By Michael Knights, CEO of Horizon Property Alliance
There are a number of reasons why it’s smart to have a professional property advisor on your team when building a portfolio.
They understand the lay of the land when it comes to trading real estate. They’ll have useful working knowledge on the legalities and practicalities of creating wealth through bricks and mortar. It’s a ready well of knowledge on from which you can draw from.
But for all their shills and resources, there’s undoubtedly one aspect of purchasing where their mentorship pays off in a single trade.
That’s in the world of off-market transactions.
Off market defined
You’d already know how property is marketed to the masses. We even do it ourselves, here.
Sellers decide to make their holdings available for purchase and then advertising far and wide in an attempt to reach as many potential buyers as possible. Multi-billion dollar companies have been built on the back of advertising real estate for sale.
The seller and their agent then try to pit all those potential buyers against one another in an effort to secure the highest possible sale price.
But what if I told you there’s another network of sales that away from the major advertising campaigns?
Off-market deals refer to those negotiated transactions where the property is never put to the open market. Instead, the seller and their agent quietly seek out the most likely buyer and attempt to reach complete a successful contract without the hoopla of a wide-ranging sales process.
Why buy off market?
Off-market deals are easily one of the best ways for a buyer to build their portfolio.
First and foremost, the process results in less competition among buyers. Instead of second-guessing offers from other purchasers, off-market deals allow the purchaser a chance to conduct their due diligence and secure the home at a price that could potentially be below what would have been achieved via an open listing.
In some instances, off-market purchases can be negotiated directly with the seller – removing the need for a selling agent and allowing some wriggle room on price because a commission isn’t being paid.
Seems like a sweet deal for buyers, but why would a seller engage in an off-market negotiation?
Sometimes time pressures will require the owner to secure a quick sale and settlement. They don’t want to go through the rig moral of paying for advertising and enduring a long-winded sales campaign.
Many buyers are also quite private. The idea of having multiple parties traipse through their property at an open home inspection is anxiety inducing.
Many also don’t want to release details about their property publically – so listing the address and photos on easily accessed websites is no good.
Get in the know…
How do you find them?
Unearthing off-market prospects is tough if you aren’t relying on a well-resourced advisor.
Firstly, the onus is on you as the buyer to make it known you are in the market. That means hours of legwork, dropping notes into letter boxes and cold-calling owners to see if they’ll consider selling.
There is also the opportunity to approach sales agents in your area of interest and letting them know of your intentions. This can work when an owner is keen to quietly sell. They may approach an agent and ask if they have keen buyers, which is an opportunity ripe for you to take advantage.
While locating off market deals is possible for most investors to do themselves, there is also the next step of sorting through what’s on offer so you can make a quick decision on whether to proceed.
A word of warning though – I’m aware that some agents try and use the ‘off market’ tag to suggest a bargain is on offer when, in reality, the price they’re seeking is well above market. These agents are trading on the hope a buyer isn’t relying on advice, and will pay above the odds in order to take the property off the market quickly.
Best course of action
Far and away the best method for finding and securing off-market property is via an independent agent or advisor.
Well connected professionals spend years – sometimes decades – building up their network of relationships and establishing a reputation as a no-nonsense operator. If a selling agent is keen to lock down a deal off-market, they’ll reach out to their known advisors and buyers’ agents first. These selling agents know they’re dealing with a professional who has buyers on their book, and can help their client make a quick decision.
Networked professional advisors will even approach sellers directly on your behalf. They can help those owners understand the nuances of their contract terms and discuss why selling off-market is a win for both parties.
Off market property is a sterling way to gain instant equity and high returns when buying, but it’s exhausting trying to sort through the options and land an excellent outcome all by yourself.
If your time is precious and you value good advice, you must contact a professional advisor who can reveal those properties that provide a huge upside without the buzz of competition.