The Dangers of Buying Off-Market Properties - Buyers Beware

Been dangled a "off-market property" carrot by a sales agent or an "investment specialist"?

Off market properties used to be one of the best buying opportunities for buyers. It still is, but, the term "Off-market properties" has been misused (as always) by sales agents, real estate marketers and some new buyers agents, as "the good stuff", when they are really NOT.

Let's go back to the beginning. In the competitive Melbourne (and most parts of Australia) real estate market, ill-prepared and inexperienced buyers who do not have the support of either the right insights or professional buyers, had been left high and dry, missing out on good properties. They become desperate, disheartened and become easy prey for sneaky sales tactics.

Real estate sales agents and marketers knew this, and they have been targeting tired buyers with what they called "off-market" properties. They have increasingly turned to using this term "off-market property" are promoting these "off-market" properties as "easy to buy" properties. Indeed, they can be easy to buy, and there is a reason. We will explain that to you in this article.

What is an Off-Market Property?

In the strictest sense, an "Off-Market", is defined as one that is not being sold. The owners might not even have any intentions to sell. This definition has been extended in recent years to include those which are not being openly advertised for sale.

Genuine "off-market" properties can offer buyers a real buying advantage. But when buying properties in an off-market situation, buyers do need to be careful with the different types of "Off-market" properties they are being recommended.

This article will show you what these types of off market properties are, and why buyers need to be careful of such "off-market" properties, which are frequently promoted by the sales and marketing agents. We will also show you how to spot them and how to avoid them, and show you where you can find the various types of off-market properties, both real and fake ones.

But first, let us explain the different types of "Off-market" properties, which are the real ones, and which are the fake ones.

What are the different types of Off-Market Properties?

Generally speaking, at Concierge Buyers Advocates, we categorise the "off-market" properties into 3 main types. These are:

1. Type A - Properties which are not selling.

2. Type B - Properties which are sold willingly, and often, not advertised openly.

3. Type C - Properties which are selling, but not advertised openly.

Type A - The Off Market Properties Which the Owners have no-firm plans to Sell

Type A is the genuine off-market properties which the vendors are either not selling, or have no firm plans to sell. These are the properties which offer buyers the best buying opportunities. No one, or not many buyers, know they might be selling. You could walk pass one, and do not even know you can potentially buy it. These are everywhere. But almost 99% of them are not for sale.

Type B - The Unwilling Off Market Properties

Some of the Type B "Off-market" properties are sold as the vendor does not want the publicity of a public listing. But most of these Type B "Off-market" properties are the ones which we would usually call Distressed properties. These are the properties which must be sold, due to the circumstances the owners and vendors are in, but are unwilling or unable to openly advertise them, for privacy, security, or any other reasons. These could be court orders, divorce properties, deceased estates, mortgagee-in-possession properties, etc. There is a genuine reason why they must sell, but they are not advertised openly in the usual public boards, due to one concern or the other.

Type C - The Fake Off Market Properties

Now, Type C, is the fake "Off-market" properties. These are the ones, which the owners, vendors or developers are actively selling, but had chosen not to advertise. The majority of these Type Cs are being sold through sales agents or "property investment strategists". And they are being actively used to convince unwary buyers, that they have "privileged access" to some rare and "profitable" properties.

When a sales person approached you with an "off-market property" or when you approached sales agents asking for "off-market" properties, it would be one of these fake "off-market" properties 99% of the time. Compared to Types A and B, the key difference here is, the owners have an intention to sell, and the sales agents would usually have some form of exclusive (or sometimes, open) agreement with the vendor and most of the times the vendors are not interested in selling them at market values.

Now, the Type C category, these can be further subdivided into 2 sub-categories:

1. the opportunistic "Off-markets" - vendors (and sales agents) motivated by opportunity. The opportunistic, greedy vendor or sales agents choosing to sell in the hidden market, away from public scrutiny. These are very often the vendors who think their properties are worth hundreds of thousands more than other properties on the street, and they do not want to invite their neighbours and public to scrutinise and talk about their expectations.

2. the developer stocks - these are the fake off-market properties. And unfortunately, these makes up the majority the so-called off-market properties being sold by sales agents, real estate marketers and new buyers agents. The developers have hundreds of new properties, and they must sell. Advertising them on the public boards isn't practical, as there are too many combinations, which means it will be very expensive to advertise them and not many buyers would search for them.

The Dangers of "Off-market" Properties

Types A and B are the legitimate, real "off-market" properties. They aren't available openly for legitimate reasons, and if buyers have access to them, they might be able to pick up some good or unique deals. As usual, always do you due diligence.

The Type Cs are the ones to be wary of.

Throughout the years, we've noticed a few common themes with these Type C fake "off-market" properties. And one of that is that the vendors and sellers are not interested in selling them at market prices. In most cases, the sellers are asking for a significant premium above market prices.

And these are unfortunately, the types of "off-market" properties being recommended by the sales and marketing people, the property investment "strategists" and new buyers agents to unwary buyers. The agents do not have to hunt for them, they are being approached by property developers and vendors to sell on their behalf. They are also almost always offered by the sellers or developers with huge commissions for every property they sell. Someone is paying for the commissions. Guess who?

These type C fake "off-market" properties are usually either overpriced or the types of properties which are oversupplied in the market. There are just too many of these products being built. Buyers are very unlikely to enjoy any growth, and we are never proud to buy one of these for our clients.

What do desperate buyers buy?

Desperate and rookie buyers are often being targeted by the sales agents, investment strategists and real estate marketers with the Type C fake "off-market" properties. They are easy prey and would usually make the serious naive mistake of believing the claims that these are "off-market" properties, and they offer the best value and least buying competition. The tired and desperate buyers are the easy targets for the agents. And when the agent said they should buy, because these properties are special and no one else have seen them... And they get excited and trusted the agent.

We've met a number of buyers who had chosen to only pursue off-market properties, believing they are doing themselves a favour, by avoiding competition. So, they go around asking the sales agents for "off-market" properties. The Type Cs are the ones they will be getting from the sales agent.

How do Type C Fake Off Market Properties come about?

The sales and marketing people are not to be underestimated. Most are smart and very opportunistic. Don't get me wrong. They work hard for the money. Just don't question their ethics.

When approached by a seller who holds unrealistic price expectations for their properties, sales agents would often suggest marketing these properties as "off-market" properties. Although they are labeled as "off-market", it is important to note that these are not the genuine "off-market" properties in the true sense of the term. Owners have every intention to sell. It is on the market to sell, but they are asking for very unrealistic prices. These are the "fake" off-market properties.

Unfortunately, it is these misleading properties that sales agents often present to unsuspecting and less experienced buyers who inquire about "off-market" opportunities.

Why are Properties sold as "Off Market" Properties often Overpriced?

One would have noticed the overpriced properties are often marketed as "off-market". And this is marketed this way because, in addition to allowing them to promote these properties as "Off-market" properties, the sales agents achieve 3 things:

1. They avoid public scrutiny of these overpriced listings. They avoid questions on why these properties are so much more expensive than others in the market.

2. They maintain the agency's reputation. Without openly advertising these overvalued properties, they are maintaining their agency's reputation as a responsible agency. They are also avoiding the embarrassing situation where a listed property is sold for way less than a published list price, if the buyer can successfully negotiate it.

3. Offers from genuine buyers will be used as benchmark. If they do receive an offer, offers from these unsuspecting buyers can be (and are often) used by the vendor to set the benchmark for a proper campaign. The vendors are often using the "off-market" campaign as guinea pigs and using any offers received as reference for a proper campaign later. We often hear agents saying these fake "off-market" properties are no longer for sale, only to see them being listed in the public listing boards. And very often the listing agent is different from the agent who had earlier been marketing them as "off-market" properties.

Where can you find the genuine "off-market" properties?

So where can you find the real deal "off-market" properties? Well, that depends on which types of "off-market" properties you are looking for.

In general, here are where you can find them:

Type A - Genuine "off-market" properties

Bulk of these properties are actually not available for sale. However, buyers advocates with the right skill-sets would be able to find them, and negotiate a purchase outcome. Our Platinum buying plan focuses on helping buyers find and buy the real off-market properties. This premium service may take a few months to a couple of years to find and negotiate an outcome. In one instance, we spent almost 2 years acquiring one such property in Glen Waverley.

Type B - Unwilling "Off-Market" properties

Buyers Advocates would be able to access them. Most of the times, there could be some legal or court orders on these properties. In blue chip areas, agents would typical list these properties for auction or sell by "set date". It is believed that selling them opening is the right way to extract market value for these properties.

However, in locations with poor demand, these would usually be sold unadvertised through buyers agents or buyers advocates, as this is usually the most efficient way of selling. They do not pay any selling and advertisements costs, and because our buyers are all qualified and ready to buy the right property, it usually means it is a definite sale if we've a suitable buyer.

Our buyers advocates are often approached by vendors and / or their legal representatives for buyers for these properties. Although we understand the buyers unfortunate predicament, we believed in running a ethical business, and doing the right thing morally. We would not undervalue such properties. We would never take advantage of someone's unfortunate circumstances. We would kindly ask a buyer to look elsewhere if they insist on taking advantage of any unfortunate circumstances. No apologies here.

Type C - Fake "Off-market" properties

These are the easiest to find. The "off-market" market is flooded with these fake off-market properties. These fake off-market properties make up over 90% of the "off-market" properties. Ask any sales agent, and they would have lists of catalogs for you. They are also available through the so-called "property investment strategists", who are no more than real estate marketers. They sell you a get-rich investment dream, but it could easily be 5 to 10 years before you realise you had bought a nightmare. Many buyers ended up losing hundreds of thousands, as the combination of high rental management fees, high body corporate fees, and negative growth turned these properties into major money pits. Remember, over 99% of these are priced well above market value.

As with any properties, buyers should always do your due diligence. This is especially true with these Type C fake "off-market" properties, to avoid being taken for a ride. If you want an independent assessment of the property you are being sold, talk to one of our independent buyers advocates. We can help provide you with an independent, unbiased assessment of the property you are interested in.

Do Concierge Buyers Advocates have Off Market Properties?

Yes, we do.

We were often approached by agents and marketers offering these "off-market" properties as well, but we would always vet and qualify these properties, before making any recommendations. We assess the property, appraise the property and if the price is within expectations, we grade and classify these properties. 99% of these properties are rejected as they were either oversupplied, irrelevant, or too expensive for what they are, to be honest, which prompted us to write this article.

We will only match the property to buyers if they are relevant and suitable for them. We would not want to waste the buyer's time. We do occasionally come across a few good ones though, so, if you are keen, do get in touch.

Type B genuine off-market properties are the ones we tend to receive from real estate agents, the vendor's solicitors, or court orders. Real estate sales agents know, as industry experts, our experienced buyers advocates can tell a genuine off-market from the fake ones, and they would not want to damage their professional reputation by sending us fake off-market properties. They are, thus, usually on-point with their recommendations.

Type A Off-market properties are available through our Platinum Buying Plan, where our emphasis is on exclusivity. We have to custom search using a expert techniques, to find and access them. Our buyers are usually the only one or one of the privileged few who has access to them.

If you are in the market to buy your property and interested to know if any Off Market properties is suitable for you, or just want to have a chat about this article, do feel free to get in touch.

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