some campaigns and to get their boards up in the streets.
We field many off-market listings, as most Buyers Agency businesses do. From quiet sms messages to bulk-advocate emails, we would comfortably field over a hundred off-market listings in a week, yet when we poll how many of these listings are actually investment-grade assets, the ratio is low. From main roads to insufficient floor areas for lender appeal, awkward floor plans to overpriced stock, our rate of off-market inspection activity isn’t as high as some would estimate.
We reject a lot of bad off-markets.
A motivated vendor is usually one with pressing financial needs, and typically one who has just purchased and needs to sell. Distressed landlord sales do come up, but the vast majority of urgent sales relate to upgrader/down-sizer activity.
Bridging finance is not an appealing option, (and sometimes not an option at all), so selling off-market often transpires for those who purchased with a short settlement.
The important questions for prospective buyers shouldn’t relate to measuring the percentage of off-market transactions made by their advocate. It should be around the number of agency connections, investment-grading systems, past-performance, and the successful off-markets acquisitions they’ve enabled.
Calling agents, focusing on specific client briefs, asking for pre-market access and remaining prepped and ready to move fast for a quality off-market is essential for us. After over a decade in the business, the ratio of acquisitions we secure as unlisted, (both pre-market and off-market) is still between 25-30%.
This ratio ebbs and flows on a seasonal basis, and justifiably.
Cate Bakos
Independent buyers advocate, qualified property investment advisor and experienced home finder, Melbourne
Main image: Freepik