With the current low levels of quality property on the market, as a buyers agency we are constantly talking to people who want to try and find a property off-market.
However, finding an off-market property is not likely going to be the solution that many hope it will be for a lot of would-be buyers out there.
In recent times, we’ve seen a big jump in the number of properties being transacted off-market. This was particularly true in the middle part of 2020 as listings were down, confidence was low and many vendors simply didn’t want to launch a large marketing campaign when many buyers were not all that keen to enter the market.
As the market turned and the buyers came back out, fueled by low-interest rates and the realisation things were not really all that bad, we started to see that there were plenty of buyers and few listings. This got people talking about finding properties off-market instead.
The Right Expectations
While buy off-market is a very good approach, you need to make sure you are approaching the process in the right way and most importantly, with the right expectations.
One of the things that we see quite a lot are people who want to spend a certain amount of money, let’s say $1.8 million, trying to buy a property off-market that is in fact, worth $2.4 million.
The belief is that because there is less competition with an off-market transaction, that the vendor will sell it for less than it’s worth. As you can probably guess, that’s simply not the case for the vast majority of vendors.
If a vendor wants $2.4 million for their property and that’s what the property is actually worth, it doesn’t matter that you’re trying to buy the property off-market or not. The property is simply worth $2.4 million. It was your expectations that were out of line.
An off-market transaction doesn’t mean you are guaranteed to pay far less than what a property is truly worth. You need to be realistic.
People want to get an off-market property because they believe they can get a property that is better than what they can afford. In reality, that is not true.
The Real Value of a Property
The other big issue people trying to buy an off-market property run into is the fact that they are not able to truly gauge what a property is actually worth.
When you’re buying a property through a more traditional process such as auction, the other buyers involved and the real estate agent are essentially telling you what that property is worth. If there are multiple parties that are prepared to pay $2.4 million for a property, then you can have the confidence that that is a reasonable price for you to pay also.
When negotiating off-market with just you and a sales agent, for most would-be buyers, there is no way for them to substantiate what that property is worth.
If the sales agent tells them the vendor wants $2.4 million and the buyer doesn’t believe that property is worth that much they can’t make a transaction happen anyway. They might put in an offer well off where they need to be and because they don’t have those other buyers around them substantiating what the property is worth. That means the deal falls over as they didn’t have the confidence to understand what that property should sell for.
Overall, it’s clear that in most instances buying a property off-market is not the issue, nor is it the secret formula to finding a great property.
It’s far more important to have realistic expectations and understand what a property is actually worth than trying to find an off-market property bargain.
My advice is always to get clear on what your budget is and get clear about what that budget will actually buy you in the current marketplace. Then you can go out and focus on the properties that you can afford and not waste your time and energy as well as miss out on the potential price gains that you could have generated from buying a good property early on through inaction.