Why it makes a lot of sense to sell a property off-market, if it is the right property in the right location

This article was researched and written by Cameron Kusher. Read more of Cameron's excellent work here.

It is claimed that the only way to sell your property is to get it advertised on the listings portals because they have the audience that will give you the best chance of getting a property sold. While this may often be the case, if you’re trying to sell certain types of properties for a certain type of vendor, then selling a property off-market can create much more desirable outcomes.

The overall cost to advertise a property for sale is significant, not as significant as a share of the actual sales price and it is a small proportion of the overall transaction costs but the upfront costs can be a significant investment for a would-be vendor. In fact the upfront costs and the risk of not selling are likely discourage a greater number of properties from being advertised for sale.

Once you add up the cost of advertising the listing on the major portals, photography, floor plans, staging the property (if you choose to), auctioneer costs if you take it to auction, you’re looking at least at several thousands of dollars and it can end up being much more than that too.

These upfront costs are not inconsequential and come with no guarantee of success. If the vendor ends up not being able to sell, they would have spent several thousands of dollars for no return. An unsuccessful on-market campaign may also make the vendor reluctant to go on-market with that property again in the future.

If you look at an unsuccessful sale from agent’s perspective, they are incur significant costs if a property does not sell. There aren’t a lot of jobs in which you can provide your labour free of charge but that is what happens when an agent is unable to sell a property.

When an agent lists a property on-the-market, they will typically hold multiple open homes, have numerous follow-up calls with attendees, undertake negotiations with any interested parties, manage listings etc etc. If the property does not successfully sell, then the agent has spent all of that time and effort and they end up receiving no financial reward for that work.

Real estate portals will make the argument that if you don’t advertise on their sites you can’t reach every potential buyer. While this may be true to an extent, the fact is that not all vendors are necessarily looking to appear to every potential purchaser.

Back in 2023 REA Group undertook some research which found that in 2022, off-market sales, which they defined as not being advertised on realestate.com.au, sold for 4.3% less than those that were for houses and units on average sold for 1.2% less. To put this in context, for a house worth $1 million this would see it sell at $957,000 and for a unit worth $500,000 this would see it sell for $494,000.

When you add in marketing costs, staging, photography, preparing the home for regular open homes the cost differential between going on-market or selling off-mark may be quite inconsequential.

Another point to consider is that some vendors will value discretion and don’t want to have a lot of people coming through their property at an open home. For a seller such as this, the opportunity to show the property once or twice to several already qualified buyers is likely to be much more appealing.

But how do we get past the argument that to get the best possible price you need to be on-the-market.?

An answer to this is that not everyone wants the best possible price, theoretically people want the best price but most people will have a price at which they would be happy to transact at.

It is a fairly compelling argument for a vendor if a real estate agent askes the question, what price would you be happy to sell this property for? Followed by, what if I could get you this price without having to take photos, to stage the property and we could get you that price with only a couple of open for inspections? I think that is a fairly compelling opportunity for most vendors.

Another answer to the question about how do we get the best price if we don’t go on-the-market is that well connected agents should know the people that are likely to purchase a property, or they should be able to access the people that are likely to purchase this property via their relationships with buyers agents.

Below are three examples whereby it is compelling for someone to choose an off-market campaign as opposed to an on-market one.

The first example is a high priced luxury property in a highly sought-after suburb. Firstly, this kind of vendor is likely to know the pool of buyers for the property is shallow. If you employ a well-regarded agent with a track-record of success in that market they are going to know who has missed out on buying similar properties previously, who is looking for the type of property you are selling and which buyers agents are actively working for their clientele in the market. You may get a few more people interested by going on market but would they be more qualified than those you will source via your own channels? Probably not and the exclusive offering in an off-market setting may actually draw out better offers as people seek to secure a sale before it goes on-market.

A second example is that you own a property in a market which is sought-after by investors, a lot of the properties which sell are similar in design and layout (think apartments). Only one person can purchase a property that is for sale, so in a highly sought-after marketplace an agent will know the people keen to buy and those that have previously missed-out on purchasing. These types of buyers are likely to appreciate the opportunity to purchase with less competition and may be more willing to pay a higher price for the luxury of purchasing off-market.

A final example that comes to mind is one whereby the property has recently (say within the past two years) been taken to market for sale but it did not successfully sell and the listing was withdrawn. The owner the property may still wish to sell but is likely to not want to have to incur the costs associated with selling again. The opportunity to sell this property without those additional costs is likely to be appealing and advantageous to that vendor.

The key point here is that you shouldn’t just discount the prospect of listing a property for sale off-market. The choice will be very much dependent on the vendors. situation, reasons for selling and previous experiences but, there are some very good reasons to choose an off-market sale rather than an on-market one.

Agents should be more open to offering both on and off market sales options as choices to their vendors. From an on-market perspective, lowering the upfront cost of advertising properties and charging a higher fee for a successful sale could be a way to encourage more people to test the waters and list their property for sale.

I’d love to hear your thoughts in the comments below.

The headline image for this article was sourced from Brisbane Content Toolkit.

Credit Reuben Nutt