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Buying Off-Market Investment Properties – Everything you need to know…

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The off-market or unlisted properties or silent sales are the ‘pot of gold’ which many property investors aspire for.

It is such an unnerving move for property investors to take the helm in the off-market so it is a MUST to understand in detail how and why the off-market properties are existing. No doubt, these types of properties present an awesome opportunity for buyers.

Off-market: what does it mean in real estate?

The off-market opportunities may not be familiar to all, so before we discuss anything about it, you will have to know the meaning of what an off-market investment property is and what it is in the real estate industry.

The two types of off-market transactions:

  • If a buyer gets the chance to make an offer on a property after inspecting before being advertised or listed for sale publicly.
  • A type of off-market prospect where a seller doesn’t want to make public the sale of their property. Simply put, these are properties that are up for sale but are not advertised or listed publicly.

Why does anyone sell off-market?

In the eastern capital cities of Australia, off-market sales have made an impact across all price categories.

The different sellers think differently when it comes to off-market lists. These are the most typical reasons they’re going off-market:

  • To save on marketing and advertising costs. $10,000-$20,000 is approximately how much you’ll save in marketing and advertising costs by going off-market. This cost-saving is then passed on to the buyer that sweetens the deal and makes for a probable sale.
  • To sell it urgently and immediately – Need we say more?
  • The need for privacy. Change in your financial situation, death, or divorce at times directs for a private and immediate sale.
  • Fewer troubles of being accessible to inspections every week. What you’d have instead are fewer people who are serious buyers inspecting the property.
  • Seller’s uncertainty and more risks if the auction clearance rates are low. As a result, this turns them to go for off-market listings.
  • Sellers are uneasy about auctions. Some sellers, most especially owner-occupiers who still live in the property value their privacy and do not want to handle auctions or deal with possible buyers treading on their property.
  • If the property is rented, and the tenants have made it hard for potential buyers to go through the property. It could also be due to tenants who may have not been keeping the property in good condition.

In the past few years, an increased number of buyers choose to buy off-market properties in and around Melbourne and Sydney.

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Why do these off-market opportunities happen?

Off-market sales transactions are customarily used for luxury properties where owners desire a discreet sale or purchase.

But then as the markets made a slowdown, especially now with the CoVid-19 pandemic situation — these first type of off-market properties is becoming popular across several real estate markets. Most sellers proceed with selling in a fast and quiet manner, much as they want to save on advertising costs. We are referring primarily to the pre-market sales where you can go through it before it becomes public.

In the meantime, as the Australian property market has become better, the real off-market properties remain to be quite uncommon and just exclusive to their rightful market — the super high-valued sellers and buyers.

The Market for off-market properties

Once you ask an agent how they deal with a regular property buyer – here are the most typical scenarios:

  • They’re not yet ready.
  • They’re usually the so-called ‘tyre kickers.’
  • They do not know what they want.
  • They still cannot decide.
  • They’re not yet pre-approved in finance.

This suggests that if an agent has to do a quick sale, pushing for these off-market properties to the regular buyer will just entail a lot of challenges, and worst, no assurance of a sale.

As a result, most agents lean towards asking the professional buyers’ agents who’ve purchased several properties from them years back.

They’re aware that such professionals can easily spot a deal when they see it and has a list of probable buyers on their records — those who let the numbers rather than emotions help them make a smart decision.

This is how the process normally looks like.

The property is listed by a selling agent, but there is a two-week interval before doing it online.

This two-week window allows for floor plans to be in place, pictures to be taken, then the seller approves these materials, including the documents or images before they’re put up online.

Let us tell you that this is not everything that transpires.

Selling agents start contacting their clients to advise them of this valuable new property in their listings. They initially talk to their ‘A grade’ clients, then to their ‘B grade’ clients. They eventually start calling everyone else who they think will like this excellent property they’ve just put up for sale.

This activity is repeated as the selling agent informs his colleagues (other selling agents) to do the same thing.

It all boils down to formally listing these properties online if none of their clients expressed the desire to purchase the property for sale.

