10 May, 2023 / Category: Blog
Have you ever wondered how some people buy their dream home without seeing it advertised? Off-market transactions have become increasingly popular in Melbourne since the slowdown of the property market. In this month’s Market Insight, we deep dive into why people choose to sell off-market and how to negotiate the best price and terms in an off-market transaction.
An off-market property is not publicly listed for sale, but the owners are willing to sell it. This could be a vendor who is happy to consider an offer from a door knocker or a vendor who has a signed agency agreement with a licensed real estate agent to sell their property on their behalf without above-the-line advertising.
There are many reasons why vendors choose to sell off-market, and understanding their motivation will dictate the best way to buy from them.
The four main reasons for selling off-market are financial, discretion, time or opportunistic.
Financial: Vendors under financial pressure may opt to sell off-market to avoid the marketing fees associated with an on-market campaign.
Discretion: Vendors looking to keep their property sale under wraps and only allow pre-qualified buyers through their property may opt for an off-market or a private sale. This allows them to decide who can come through their property and sell only once their desired price is agreed upon.
Time: Some vendors are time constrained (they may be moving overseas, settling a deceased estate, or a couple separating) and need to sell their property quickly for the best price. In this case, they may not have time to prepare the house for sale and run an on-market campaign.
Opportunistic: These vendors are open to accepting an offer from a door knocker or real estate agent if they have the right price and terms. They don’t necessarily need to sell, so negotiations may take some time, and they may be seeking a higher price than other properties for sale.
If you’ve ever tried to look for off-market properties in the area you want to buy, you will know they are incredibly difficult to unearth without an extensive network and a lot of time.
This is where a Buyer’s Agent comes in. We are well versed in door knocking, and we’ve spent decades building relationships with real estate agents in our specialised areas. When they get an off-market listing, we are often the first people they call to see if we have a qualified buyer.
At Infolio, we know each off-market needs a unique approach to negotiating a good outcome for the buyer. When you buy at auction, the buyer must conform to the terms set out in the Statement of Information, and the accepted offer must be unconditional.
When buying off-market, buyers have more flexibility, it’s not all about price. Levers such as settlement length, deposit size and finance approval can be important negotiation terms.
Once you understand the vendor’s motivation, you can tailor your negotiation to suit their needs while ensuring you get the best result.
For example, if they are a passive seller with no time constraints, the buyer may be willing to pay a higher price in exchange for a longer settlement or smaller deposit. On the other hand, if they are a highly motivated seller (i.e. need to sell quickly to settle a separation), then the buyer may be able to negotiate a lower price in exchange for a shorter settlement.
We recently bought this stunning off-market property for our client in Brighton. It was over 1,200m2 and featured a newly built modern house with five bedrooms, a pool, basement, cellar and all the features one would expect in the high-end market. A hard-to-find family estate in the heart of Brighton. When we started negotiations, their asking price was high, so we made an offer below the market to allow us room to bridge the gap during the negotiation process.
We knew the vendor needed some money from the property’s sale quickly; however, the property was tenanted, making settlement long and complicated. To get the vendor to adjust their price, we offered a higher deposit with an early release clause. After two months of negotiations, we secured the property for circa $10,000,000, well below the vendor’s starting price.
At Infolio, we pride ourselves on showing you the whole market, including both on and off-market properties that fit your brief.