Buying carefully is particularly important right now with the way Melbourne’s property market is moving. Despite predictions that home price rises would ease this year they have done the opposite and the market’s running hot with strong price growth and high clearance rates. The spring market shows all signs of having strong demand, short supply, competitive buying, and smashed reserves. This environment plays into real estate agents’ hands and is best avoided.
Many of the most experienced developers avoid buying at auctions where emotions are high and competition fuels higher prices
A buyer’s agent is one way to circumvent the auction process, but you will likely to be paying a 5-figure fee for the service. However with good planning and determination you can seek out off market sellers yourself.
Who are the people who prefer to sell off market?
There are different reasons why an owner would choose to sell off market. The vendor may have reasons to action the sale quickly but has a long tenancy in place, making it difficult or impossible to dress up or improve the property prior to the sale. Access for inspections might be difficult. Or, even when the tenants are finally out the sudden extra cost of the dressing up, (which agents often recommend) can steer an owner to the off market option.
The whole expense in itself of dealing with a real estate agent can put a seller off. Photography, advertising and associated costs can add up to $50,000 and the natural reaction is to load it onto the sale price. Off market sellers won’t be desperate to recoup this kind of money and are more likely to sell a bit lower.
Another example is where the vendor may have had an exasperating or convoluted auction selling experience in the past and has instructed the agent to conduct an off market process this time around.
Or quite simply, the vendors might be the private types who hate the idea of lots of inspections and open days.
If someone inherits a property from a relative it is a huge windfall already and they can be less particular about extracting the property’s full potential value, and prefer the less complicated off market sale route.
The ideal time to buy off market is when a vendor has bought a new property and they want to sell quickly, at a fair price, unencumbered by the expense of a full marketing campaign.
How are these sellers found?
Many leading buyers agents that hunt down off market opportunities describe doing countless hours of diligent property scouting. This means doing the hard yards of traditional letterbox drops, door knocking, or phone calls in the targeted neighborhood.
And also studying data bases. This can reveal people who have tried to sell a few years earlier but failed, perhaps expecting a bit too much. After pulling their horns in for a while, disappointed, they may be ready to sell again now. And with a few years of price growth under the bridge they may now be ready to sell if they are offered the price they were originally hoping for.
Other sources for off market sales.
Contacting the area’s Vendor Agents is essential to see what they have to offer, or what they can find. With the right offer you may get a chance to buy a property before the Vendor Agent steers it to a real estate agent.
Local Rental Agents or Property Managers can be a source of leads for off market sales, because they may be the first to hear of an owner’s interest in selling a rental or investment property.
Real estate agents are also a source for off market buys. And for pre-market buys. A pre-market buying opportunity exists for a limited time only before the property hits the internet or becomes fully promoted by the real estate agent.
For the first two weeks or so when an agent gets a new property to list the photographs are being taken and floor plans illustrated etc. The property is not being promoted yet. In the first few days the agent may ring several potential buyers who are major prospects, because if the property sells at this point the agent often gets to keep the whole commission, or at least more of the commission for themselves. Because soon after that, when the property is online and advertised, the rest of the firm is now involved and the commission will be shared with other agents in the office.
So the opportunities for off market value-driven buying are out there. But they often have to uncovered by groundwork, or even footwork.
If you’re planning a development for apartments, units or townhouses, or would like more information about strategies for buying for development, SAW Constructions are glad to share our valuable experience.
Call us today on (03) 9550 0700.