Why market conditions matter for off-market deals

off-market deals

There is a belief in some property investment circles that off-market deals are always the golden real estate goose.

If a property is offered to you off-market, then seemingly it must make financial sense to buy it.

The truth of the matter is that sometimes it’s best to give off-market deals a wide berth – especially in slower market conditions.

Let’s consider recent market conditions in somewhere like Brisbane where there have been plenty of off-market deals if you have the right agent networks.

Part of the reason for this was the market was only moderate at best during the lockdown.

Just like other parts of the country, no one truly knows what impact the pandemic will have on property prices so most markets when into a hibernation of sorts.

However, people still need to buy and sell real estate regardless of what’s happening locally, nationally, and internationally.

And one way to create more interest in a property in a sluggish market is to offer it as an off-market deal.

This is a sound sales strategy but not necessarily a solid buying one.

Are off-market deals the Holy Grail of property investment?

New clients often come to us requesting an off-market deals because they believe off-market deals are the Holy Grail.

Sometimes they are, but sometimes they are not.

The major problem with off-market properties in a slow market is that it can be difficult to ascertain its true market price.

This often means that the vendor has a number in their minds that isn’t realistic but because they haven’t tested the market, they don’t know that.

Novice investors probably don’t know that either, so, under the guise of securing an off market “opportunity” they pay whatever price the vendor is asking.

Experienced buyers’ agents, on the other hand, will not be so easily fooled.

Often what happens is the vendor is forced to test the open market and they soon learn that their dream sales prices is likely to stay that way.

But when they’ve had a market reality check, we may start negotiating because they are being more realistic on price.

When a market starts to heat up, off-market deals become scarcer because the vendor and the agent want to create competition between buyers on the open market, which drives up prices.

So, it stands to reason that during strong market conditions off-market deals are the most valuable to buyers.

That’s because, while you may pay the seller’s asking price, it’s still likely to be lower than what you would have to pay in a multiple offer situation or at auction.

The power of networks

When the market is rising, most agents will list a property on the market to help to achieve the highest sales price for their vendor. 

However, that doesn’t mean that off-market deals aren’t still around.

You just have to know the right people!

Even though the market has firmed in Brisbane, we’re still doing about 60 to 70 per cent of our property acquisitions for clients off-market.

While sourcing those off-market deals is harder than it was a few months ago, our relationships with agents means we are continually on their radars.

Even in stronger market conditions, there are many reasons why someone would want to sell off-market, including privacy considerations amongst others.

However, one of the main reasons that agents approach us directly is that they know we have qualified buyers ready and waiting to purchase property.

Not only do they know they will likely make a sale, but we are a repeat customer that they can rely upon.

That’s why it’s these types of professional networks that are the most valuable to savvy investors looking to grow, or add, to their portfolios sooner rather than later.

High-Performance Property Investment in
5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh

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High-Performance Property Investment in 5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh