OFF MARKET PROPERTY GUIDE 2021
Off-market property now accounts for 50% of all transactions in some areas of London and Surrey. Selling a property off-market has long been the preferred approach in super-prime markets. However, in recent years, the strategy has grown in popularity and is more prevalent in the mid-range price bands.
In this guide to Off Market Property (OMP), we will uncover the facts. Consequently understanding how selling or buying off-market property works will help avoid costly mistakes often associated with it.
OFF MARKET FAQ
Here are some of the most frequently asked questions;
2) Is it just a myth fuelled by selling and buying agents to attract more potential applicants and clients.
3) Is it “The Emperor’s New Clothes” of the property world?
4) Can agents risk not playing along in fear of being left out or looking inferior?
5) Are buyers enticed by these elusive properties thinking they have access to private inventory no one else has?
6) Do buyers respond to off-market adverts only to be cross-sold something that is openly available?
7) Are buyers aware that some off-market property is grossly overvalued?
There is no denying that off-market property does exist. However, is it as prevalent as some agents will have you believe? Do they envelop any discreet sales, pre-market instructions, and embarrassing listings to increase these statistics?
WHAT IS OFF MARKET PROPERTY?
The definition of OMP varies greatly depending on the source. That said, it generally refers to any property not advertised on the open market. Off-market could be any channel, not just an estate agent. Buying agents are responsible for a large proportion of off-market transactions in London and Surrey. Not only do they have extensive connections throughout the property industry, but they also have access to their client’s OMP. Buying agents are usually first to be asked by their clients if they know of any suitable buyers.
Off-market property also includes property discreetly marketed by an agent but only to buyers and buying agents they know. In some cases, the selling party maybe request a full profile of the buyer before any information is released.
SELLING OFF MARKET PROPERTY
There are numerous legitimate reasons for selling property off-market.
The vendor does not want the property, and its contents displayed to the general public. Publishing images of art or antiques on the internet, for example, is not an option.
A high profile vendor may not want people viewing as a result of who they are. Therefore, the selling party will diligently profile all prospective buyers.
ULTRA PRIME PROPERTY
There may only be a handful of potential buyers in the market with the ability to purchase at this level. Sourcing suitable buyers can take time. Having an ultra-prime property on the market for too long can send the wrong signal to buyers.
Most commonly the “3 D’s”. Death, Divorce and Debt. The vendor does not want the neighbours to know they are selling. They do not want lots of probing questions during a difficult time.
In certain situations, they may only want to sell to specific people for any number of reasons.
They may have a trusted buying agent that handles all their property matters for them. They do not need to use an estate agent.
The vendor may need to sell at a certain point in the future. The agent will only introduce potential buyers agreeable to the specified conditions.
The selling agent may want to test the market first to gauge demand to achieve the best price. They will have confidential conversations with a handful of trusted buying agents or key clients.
The vendor only wants serious buyers to receive information or view the property. The agent will profile all prospective buyers before sending property details. Buying agents are usually involved in most off-market transaction as they only work with well-qualified buyers.
DISCREET MARKETING OR OFF MARKET PROPERTY
There is always much debate about what is and what is not off-market. Discreet marketing and off-market are often confused. Some agents will mailshot their entire database with a new “off-market” instruction. Others will argue it cannot be off-market if everyone knows about it. Just because it is not on the internet, it does not mean off-market. You can see how confusion can arise.
WHAT OFF MARKET IS NOT?
A WAY TO SELL OVER VALUED PROPERTY?
The majority of off-market property The Buying Agents see is overpriced.
It is the selling parties’ job to get the best price for their client, the vendor. This process often involves marketing the property with a slightly higher asking price than the anticipated sale price. This margin is usually around 5 – 10% to compensate for negotiation. Anything above this level is just overvalued. There can be several reasons for this;
The vendor has set the price and has unrealistic expectations. The agent knows they will lose credibility if they list it on a website, so they agree to market discreetly.
