Off-market Overpriced Properties

This particular off-market property caught our attention after the selling agent suggested we take a look. And to be fair, it was very well presented.

The home felt well maintained, nicely upgraded and clearly had the quality of a top-notch house. In the right location, such as Glen Waverley, Wheelers Hill, Mount Waverley, this could easily have been a $2 million property. Or a $2-3 million house if this is in Inner East Melbourne. But it wasn’t.

It was in a pocket of South-East Melbourne where the surrounding sales simply did not support the vendor’s expectations.

The sellers were looking for more than $1.5 million. But our on-site appraisal said $1.3 million.

We knew the selling agent well, and they knew us well enough that there wasn’t much point dancing around the issue. After inspecting the property, we told them plainly that we could not justify anything much above $1.3 million.

They maintained that the vendors wanted more than $1.5 million.

Their words said one thing. Their body language said something rather different. They knew.

Our impression was that the property was effectively being tested off-market at an ambitious price, before being exposed to the scrutiny of the broader market in South East Melbourne. Using the "Off-market" buzz word is a tactic to market such properties.

There is nothing inherently wrong with selling off-market. Genuine off-market opportunities at a decent price can be excellent. But buyers need to understand that “off-market” does not automatically mean “good value”, “exclusive opportunity” or “below market”.

Sometimes it simply means:

“Let’s see if someone will pay our price before we put it on the open market.”

We declined to pursue it.

Around three weeks later, the property was officially listed for auction with an advertised range of approximately $1.0 million–$1.1 million.

Auction day arrived, and bidding reached approximately $1.35 million, and the property was passed in. So despite bidding already sitting well above the advertised range, the property was still unsold. That result told us a lot.

Our original appraisal of around $1.3 million had been much closer to where the market saw the property, and no where near the vendor’s initial $1.5+ million expectations. We weren't low balling, we're just being realistic.

This is why we never become overly excited simply because someone tells us a property is “off-market”. We receive hundreds of off-market properties every month. We screen all of them and most of them were rejected. Only less than 3-5% are worth further due diligence. We talked about our concerns with off-market properties in this article.

The important question isn't: “Can we get access before everyone else?”

It is: “What is this property actually worth and is it worth pursuing?”

Sometimes an off-market opportunity really is an opportunity. Most of the time, it is simply a very opportunistic and optimistic vendor looking for an optimistic buyer.

We chose not to be that buyer. We walked away and watched the show.

The property was delisted after 2 months. Unsold.

Rejected Due to: OVERPRICED