March 2017 Newsletter

SELLING OFF MARKET

By David Servi

Sydney residents should be wary of selling their real estate properties “off-market” and without the benefits of an extensive marketing campaign, warns Spencer & Servi director David Servi.
Too many agents these days are promoting these off-market or “silent” sales, he says, because they can then pocket a quick commission, likely to be a considerable sum even if the property sells for substantially less than it might at a public auction.
“These agents have their eyes on an easy commission”, David explains. “They want high turnover without the labour of properly marketing a house or apartment. They might say the property-owners can save the expense of a marketing campaign. But they don’t point out how much the owners stand to lose when they cut out potential buyers and sell privately.”
Say, for instance, a Surry Hills resident who wants to sell a property worth roughly $2 million approaches an agent. The agent might suggest an off-market sale, and might refer to a list of so-called “qualified buyers” that he or she has to hand, calling them “committed purchasers”, and telling the owner they are more likely to buy than the strangers who clog up property inspections.
And, the agent might add, with a quick off-market sale, the property-owner could save thousands by avoiding the cost of a marketing campaign, he or she wouldn’t have the stress and inconvenience of opening their homes to wandering sticky-beaks, and the sale proceeds would arrive more quickly.
But this agent might fail to point out that without a comprehensive marketing campaign tapping into the power of the market and competitive tension amongst buyers, particularly in today’s market, the property-owner could easily miss out on as much as 10 or 15 per cent of the property’s value at auction.
So instead of an auction return of, say, $2.2 million, less $5,000 to $10,000 for the marketing campaign, the owner might reap $2 million or so from an off-market sale. And nearly $200,000 is a lot to pay for the inconvenience of a few property inspections.
Obviously, David says, there are times when property-owners feel they need to sacrifice extra profit for a quick sale. But in most cases, he says, vendors should beware of the quick buck. Buyer’s agents love off-market sales – which should be a good indication that the property-owner is missing out on substantial profits, he points out.
The trend of selling off-market, without a full advertising and inspection campaign, has been influenced by the shortage of stock in a constrained Sydney market. Potential sellers are tempted to simply make a few telephone calls to agents in their area, and then succumb to the lure of a rapid and convenient sale without the costs of a comprehensive campaign, complete with advertising, professional photography, website listings, social media posts, signboards and a public auction conducted by a professional auctioneer who knows how to whip up buyers’ enthusiasm.
Some inner-city agents insist their extensive databases of so-called committed buyers ensure that a privately-sold property will sell for as much as it would at public auction, without sacrificing speed or privacy.
But how do these agents compile these databases of “committed buyers”, David asks. For nearly all purchasers, buying a property is something they might consider once in three or four or ten years, he adds, and it’s hard to see how these buyers’ lists can be comprehensive - there could easily be potential purchasers who are not on the database.
“Only a comprehensive campaign uncovers all the potential purchasers,” David says. “Sometimes buyers aren’t even thinking about buying until a particular property they’ve always coveted comes on to the market. When they see that property on the market they are stirred into action”.
Professional real estate agents should, in all conscience, make it clear to property-owners that they could get a lot less from the final sale of their property if they choose not to pay for a marketing campaign, and opt instead for a quick, off-market transaction. It’s hard to prove beyond doubt that a public auction would have delivered substantially better results,” David adds, “but anyone who has watched the real estate market for years, and worked with buyers and sellers for decades, instinctively knows that full marketing campaigns bring in better results, substantially outweighing the cost of the campaign. “Anyone who doesn’t warn property-owners that an off-market sale could, and probably would, end up with a diminished sale price is not acting in the best interests of their clients”.