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Is it easy to find off-market properties or listing – how?

The good thing is that you may search for off-market properties on your own with just a bit of assistance.

The real estate agents of off-market properties

It is typical for off-market properties not to be advertised publicly. You may not quickly search for them unless you contact the real estate agents in the location.

You need to get onto the the databases or e-mail lists of real estate agents in the location you’re supposedly buying a property. Contact them and be sincere and open with them regarding your requirements and your budget.

In your discussion with them or e-mail, include the following to let them know what you want:

  • The area or suburb;
  • What price range do you prefer;
  • The type of property – should it be a house, apartment, condo unit, townhouse, etc;
  • The number of bedrooms;
  • Accessibility to transport, schools, or other services and conveniences;
  • Other special features or amenities you want.

Agents like this set-up because it makes it easier for them to persuade the potential sellers to put up their properties for sale and secure the listing.

Just be cautious in the fact that if you’re advising them of the price range – that would affect your negotiating stance.

Availability of off-market websites

The off-market listings have blown up in numbers in Australia such as the presence of the latest and state-of-the-art property matching websites like Listing Loop, Property Whispers, and more which make it accessible for the buyers to register and use.

How does it work? Buyers can just simply input the data about the kind of properties they want and they will then be matched up with properties in their databases accordingly based on the requirements entered.

The websites are very useful, fast, and practical, you need not browse on a list anymore.

Engage the services of a buyers’ agent

Buyers’ agents prove to be great at sourcing the most ideal off-market properties as they have wider connections and networks in the industry. They have the right industry know-how and easy access to most unlisted properties as some vendors would rather engage with them for a quick sale vs. the effort of using money and time on some real estate listings. Generally, 50% of the properties they buy come from great off-market deals.

What they do is charge approximately 2% from the purchase price as it entails more legwork. Oftentimes, they literally go knocking on one’s door and requesting people to sell, having no need for a real estate agent at all.

A buyer’s agent can do all the legwork for specific people such as the investors, individuals poor on time management, and the interstate buyers.

If you don’t want to go to a buyers’ agent, the goods news is that you can do this yourself! Of course, it’s not going from door to door, but there are other ways to achieve the same outcome that are manageable enough.

If you have the criteria like the location, land size, the number of bedrooms, what needs renovations, price levels, and more — then you can always e-mail all the real estate properties for sale in the suburbs you like, and inquire if they have any off-market properties listed which fit your criteria.

When you do get successful and receive a call back, before you even start the negotiations on an off-market deal being offered, make sure you do an accurate evaluation of the property first. Remember, you have been open with your price range at the beginning so this may have an impact on the price being presented.

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What are the practical ways in finding off-market properties?

  • Advertising through ‘word of mouth’: Check and inquire if they heard of any off-market properties — from your circle of family, friends, mortgage broker, and even a legal representative. Once they know you’re interested, they will always be reminded that you’re looking for one.
  • Availability of networks: There are three people usually in the know to unlisted properties and they’re the wholesale sellers, contractors, and real estate lawyers. If you try to network with these professionals, you are into options that are not yet publicly listed.
  • Usage of Public records: Public records usually highlight pre-foreclosures or short sale properties found in local newspapers and state and local council websites. If you’re searching for pre-market listings, these records prove to be good sources. Sometimes, you will find the foreclosure properties and failed foreclosure auctions or REO properties owned by the lenders.

Conclusion: Will you consider off-market real estate a good deal?

Did you know that majority of the pre-market and off-market opportunities do not turn out to be great deals after all? It is quite important to take note of this.

The reason is that several agents just end up getting their new business (the properties’ listing up for sale) by “buying” the listing.

This suggests that they lure the seller into using their services by quoting an overstated price first, and after securing the listing – they would gradually condition them to agree to take the real market price.

This then means that many of the pre-market or off-market opportunities are primarily listed at inflated values first before they are lowered to the market level prices, typically done much later when they are officially online or at live selling.

It seems a bit complicated, ‘right? But this is how the property market works.

Be familiar with the lessons and insights we’ve shared with you as they would be of help in the future.

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