Networking has always played an important role in the world of business, with many a key deal done on the golf course or over a drink at a favoured club. Some property transactions are carried out in the same way.
Reports of multi-million dollar property deals will often note that the transaction has occurred through a privately brokered deal. In other words, the property was not advertised or marketed in the usual way by a selling agent but instead sold via an off-market deal.
And while selling agents often leak the price and name of the buyer or seller to the media because it’s good for business, much of this reporting should be taken with a grain of salt. High-profile buyers or sellers use off-market deals specifically to avoid the type of public scrutiny given to regular property transactions.
But is the ability to avoid the usual auction or private sale process just something enjoyed by the well-heeled and those in the know? Or are off-market transactions worthy of wider attention?
It is not uncommon for off-market deals to occur in such rarefied precincts as Melbourne’s Toorak and Brighton or in Sydney’s Bellevue Hill and Double Bay. These deals can also occur in less pricey suburbs, when owners of niche properties get a knock on the door. It might be an offer from somebody who has fallen in love with the look of the place, or perhaps wants to be close to a particular sought-after amenity such as a prestigious school.
Bypassing the usual property sales process might be attractive, but make no mistake; this type of transaction requires some finely tuned market knowledge and negotiation skills if the buyer is to get value for money.
So where does a buyer begin their quest for off-market property deal? Some people who have hand-picked a property are intrepid enough to knock on the door and ask the owner whether they’d be interested in selling and at what price. The greatest danger with this strategy lies in not knowing what the market price is or not having the negotiating skills to arrive at a good deal. Adding to problems with the direct approach is the fact that in the most aspirational areas there is no cut-and-dried market price, which is why we consistently see price records being set.
A financially safer strategy is to appoint an intermediary, such as a real estate agent or experienced property adviser familiar with the area. An intermediary removes emotion from the process and this gives the buyer a psychological and financial advantage. An experienced broker will determine a price point before starting any negotiations – particularly in cases where a property is not actually for sale – and then establish what price the owner would be prepared to accept.
If you are trying to pursue an off-market deal, it’s important to tap into the networks of these advisers and estate agents. When your network is well-oiled, the grapevine will reveal that a certain property might be available at the right price.
The savvy buyer who is in the market for a $3 million-plus property in Melbourne or a $5 million-plus property in Sydney should determine the four or five key selling agents who control the suburbs or areas they are most interested in. The savvy buyer would then call those agents every week and establish themselves as being in the market for the right deal. Of course, it makes good business sense to approach agents or advisers with a clear idea of the type of property characteristics you are after.
There may be occasions when a sought-after property has failed to sell at auction and an agent is subsequently prepared to sell it off-market to the ideal buyer. Bear in mind, though, that these types of transactions may not be as exclusive as they appear. The same property may be offered to several buyers, who may be in a blind auction. It takes a very cool and well-informed buyer’s agent to sniff out the seller’s expectations, convey them accurately to the buyer and pitch an offer at the right level and on terms that will appeal to the seller.
This sort of networked negotiation is as much about establishing insight and intimacy as it is about sheer financial acumen. A touch of the matchmaker, a pinch of Machiavelli and a dose of Goldilocks are all part of the package.
Personally, I am surprised that off-market transactions don’t occur more frequently. The ability to broker these sales is a fundamental skill that real estate agents and property advisers should possess.
For the novice, there are a couple of closing tips. As a buyer, never make an offer until you have ascertained the technical value of the property you want to buy and what, if any, premium you are prepared to pay to secure it. There will certainly be a premium.
As a seller, you must also establish technical value before considering any offer. Then, you need to decide how much you will pay to secure your treasure, then determine how little the buyer will accept.
This story first appeared in Eureka Report