In today’s “seller’s or landlord’s market,” the pursuit of the Off-Market transaction becomes increasingly utilized as available inventory is scarce. Therefore, when an agent finds an owner considering selling or leasing a property, that agent, who generally has one or more clients looking for similar property, will encourage a buyer or tenant he knows to make an offer. Conversely, if an agent cannot find a listed property for a buyer or tenant, he may advise them to entice an owner into selling or leasing by making an Off Market offer. Therefore, in these scenarios, can negotiating an Off-Market deal benefit the owner, the buyer, the tenant, the agent, or all parties equally? I believe the answer is “yes” to all parties if handled properly and professionally.
Let us briefly explore this type of transaction from the owner’s perspective to determine if this situation is advantageous.
Discretion: Is there a benefit to the seller in keeping the transaction discrete or confidential? Perhaps they do not want neighbors, employees, competitors or others to know about the deal until it is done.
Focus: Dealing with only one or a select group of interested parties can limit potential disruption of the owner’s business caused by full-fledged public marketing efforts; this can create a very efficient sales process.
Leverage in Negotiations: Owners can be more firm in price, since the perception is that they do not ‘have to sell.’ An agent Inviting several buyer groups to the table can also create a competitive bid scenario where qualified groups push up the price.
Limited Exposure: You are not exposing your property to the highest number of prospects, which could potentially lead to missing that ideal buyer who would have paid a premium or offered better terms.
Time: Time can be spent evaluating offers that may not be acceptable or that do not materialize into a closed transaction.
Now, let us consider the plusses and minuses of the Off-Market offer scenario from the Buyer’s perspective:
Opportunity: Pursuing these types of transactions will open up more opportunity for someone who wants or needs a property.
Focus: Generally speaking, they would be the only one or part of a smaller group actively negotiating with the Seller, and this will result in more of the Seller’s attention on them in making the deal.
Time: Off market negotiations can create an environment allowing more time for negotiations and Buyer’s due diligence.
Time Spent: Buyers can spend time considering, preparing and presenting an offer where the Seller may not even really want to sell at this point.
Price: If they really want the property, they may have to pay a premium to get it.
Motivation: Buyers are generally more of the drivers of this type of transaction, and this gives Seller’s leverage.
Lastly, from both Buyer’s and Seller’s perspective, agent representation also needs to be addressed. The agent(s) who have been working to put the deal together ought to work diligently to achieve a mutually beneficial agreement for the parties. This can be challenging at times, especially if they have a longer ongoing relationship with one of the parties than with the other. It may be advantageous to bring your own agent to represent you to avoid the dual agent scenario. However, working with only one agent can be acceptable and beneficial to ensure that both parties best interests are considered and achieved, especially if you know and trust the agent’s character.
The benefits of having a dual agent in this type of scenario is that the parties can reduce the commission amount and increase the fluidity of communication.
Contact Christopher today to discuss your unique scenario and how we can help you whether you are buying or selling.
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Christopher J. Destino, SIOR, a Principal at Lee & Associates, is an engaging, responsive professional who enjoys working closely with his clients and helping them succeed.
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