OFF MARKET PROPERTY GUIDE
Off market property in some areas of London and Surrey now accounts for as much as 50% of all transactions. 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 lower price bands too.
In this guide to Off Market Property (OMP) we will uncover the facts. Understanding how selling or buying off market property really works will help avoid the 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 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 properties are grossly overvalued?
There is absolutely no denying that off market property does exist. However, is it really as prevalent as some agents will have you believe? Do they just envelope 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. However, as the name suggests, it generally refers to any property that is not advertised on the open market. This could be any property sold through 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, they also have access to their client’s properties. Buying agents and property finders are usually first to be asked by their clients if they know of any suitable buyers.
OMP also includes property discreetly marketed by an agent but only to buyers and buying agents they know. In many cases the selling party is requested to give the vendor a full profile of the buyer. This profiling is normally done before any information is released to control exactly who knows a property the property is potentially for sale.
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 for example, on the internet is simply not an option.
A high profile vendor may not want people viewing as a result of who they are. In this case 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 a property an ultra prime 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 for fear of 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 open to the specified conditions.
In order to get the best price for the vendor, the selling party may wish to contact a handful of key clients or buying agents first to gauge demand.
They want to know the property will only be marketed to serious buyers. The agent will profile all prospective buyers before sending property details. This is one of the reasons so much off market property is sold through buying agents. Agents know that buying agents 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 property often confused. Some agents will bulk email their database with a new “off market” instruction. Others would argue it cannot be off market if everyone knows about it. Even though the property has not been advertised on the internet it has still been advertised. Off the internet does not mean off market. You can see how confusion can arise and this confusion is often abused.
WHAT IS NOT OFF MARKET?
A WAY TO SELL OVER VALUED PROPERTY?
The majority of off market property The Buying Agents see is quite simply overvalued.
It is the selling parties’ job to get the best price for their client, the vendor. This will often involve 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 over valued. This could for a number of reasons;
The vendor has set the price and has totally 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. Selling discreetly will give the agent time to “chip” (gradually reduce) the price to an acceptable level before advertising properly.
Both the seller and vendor know it is overvalued. They think they can dupe a naive buyer who does not know the real value of the property. This shows complete ignorance to the process and just wastes their time. Even if they did find an unsuspecting buyer, the price would still be questioned later. If buying with a mortgage the application with require a mortgage valuation. In addition, even a basic building survey will include a guide price or opinion on 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 a 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 does not agree with the agent’s appraisal they often try to sell “off-market” to by-pass the agent. A good 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, 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 check points. They are often oblivious for years until they come to sell the property. Value bears no relation to purchase price, it is simply 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 as seen. The truth is that they usually just get access to property no one else wants.
AVOID LEAVING A DIGITAL FOOTPRINT
Most property portals have a Listing History feature that shows first listing date and any price changes. If the agent knows the property is overvalued, they may not want its price history to be seen.
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 etc, etc. It is simply that the property is not priced correctly to take the objections into account. The average time to sell a property will vary greatly 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 or telling how long a property has been on the market. If it was priced correctly to start it is perfectly acceptable. 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, we list everything. We regularly have to tell an agent their new listing has been available for two years.
In summary, it is true that an increasing number of super prime properties are now sold off market. There are many genuine reasons for wanting to sell off-market and in most cases, this is easily established. 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 you have had difficulty finding 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.