Is Buying Off-Market Property a Good or Bad Strategy
Australia's property market is currently in a recovery phase, with strong demand and limited supply driving prices higher.
In such a competitive market, off-market properties are becoming an attractive option.
But what exactly are off-market properties? Most especially, is buying an off-market property a good or bad idea?
What is an Off-Market Property?
Some buyer's agents typically encounter two types of off-market transactions:
Pre-Market Opportunities: These allow buyers to inspect and make an offer on a property before it’s listed online and exposed to the broader market.
True Off-Market Properties: These are properties where the seller wants to keep the sale private for various reasons.
Why Do Pre-Market Opportunities Happen?
When a property is listed for sale, it usually takes around two weeks before it’s made available online. During this time, photos are taken, floor plans are drawn, and the seller approves marketing materials.
Most selling agents would prefer to keep the full commission for themselves. So, they first reach out to their "A" clients, offering them the property privately. Then, they notify their "B" clients and anyone else they think might be interested.
After a few days, the property is then shared with other agents, who will reach out to their clients. If the property doesn’t sell, that's when it will be listed on the internet for anyone to see.
How Can I Find Off-Market Properties?
For a normal buyer or investor, finding off-market properties can be challenging. You may only interact with agents a few times in your life and might only work with them on a specific property.
However, experienced property experts like us are involved in several transactions every year and have already established strong relationships with agents across various markets. This means that if you want to uncover opportunities such as off-market properties, consider working with the right professionals to get tailored guidance and increase your chances of success.
Why Do Some Sellers Choose an Off-Market Sale?
Sellers may opt for an off-market sale for several personal or financial reasons, including:
Saving Money: To avoid marketing and advertising expenses, although this may reduce competition and lower the selling price.
Privacy: Some sellers want to keep the sale private, especially from neighbors or family.
Quick Sale: To skip the traditional marketing phase, allowing for quicker negotiations and faster sales.
Stress and Intrusion: Some sellers prefer to avoid the stress of open houses and multiple viewing appointments. This is often the case for sellers dealing with personal challenges like divorce, death, or urgent relocation.
Why Do Buyers Seek Off-Market Properties?
On the other hand, buyers are attracted to off-market properties for various reasons, such as:
Exclusive Access: Some buyers value the unique opportunity to view properties before they hit the general market.
Better Deals: Many buyers believe they can secure a better price since sellers might be more willing to negotiate or accept lower offers in exchange for a faster sale.
Less Competition: With fewer buyers aware of the sale, there is less chance of bidding wars, which can drive prices up in an open market.
Negotiation Power: Buyers may feel they have more flexibility to negotiate terms and prices in an off-market sale.
Fact vs. Fiction
There are some common myths about off-market properties:
Myth 1: Off-market properties are always cheaper.
Fact: Off-market properties are not necessarily sold at a discount, as the price depends on the seller's situation and market knowledge. In some cases, sellers might even expect higher prices due to perceived exclusivity.
Myth 2: Off-market deals always offer better value.
Fact: Value is subjective and depends on various factors such as the buyer's and seller's expectations, the property’s condition, and its location.
What are the Drawbacks of Buying Off-Market Properties?
While buying off-market might seem like an attractive option, they also have potential drawbacks:
Overpriced Listings: Without the transparency of the open market, some sellers may have unrealistic price expectations. In this case, buyers must do their due diligence and seek independent valuations.
Limited Options: If buyers focus only on off-market properties, they might miss out on other suitable homes or investment opportunities.
Networking Requirement: Buyers typically need to have strong relationships with real estate agents or be well-connected in the investor community to hear about these opportunities.
Reliance on Buyer’s Agents: While a buyer’s agent can help access off-market deals, buyers are dependent on the agent’s network and expertise. It’s important to choose agents with experience and a proven track record.
Finally, is Buying an Off-Market Property a Good Idea?
While many off-market and pre-market opportunities aren’t ideal, they can be valuable under the right circumstances.
If you're unsure about how to navigate this phase of the property cycle, Providence Property Group can help you. We are committed to finding the right property while guiding you with transparency and care every step of the way. So, if you're ready to take the next step, reach out to us today for expert guidance.