Is Off-market Really Off-market?

By Steve Waters
Everyone has something that niggles at their sense of fairness or logic.
For some it’s grammatical errors and the incorrect use of ‘there’, ‘their’ and ‘they’re’.
For others, it might be cars cutting into an off-ramp queue from the left-hand lane.
Some can’t stand fingernails dragged across a blackboard.
Yes, we all have a pet hate – and mine is the constant confusion about the terms ‘off-market’ and ‘pre-market’ by some buyers’ agents.
The difference
My gripe about the misuse comes from a good place. I am bothered that clients are ill informed about the meaning of each, and buyers’ agents who interchange the terms at will should know better.
Off-market deals – These occur when the vendor had no intention of selling, and was approached by an interested buyer, or their representatives, to see if an agreement to trade could be negotiated.
Pre-market deals – In this instance, interested parties are told about a property that is available for sale, but hasn’t been publically listed or advertised.
It’s a common error mixing the two. In fact, I would estimate 98 per cent of ‘off-market deals’ I hear about are actually pre-market.
The importance
What’s interesting is some buyers’ agents advertise their expertise at securing ‘off-market deals’ – but in reality, a true off-market deal doesn’t place the buyer in a position of power.
As an example, our team recently negotiated an off-market deal for a client to purchase their neighbour’s property. It had a special value to our client, as it would allow them to create a total site of over 3,500 square metres.
We approached the owner, who had no intention of selling, and started the conversation. It took several months of to-and-fro discussion before we reached an agreement. Our role was simply to open up communication and seek common ground.
In terms of pre-market, we have just recently been contacted by an agent with a potential purchase. The owner is looking to sell, but would consider doing so without the fanfare of advertising and an open home.
As you can see, the essential difference between the two is that with the off-market deal, we rarely have a vendor eager to trade. In pre-market, the seller is ready to sell – and, in some cases, over-eager.
Under these conditions, pre-market deals are more preferable, as buyers who aren’t enthusiastic to trade require either a special premium above market value or favourable contract conditions to convince them.
Important consideration
Here’s an important piece of information some buyers’ agents won’t tell you.
Being presented pre-market deals doesn’t always mean you’re being offered a bargain.
When you’re presented with opportunities that are pre-market, you might think you’re special – the selling agent has called you first to lay out the opportunity.
More often than not, however, pre-market opportunities are no better than what can be found on the open market. Pre-market can be used as a sales technique, and smart buyers won’t be ‘baited’ into a pre-market opportunity without making sure the numbers stack up.
Another factor to keep front of mind is that the market cycle often dictates how common pre-market deals are. I’ve found that in really buoyant markets, there’s no way an agent is going to let a seller trade pre-market. The reasons? Firstly, the agent needs the exposure of signboards and advertising to help them secure new listings – the hardest thing for an agent to get in a hot market.
The other reason is they know there’s competition, so they want to expose the property to as many buyers as possible.
In quieter markets with lower enquiries, however, expect more pre-markets. Agents want to secure the deal and move on to the next transaction quickly.
So, in a hot market they’re looking for listings, in a cool market they’re looking for buyers. It makes perfect sense.
Another note – some buyers’ agents claim they only deal in off-market property. If that’s true, they’re not exposing their clients to nearly enough listings. As a buyers’ agent, you need to use every avenue available to find potential deals – off-market, pre-market, open listings, mail outs, phone calls, agent’s rent rolls – whatever stone needs to be turned over for your client to find the right property.
In our experience, the vast majority of deals are done on market – over 90% would be a fair figure.
Avoiding a bad deal
The most effective way to avoid being fed consistently bad pre-market deals is to establish a good working relationship with a network of trusted agents.
That’s right – there’s no ‘silver bullet’ solution. It takes work.
You must forge and maintain connections that will ensure you are one of the first notified when a real opportunity arises.
You must keep up your end of the bargain too. Agents want to deal with buyers who are prepared to trade, can make fast, reasonable decisions, and who have a track record of completing transactions.
Reputations in this game are hard won and easily lost. If you become known as difficult and unreasonable, or constantly use questionable tactics during negotiations, then don’t expect agents to keep calling.
The agent is a conduit to put you onto a house. They have a top-10 buyers list who are ready, willing and able to complete deals. You a want to be on that list.
We have built relationships with a huge number of agents – some over 17 years – and it’s paid handsome dividends for our clients.