What are off market deals?
At their effective and practical core, they are one method to reduce potential competition for a property.
If you can avoid competition, it becomes easier to buy well. You can be conservative about how much you initially offer and you aren’t competing with a horde of other buyers, some of whom may be including emotion in the price.
Warren Buffett had this to say on the topic of competitive buying scenarios:
“I don’t participate in auctions. I just decide what it’s worth to me. And if somebody wants to sell me a company, and I want to buy that company, I’m happy to buy it. But I don’t want to have my affairs run by an auctioneer.”
Peter Thiel said it more bluntly:
“Competition is for losers”
Monopolies are certainly a lot more fun…as is being the only buyer being shown a property to purchase.
Buffett prefers to negotiate with sellers one on one and avoid any competition from other buyers. This is a belief that resonates with me when I am competing with 15+ offers to purchase a property on a Saturday after an open home.
On one hand; the property with 15+ competing offers has confirmed that what we are trying to purchase will be in healthy demand when it’s time to sell, on the other hand; you are less likely to achieve a bargain price on the buy in.
We carefully check all of our off market deal flow as it’s a chance to avoid competition when purchasing.
There is plenty of marketing hype and exaggeration around ‘off market deals’ in the Buyer’s Agent industry. Any BA can secure a property against other BAs by paying 5% more.. the real skill is securing for 1K more, or sometimes less than the second placed offer. It’s the same situation with off markets.
We receive tens of calls, texts and emails every week with off market residential and commercial stock, a constant flow of off-market opportunity. We discard 99% of it before considering an inspection. Our focus firstly is on the quality of the property and secondly achieving fair value or better on the price, not on what channel we may be able to secure the property through.
Almost all of our off market secures at Allen Real Estate come via our agent network and connections. Private sellers and developers are other channels, but they are not nearly as productive as the pipeline from sales agents. Real estate agents act as a valuable filter in that they only list properties with sellers who want to sell and aren’t just testing the market.
Why do people sell off market?
There are a lot of reasons however the main reason is simplicity and ease of effort. The seller can avoid marketing and preparation costs, which can be many thousands of dollars, and also avoid having a lot of strangers walking through their home if privacy is an issue. Sales agents know that they are likely to find a well-qualified buyer through their Buyer Agent database and a guaranteed commission is very attractive.
Another common reason is that the seller doesn’t want the property going online and wants to remain incognito, or a quick and seamless transaction, even at the cost of possibly achieving more money by listing online.
Here is some recent data from our agency of the most recent thirty property secures for our buying clients. To be the only buyer offered a property you need to have an excellent reputation with the selling agent and a high degree of trust.
30 secures
6 were secured off market
24 were listed online before we had a chance to inspect
20% off market secure ratio
Details of the six off market deals:
1) Pre internet inspection – able to secure the property before going online
2) Only buyer negotiating, no competition
3) Only buyer negotiating, no competition
4) Only buyer negotiating, no competition
5) Select buyer agents inspected, four BAs offered on this property and we secured for 1K over the second highest offer (well under market value). Having good working relations achieved over years and decades with your agent network allows you to be a preferred buyer.
6) Only buyer negotiating, no competition
The main goal of a solid investment is to make sure the fundamentals are in place. Then you go to work on price after you have ticked a lot of boxes. The longer you hold a property the more important the ‘quality’ consideration will be compared with how much you paid based on the list price or whether you bought on or offline.
These stats were compiled a few months ago and as of late 2024 we are buying more off market properties than ever before, as a valued subscriber to this email please forward to anybody else who may be interested in off market deal flow, some of which we have started posting here.
Also, our Instagram page has samples of off and on market opportunities and secures
