Off-market property now accounts for 50% of all transactions in some areas of London. Selling a property off-market has long been the preferred approach in super-prime markets. However, the strategy has grown in popularity in recent years and is more prevalent in the mid-range price bands.
In this guide to Off Market Property, we will uncover the facts. Consequently, understanding how selling or buying off-market property works will help avoid costly mistakes.
Here are some of the most frequently asked questions;
1) Does off-market property exist?
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 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? To increase these statistics, do they envelop any discreet sales, pre-market instructions, and embarrassing listings?
This guide looks to dispel the fiction and discover the facts about off-market property in London.
The definition of off-market varies greatly depending on to whom you speak. The term generally refers to any property not advertised on the open market. However, “off-market” could be any channel, not just an estate agent. Buying agents are responsible for most off-market transactions in London and Surrey. They have extensive connections throughout the property industry, but they also have access to their client’s property. 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 may request a detailed profile of the buyer before any information is released.
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 their property for privacy reasons. Therefore, the selling party will diligently profile all prospective buyers.
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 many reasons.
They may have a trusted buying agent who handles all their property matters. They do not need to use an estate agent.
The vendor may need to sell at a certain point in the future. Therefore, the agent will only introduce potential buyers agreeable to the specified conditions.
The selling agent may want to test the market to gauge demand to achieve the best price. They will have confidential conversations with a handful of trusted buying agents or their top clients.
The vendor only wants serious buyers to receive information or view the property. Therefore, the agent will profile all prospective buyers before sending property details. Buying agents are involved in most off-market transactions as they only work with serious buyers.
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.
Most of the off-market property The Buying Agents see is overpriced.
The selling parties’ job is 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. However, the agent knows they will lose credibility if they list it on a website, so they agree to market discreetly.
The agent 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 asking 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 property’s actual value. 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.
The Buying Agents are often approached directly by vendors to sell their property. They assume that they will not have to pay a selling/buying fee if we have a retained buyer. However, in reality, as we only represent a small number of clients at a time, this is rare.
We would happily sell the property through our off-market channels, but we would need to charge a selling fee. In addition, selling off-market property properly to achieve the best price takes time and resources.
More importantly, vendors unwilling to pay a selling fee are usually unrealistic when negotiating. The average selling fee is 1.5 – 2%. As a result, anyone reluctant to speculate to accumulate will often not have a rational approach to market value or asking price.
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 property’s value. Part of this process is to ask if they know what it is worth. For example, have they had an RICS valuation or an estate agent’s 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.
Off-market property always attracts press and hype. Sellers think that by labelling a property “off-market”, they will increase its appeal and price.
In some cases, this is true, and there will always be one naive buyer. They also succumb to the hype and think they are buying something no one can. The buyer pays cash and doesn’t see the point in a survey, bypassing 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.
Many selling and buying agents exaggerate the extent of their off-market transactions to attract more buyers. Buyers think they will get access to a property no one else has seen. The truth is that they usually get access to the overvalued properties no one else wants. Contact us for further information.
Most property portals have a Listing History feature that shows the first listing date and any price changes. However, the agent may not want the property’s price history to be visible if they know it is overpriced.
There is only one reason why a property will not sell, and that is the price. For example, it has nothing to do with location, size, condition, lease or noise. 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.
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 listings at ridiculous prices. The vendor hopes that an unsuspecting buyer will one day take it. The reality is that it will remain unsold unless the market catches up with the price. The longer it is on the market, the less chance of selling. The Buying Agents have a database of off-market property, and we lost everything. We regularly tell an agent their new listing has been available for two years.
In conclusion, 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 off-market for legitimate reasons can be overpriced. Therefore having impartial advice on the transaction is essential.
Please get in touch if you want to discuss buying or selling discreetly.