Braden Walters, Sales Agent at McGrath Estate Agents and REINSW Board member, explained that an off-market sale – where the property is sold without any public advertising – can come about in different ways.
“You tend to see them after there’s been a particularly high-priced sale in an area and there are disappointed potential buyers who are desperate to buy in the same building or street,” he said. “Some sales agents will take the opportunity to contact other owners in the building or street to see whether they’re open to receiving an offer from one of the unsuccessful buyers.
“I’m strongly against off-market sales unless you’ve recently sold a property and there are leftover potential buyers who are red hot.
“Off-market sales are just not in the best interests of the vendor and aren’t transparent for buyers. Agents who resort to these tactics simply fail to demonstrate to their vendors how big a part a carefully crafted marketing campaign plays in creating urgency and competition in the sales process,” he said.
Ben Bickmore-Hutt, Director of Residential Sales at Bickmore-Hutt Realty, said there are some sales agents who are trying to stay ahead of their competition by not charging for marketing costs.
“Off-market sales are ‘no fuss’, and can be a quicker and quieter way of selling a property – especially for prestige buyers who want to be discrete,” he said.
“Sales agents who are up to date with technology keep detailed buyer databases, which means they’re able to act quickly and can get in touch with qualified buyers who can be introduced without a full auction campaign or associated marketing costs.”
Mr Bickmore-Hutt said the low interest rate environment has encouraged people to buy before they sell and this increases pressure around the selling process, so the speed of an off-market transaction can be attractive.
According to George Rafty, Principal at First National Newcastle City and 2016 REINSW Award for Excellence winner in the Residential Salesperson category, off-market sales in regional areas are more common amongst agents who are more experienced and have the nous to chase business, rather than wait for it to come to them.
“Because of the buoyant market conditions, there’s simply not enough stock to cater for buyer demand. Competition is fierce and, as a result, off-market trade has been steadily increasing – and there are signs that it’s still increasing,” he said.
“There’s lots of competition for homes. Buyers want to get in first and get it done before they have to compete with everyone else.”
Pathway to a premium price?
Mr Rafty said off-market sales work well in situations where you have a buyer who wants a specific house – and if you can get it for them, the chances are it will come at a premium.
“I think there’s definitely a place for off-market sales and they do suit a particular type of client, but it’s not the best approach on all occasions.
“If I was selling my house, I wouldn’t want to sell it unless there was a high-level and detailed marketing plan in place. I’d want all potential buyers to know it was on the market and selling.
“Competition drives price and that’s what we’re paid to do – get a premium price for our vendor,” Mr Rafty emphasised.
Braden Walters also has concerns surrounding price outcomes. “I don’t generally see any amazing prices or record results in an off-market sale,” he said. “They don’t allow all buyers the fair and honest opportunity to purchase the property. With a public campaign, there are no smoke and mirrors.
“As a buyer, when a property goes to market you can see who your competition is and you know you are competing for the property properly. In an off-market sale, the owner is worse off. How do they know that they ended up with the best price? They don’t,” Mr Walters said
Favourite for buyers’ agents
According to Mr Walters, the rising popularity of buyers’ agents has played a role in the increase of off-market sales. “They’re a great way for buyers’ agents to view properties that would normally never be advertised and get their clients a better buy.
“Buyers’ agents love it. They can get their clients in and negotiate cheaper deals without the competition,” Mr Walters said.
Ben Bickmore-Hutt agrees and said buyers’ agents can use off-market sales to build value into their offering. “Buyers’ agents are proactively seeking out off-market transactions to make their services seem a bit more exclusive to their clients,” Mr Bickmore-Hutt said.
Nick Viner, Principal at Buyer’s Domain, agrees, added that off-market sales can sometimes act to over-inflate perceived values. “Some people end up paying a higher price for a property because it’s being offered exclusively,” he said.
Mr Viner said buyers’ agents are constantly ‘shaking the tree’ and working out details of properties before they get to market, and this may also account for why there are now more off-market opportunities.
“If you’re a buyer who has been looking for two years on realestate.com.au and Domain, and you’ve exhausted all avenues and a buyers’ agent comes along and says ‘I can show you something off-market’, you’re quickly going to become interested,” he said.
However, he admits that there are some buyers’ agents who are talking up the numbers of properties they have available to them. “There are some who exaggerate the number of off-market opportunities they can provide because it’s a very compelling argument to a buyer.
“The prospect of having something that’s not listed on realestate.com.au or Domain is very attractive. However, in reality, the volumes are not as high as some buyers’ agents like to make out. It’s more like the odd one here and there,” he said. “Having said that, a good 40 per cent of the transactions I’ve been involved with this year have been off-market.”
Mr Viner warns that some sellers could be keen for an off-market sale because of a defect with the property that may be discovered if a full marketing campaign and investigation was to occur.
“If someone is rushing in to sell a property, there could potentially be something fundamentally wrong with the property and the vendor may be attempting to offload it quickly. If it looks like a property could sit on the market for a while, a quick off-market sale would have obvious benefits,” he said.
According to Mr Viner, the lack of stock means that some sales agents are convincing vendors to test the waters off-market to find out price levels without attracting the attention that a full-scale marketing campaign would bring.
“The current market is exacerbating off-market sales with agents pushing vendors to get the stock and show a few people off-market,” he concluded.
It’s always important to evaluate what is the right option for your vendor. The reality is that there’s no one-size-fits-all approach and off-market sales can be attractive under the right circumstances, so always be sure to explain both the benefits and the potential pitfalls.