Off Market Myths - With Junge Ma

Buying off-market instantly means a better deal, right? Not always. Sometimes they might be even worse deals, but they've just got the buzzword off-market wrapped around them. In this episode, I'm going to open up your eyes, talking about why an off-market deal isn't always the best opportunity, and how sometimes there are actually more people competing to buy, not less, and how sometimes the agents may use the buzzword off-market to actually drive the prices up even further. I'm Joma, lead research analyst at InvestorKit, and let's get into it.

So in this episode, let's do it by busting three myths around off-market opportunities. Myth number one, off-market opportunities doesn't always mean better opportunities. It's just a different channel, and some properties are off-market for a reason. Sometimes vendors just want to sell fast without open inspections or auction campaigns. Sometimes the sellers just don't want to spend a lot of money on marketing, staging, professional photography, etc.

Sometimes the property might be less attractive. For example, it has poor layout, it has a poor location, and listing publicly might not be receiving good feedback and might be sabotaging the sales price. Or sometimes it's just a strategy for the sales agents to create a formal environment to get better prices. So after all, off-market properties can be just normal properties being sold from a different channel, or sometimes they could be inferior properties where the agents are using this off-market strategy to sell for a better price. So myth number two, off-market opportunities means less competition, more negotiation power, and more time to decide.

The reality is off-market properties are not actually exclusive. They're still on-market, it's just on a different platform. They are pushed to a lot of buyers' agents. In the meantime, they are emailed out to all the hot buyers in the agent's database. In fact, I've been receiving off-market opportunities all the time.

I'm not sure I'm not the only receiver of those emails. There must be thousands and thousands of recipients for that email, so you can't really say it's exclusive. And some of these off-market opportunities, they're not really off-market. They're actually pre-market previews before really going onto the market. And I've talked to a lot of my colleagues, and they've told me in hot markets like Townsville or any northern Queensland cities, it might take just one or two days from the property being pushed to buyers' agents or clients to being secured by someone.

So how can you say that is less competition? Sometimes you feel there's less competition because you can't really see how much competition you're facing due to the lack of a public inspection. And that can be risky because it's an opportunity for the sales agents to shape urgency by withholding information from you. This is why it's so important to understand that the agents can control the narrative of an off-market property. What I mean by that is that even there's no competition for a property, the agent can make it sound like there's a lot of competition around it and you're getting a great deal.

Or they may go to the opposite direction, like they're looking after you and giving you an amazing deal. Well, sometimes they might be. A lot of the time, it's not what's happening. That is why you always want to trust your data because whether a property is off-market or on the market, two plus two will always equal four. The numbers do not lie to you.

Putting your trust in the data when pricing the property and not in the excitement of the words off-market. Myth number three, sellers behind the off-market opportunities are no different from sellers behind the properties listed publicly. The reality is off-market opportunities may have unrealistic vendors behind them. What I mean by that is sellers who do not genuinely want to sell or sellers who have unrealistically high expectations. Most on-market property sellers are genuine.

By listing the properties publicly, they are paying for marketing and auction costs, so they have committed emotionally and financially to the sales. In comparison, some off-market property sellers are different. Some of them may just test in the market, checking how much interest my property will be getting or how much buyers would like to pay for my property. And if they do not receive a good price they're expecting, they may just withdraw. And sometimes they might be having unrealistically high price expectations, especially when the sellers have put in a lot of money in renovation trying to add value to the property, but in the end, they may not have added the value they wanted.

Or sometimes they're just misled by the agents and expect unrealistically high price compared to the actual market conditions. To summarize, off-market opportunities can be good, but sometimes it can be bad as well. So it's not a better or worse channel compared to the public listings online. It just gives you extra options and it can never be your goal. If you come across with an off-the-market property that you really like, you still want to do these things.

One, carefully do your due diligence checks and make sure there's nothing wrong with the property or the suburb itself. And two, make sure the pricing is reasonable using data and reliable valuation benchmarks. Always trust the numbers. Three, stick to your portfolio strategy and buying criteria. Don't buy it just because it's off-market.

And four, don't fall into the formal environment the sales agents are trying to create for you. And last but not least, know how to negotiate strategically with the seller or the sales agent so that you're not overpaying for any property. I'm interested to hear your comments below. My name is Joma, the lead research analyst at InvestorKit, and I'll see you next time.