Podcast #10 | Off Market Property, The Pros & Cons

Podcast #10 | Off Market Property, The Pros & Cons

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There also known as silent listings or off market real estate. An off-market sale is a term used to define a property that is for sale without public advertising.

We explore the the pros and cons of buying and selling this kind of real estate.

Who has access to these listings & the best way to approach them.

Support Article: Off Market Listings.  A guide to off market listings. 

Off Market Property, The Pros & Cons | Transcript.

00:30 Today we’re gonna talk about off-market listings. They’re a pretty exciting thing, the idea of a listing being out there that you haven’t seen yet as a buyer or if you’re selling a property, the idea of not having to go through the rigorous process of getting a house ready for sale, running open for inspections, or doing an auction campaign.

So we’ll be looking at the pros and cons for both buyers and sellers, how do you find these kinds of listings, and how do you make it work for you if you’re buying and how do you make it work for you if you’re selling.

01:05: Off-market listings can be described a few different ways. Typically, it’s a house that is for sale that doesn’t have the public advertising campaign, like a for sale board, professional photos are advertised on digital websites, advertising in newspapers, none of that is associated with an off-market listing.

So it’s basically a property that’s for sale without the announcement of it being for sale. Secondly, you could probably see an off-market listing is a property that’s coming to market, so the sellers have hired an agent and the agent’s running around town and saying, “Hey look, I’ve got this property for sale. It’s coming in the market in two or three week’s time,” and he’s able to round up a little bit of business and try and get a sale prior to the public advertising campaign.

01:54: This is a great way to attract an off-market listing in a much safer way of targeting these kinds of listings, and I’ll go into a bit of detail on that. And thirdly, properties that have come off the market.

They’ve been withdrawn from sale, and you literally knock on their door two or three months down the track and say, “Hey, look, Mr. Seller, are you still interested in selling your property?” So what are the pros for a seller when they’re approaching the off-market place?

02:20: Firstly, you can test the market out, see if your price is correct, if it measures up to market value, and see if you’re really on check with what the agent’s telling you that your house is really worth. If you have an off-market buyer coming in and they’re completely disagreeing, you have multiple buyers that come in and share the same opinion, it’s probably a really good indication of how a public advertised campaign would work for you.

Secondly, you can maintain your privacy. You can have a lot less stress when it comes to having your property on the market for a long period of time. Now, in real estate, it’s commonly known that if a property sits too long in the marketplace, normally it’s about 28 to 35 days, if it’s for sale longer than that, generally it becomes a stale listing.

03:07: So you can attract buyers that are looking for bargains, looking for a cheap price. So there is a huge amount of pressure in getting your advertised campaign right, your price right, just so you can have a nice and easy sale within that 28-day period and avoid the trouble of discounting your property after 35 days, and advertising price to clients, and really struggling to get a top price after that’s happened.

You have potential savings on your advertising and your time and effort in getting your house ready for sale. Sometimes an off-market listing could sell as is, so you wouldn’t have to go through the process of maybe painting or de-cluttering and all the efforts involved in that. And look, quite honestly, if buyers are willing to go through the risk of an off-market purchase, I think they are serious buyers and they’re most likely gonna pay more for your property.

04:04: What they’re really telling you is, is that anything that’s out there in the marketplace, they don’t like it. They don’t agree with the pricing or it just doesn’t suit what their needs are, but they’re at your property looking at it and they are clearly liking something about it, so you’ve got I guess a good pull if they’re in front of you wanting to put an offer down, a reasonable offer down.

So from a buyer’s perspective what are the pros for approaching off-market property? Well, obviously, there’s less competition. A publicly advertised auction in a good market can be a pretty daunting process. You come to the auction on a Saturday and there is literally about 50 to 100 people standing at the front of the property, it’s quite a high intense environment where there could be up to 15 bidders quite easily.

04:56: Nobody really wants to be put into that scenario, but buyers are forced into that scenario and off-market doesn’t really have that. There could be a scenario where you have a private action if there’s a couple of bidders, but there never really is more than two or three bidders in an off-market listing. And the second allure is hopefully the price is lower.

So if the property isn’t in a city suburb, it’s outside the hot 10 kilometer radius of a CBD area where prices are running really, really hot. If it’s outside of that zone and it’s a common property, there is a great chance of securing a price that’s below market value. Since we’re talking about buyers, let’s talk about the cons or the risk of buying property off-market.

05:46: Now, I’ve been a buyer’s agent for well over a decade now and I can really talk about a number of stories where an off-market listing has been a very, very risky purchase and a big part of my job being a buyer’s agent is knowing what to look for when it comes to the due diligence involved and required to make sure that we’re actually buying something that’s not a lemon in different ways.

So, for example, you’d have to be prepared to spend a little bit of money and do a building and pest inspection. You’d have to go to the effort of door knocking the neighbors and saying, “Hey, look, I’m looking at buying the property. How are you? My name’s this and that Jim and I might be your neighbor one day. How’s your relationship with your neighbors?” I know it sounds a little bit creepy, but it’s amazing what a simple door knock can do and a two or three minute conversation.

Go to the extremes and call the local police up. I know that sounds wild, but say, “I’m looking at buying a house in this area. Has there been any reports of crimes or reoccurring issues in this property?”

06:54: I find that when I do a lot of due diligence on a property, more times than others, I would find something wrong and a reason that I would tell my buyer to look, let’s just probably walk away from this.

The biggest problem a buyer can face is an unrealistic or an unmotivated seller. So this would happen in a scenario where the property is very unique and you might door knock a home or you might approach them that they just have no massive desire to really do business with you. And the only way you’re actually gonna win being a buyer in this scenario is by throwing a lot of money at the seller. So in this case, it’s not an ideal situation and negotiating is very difficult because the balance of power lies solely with the actual seller.

07:48: So how do you find an off-market listing? Well, the best source is your local real estate agent, all those annoying little mailbox drops you get in the mail saying, “How much is your property worth? We’re doing appraisals in your street this week. We’ve got an over-supply of buyers and they’re looking for a house just like yours.” All those kinds of little advertising brochures that you get in the mail, they generate a lot of business for real estate agents, and it’s one of the biggest ways they are able to meet the locals and get into their properties and basically give them an appraisal on market value, and you get to meet your local real estate agent. And the agent basically databases that and follows up with the potential clients or the future clients because eventually they do turn into clients.

08:37: When you look at the life cycle of people living in the outer suburbs of Melbourne, the properties turnover every seven or so years, so if you’re an agent for long enough in the area and you work hard enough on these appraisals, you could really do well in the sense of having a big database of real-time sales after a period of five to eight years.

So your local real estate agent is a great source of off-market listings. Secondly, a buyers agent would be the best source of a qualified listing because they are able to not only say, “I’ll find out about an off-market listing,” but they’re also able to qualify one and say, “Hey, is this good or bad listing, is there an issue, does it have any history?” And run the correct due diligence involved to take the risk out of the purchase.

So how do you make an off-market listing work for you as a buyer? The simplest way to make an off-market listing work is making sure that you send across a clear message that you’re a serious and qualified buyer.

09:42: How you do that is, is know your criteria, know exactly what you want, have your finance approved, and when you approach an agent, you’re able to tell him exactly what you need. And if you have a buyer’s agent, you’re empowering him to…

Him or her, to move forward and target many agents across in the area and do all the work necessary and be very specific because an off-market listing isn’t a time or a place to explore the market and just walk through an off-market property for no reason, hence why it’s important to have all your stars aligned and really demonstrate to the people you’re working with that you are a serious buyer. If you’re a seller and you’re looking at going off-market, I personally wouldn’t recommend it.

The only time you’d really wanna go off-market is if you have a real reason to or your property is very unique, it’s very high value.

Typically over the $2.5 million mark is where you’d look at doing things off-market to generate that price.

10:51: And the reason why I don’t recommend an off-market listing for most sellers is because you wanna create a scenario where there’s competition, either through an auction or a private negotiation.

You wanna have two, three, four buyers fighting for your property, and that’s the only way that you’re gonna get a premium when you sell. Your real estate agent definitely has a big part in achieving a big price, but your real estate agent is only as good as he can be when it comes to having multiple buyers.

If he only has one buyer to deal with, it makes negotiations very, very difficult, and it can fall over very quickly when the buyer knows that there is no other competition.

11:33: Okay, so we’ve come to the end of the episode today where we’re talking about off-market listings. If you need help with off-market listings, if you’re a buyer, check out our website at wiserealestateadvice. We have a handful of advice agents that work all around Melbourne, that can assist you with off-market property. If you’re a seller, check out vendoradvocatemelb.com.au, it’s the number one ranking vendor advocacy service in Melbourne. Thanks for listening. We appreciate every listener that takes the time to get to the end of every one of our podcasts. This is a quick thank you. We’d love for you to leave your details on our website with a suburb or a property address that you’re interested in and we’d love to send you a quick report on the suburb or the property that you’re interested in and give you some information on the place. For more topics on real estate, check out propertyinvestorpodcast.com.au. We’ve got a broad range of topics that talk about buying, talk about selling, and all the bits in between when it comes to real estate. Thanks for listening.

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