The “Off-Market” Deal – Good for Buyers or Sellers?

8/22/2017

If you have been presented with the proposal for an “Off-Market” transaction, as defined as a transaction that is not presently listed on the multiple listing service(s), you, as either Buyer or Seller, must weigh the pluses and minuses of such a transaction. In this article you will find insights to help carefully consider this.

"Can negotiating an Off-Market deal benefit the owner, the buyer, the agent, or all parties equally? "

In today’s “seller’s market,” the Off-Market transaction becomes increasingly utilized as available inventory is scarce. Therefore, when an Agent finds an owner considering selling a property, that Agent, who generally has one or more clients looking for property, will encourage his Buyer to make an offer. Conversely, if an Agent cannot find a listed property for their client, they may advice their Buyer to entice an owner into selling by making an Off Market offer to purchase. These are just a couple scenarios that bring about Off-Market negotiations. However, can negotiating an Off-Market deal benefit the owner, the buyer, the agent, or all parties equally? I believe the answer is “yes” to all parties, if handled properly and professionally.

Seller’s Perspective
Therefore, let us briefly explore this type of transaction from the Seller’s Perspective to determine if this situation is advantageous.
Pluses:

Discretion: Is there a benefit to the Seller to keep the transaction discrete? Perhaps they do not want neighbors, employees, competitors or others to know about the deal until it is done.
Focus: Dealing with only one interested party can limit potential disruption to your business caused by the full fledge marketing efforts.
Leverage in Negotiations: Because you are not actively marketing you can be more firm in your price, since you are not perceived as ‘having to sell.’

Minuses:

Limited Exposure: You are not exposing your property to the highest number of prospects.
Price: More interested parties can drive up price via negotiations and bidding process (competition).

Buyer's Perspective
Now, let us consider the same scenario from the Buyer’s perspective, when making an offer on an unlisted property.
Pluses:

Focus: Generally speaking, they would be the only Buyer actively negotiating with the Seller and can therefore get the Seller’s focus on them in making the deal.
Price: Because there are not multiple offers on the table, they have less concern of being over bid by another Buyer.
Time: When they are the only active Buyer, they have more time for due diligence and negotiations.

Minuses:

Time Spent: Buyers can spend time considering, preparing and presenting an offer where the Seller may not even really want to sell.
Price: If they really want the property, they may have to pay over market to get the property.
Motivation: Buyers are generally more of the drivers of this type of transaction, and this gives Sellers leverage.

Agency Perspective
Lastly, from both Buyer’s and Seller’s perspective, Agent representation also needs to be addressed.

Representation: Generally, when dealing with one Real Estate Agent who has been working to put the deal together, they will work diligently to achieve a mutually beneficial agreement for the parties. This can be challenging at times, especially if they have a longer or ongoing relationship with one of the parties more than the other. It may be advantageous to bring your own Agent to represent you. However, working with only one Agent can be acceptable, especially if you know and trust the character of them.
Commission: Buyer and Seller can save money by doing the deal for a reduced fee, especially if only one Agent is involved, since the full marketing costs were not required.

In both scenarios, it will take discernment and the helpful assistance of a qualified and well respected agent to ensure that both parties best interest are considered and achieved.

Contact Christopher today to discuss your unique scenario and how we can help you whether you are buying or Selling.