What Does Off Market Actually Mean?
‘Off-market’ is a term that is becoming used quite regularly in the property investment industry, and is a tactic that we are beginning to see used regularly by buyers agents or advocates.
Initially, you might think nothing more of it other than an opportunity to purchase a property in a slightly unconventional manner, however, there can be more sinister factors at play, and you should exercise extra caution should you find yourself presented with a property that is ‘off-market.’
So, what does 'off-market' actually mean? As the name suggests it is a property that is not listed for sale. Online, with a real estate agent, or even a sign out the front for that matter. In these situations, the ‘vendor’ or property owner has been approached and convinced that now is the time to sell, and an attractive price can be sought for them. There are any number of possibilities as to how the buyers agent/advocate came to convince the property owner to sell. It may be a former/current client trying to unload an under-performing property, or it may be a case of the buyer's agent approaching local real estate agents and directly contacting owners of properties currently under management by the estate agent.
Now, let's play devil's advocate for a minute. It could be argued that there is nothing wrong with selling a property this way, the homeowner is able to sell their property quickly with a list of buyers ready to purchase, and would have to pay commission to a sales agent anyway, so what’s the harm?
The issues start when the term ‘off-market’ creates a false sense of urgency, and that the ‘rare’ opportunity to purchase an amazing property won’t last long, thus forcing you to act hastily. Because there is a lack of normal market dynamics, it is difficult to clarify and define value. An 'on-market' property generally allows you to see when it was placed on the market and any discounts or listing changes that may have occurred. The property may have even been passed in previously and re-listed on the market after a building and pest inspection failed, all information that is missing from an 'off-market' property.
Market norms in a traditional sale help all parties achieve a desirable outcome and each party's’ objectives are clear, without the normal market dynamics the door is left open for under the table deals, and the potential for unconscionable activity to occur. A property on the open market presents you with complete information, there is no 'off-market' obstruction or smoke and mirrors.
Now while the scenarios above are hypothetical, in recent months we have had a number of Ripehouse users come to us with concerns over these 'off-market' properties that have been presented to them by their various buyers agencies. The reports that contained these properties listed comparables that were not even close to the mark, and were in different leagues. The comparables list was very specifically curated to portray the property as a much higher value investment on paper, and give a price range indicator that, based on proper comparable data was over-priced at best.
When a property is 'off-market' it can be easy for a so-called 'buyers advocate' - someone supposed to be working for you - to construct a market appraisal that presents the property in a favourable light. With incomplete information (ie. the property is 'off-market') you do not have the resources or market information to act with clarity and conviction.
All this may seem quite obvious to some, but a gentle reminder to us all is never a bad thing. As always we urge you to conduct your due diligence, and always ask questions if you suspect that something may not be quite as it seems, or you doubt something that is being fed to you.