BUYING THE INSTRUCTION
The agent has purposely overvalued the property to effectively “buy” the listing. Discreetly selling the property will give the agent time to “chip” (gradually reduce) the price. This process reduces the price to an acceptable level before advertising openly.
Both the seller and vendor know it is overpriced. They think they can trick a naive buyer who does not know the real value of the property. This approach shows complete ignorance of the process and wastes their time. Even if they did find an unsuspecting buyer, the price would still come into question later. If buying with a mortgage, the application will require a mortgage valuation. Besides, even an entry-level building survey will include a guide price or opinion on the purchase price.
AVOID PAYING A SELLING AGENTS FEE
The Buying Agents are often approached directly by vendors to sell their property. They assume that if we have a suitable buyer, they will not have to pay a selling fee. This would be the case if it matched a client’s criteria. However, in reality, as we only represent a small number of clients at a time, so this is rare.
We would happily sell the property through our off-market channels, but we would need to charge a selling fee. Selling off-market property properly, to achieve the best price takes time and resources.
More importantly, vendors not willing to pay a selling fee are usually hard to negotiate with. The average selling fee is 1.5 – 2%. Anyone not willing to speculate to accumulate will often not have a rational approach to market value or asking price.
IGNORE AN AGENT OR VALUERS’ ADVICE
As mentioned above, we are regularly contacted directly by potential vendors to sell their property off-market. After establishing why they want to sell off-market, we then try to gauge the value of the property. Part of this process is simply to ask if they know what it is worth. Have they had an RICS valuation or an estate agents market appraisal?
Most good estate agents will not want overvalued stock on their books as they will lose credibility. If a vendor disagrees with the agent’s appraisal, they often try to sell “off-market” to bypass the agent. A reputable buying agent would not want to lose credibility either.
INCREASE THE HYPE
Off-market property always attracts press and hype. Sellers think that just by labelling a property “off-market” they will increase its appeal and hence the price.
In some cases, this is true, and there will always be one “know it all”. Just like the vendor, they are also a victim of the hype thinking they will gain kudos. They pay cash and don’t see the point in a survey so bypass all the usual price checkpoints. They are often oblivious for years until they come to sell the property. Their purchase price bears no relation to market value today. The property is simply worth what it is worth in today’s market. We regularly see people who have wasted millions of pounds from not getting objective advice.
AN ADVERTISING TOOL
Many selling and buying agents exaggerate the extent of their off-market transactions to attract more buyers. Buyers think they will get access to property no one else has seen. The truth is that they usually just get access to the overvalued properties no one else wants. Contact us for further information.
AVOID LEAVING A DIGITAL FOOTPRINT
Most property portals have a Listing History feature that shows first listing date and any price changes. The agent may not want the property’s price history to be visible if they know it is overpriced.
HIDING THE PROPERTY HISTORY
There is only ever one reason why a property will not sell, and that is the price. It has nothing to do with location, size, condition, lease or noise, for example. It is merely that the property price is not incorrect to take the objections into account. The average time to sell a property will vary significantly from 1 day to several months, depending on the market.
As discussed, there is nothing wrong with testing the market to achieve the best price. There is also nothing wrong with showing how long a property has been on the market if the price is correctly to start. No buyer would have a problem with this as they would probably do the same when they sell.
However, hiding an overvalued property off-market is futile. We often see agents trying to sell the same old listings at ridiculous prices. The vendor hopes that an unsuspecting buyer will one day take it. The reality is that unless the market catches up with the price, it will remain unsold. The longer it on the market, the less chance there is of selling. The Buying Agents have a database of off-market property, and we list everything. We regularly have to tell an agent their new listing has been available for two years.
The number of super-prime properties sold off-market is now increasing. There are many genuine reasons for wanting to sell off-market, and an experienced buying agent can quickly establish this. However, even the properties sold OM for legitimate reasons can be overpriced, so having impartial advice on the transaction is essential.
Do you have a specific requirement in London or Surrey? If so, please contact The Buying Agents below to arrange a confidential call. Alternatively, please do not hesitate to contact us directly on +44 (0) 20 3600 0048.