The emerging trend of ‘off-market’ sales is putting some vendors at risk of underselling their properties, one real estate CEO has warned the industry.
Starr Partners CEO Douglas Driscoll said it’s not inconceivable that some people could be underselling their homes by as much as five per cent, which, on a $1 million property – the median price of a property in Sydney – is $50,000.
Mr Driscoll said ‘off-market’ sales – which often describe properties that are up for sale without being advertised on the major property portals – are growing as real estate agents get savvier about leveraging their database of buyers.
However, he warned not only is the term misleading vendors, it is causing some agents to adopt a ‘good price, minimum hassle’ mentality.
“Technically speaking, there’s no such thing as an off-market property – in fact, it’s an oxymoron,” Mr Driscoll said.
“Many agents use the term when describing a property that is being covertly marketed, and it’s time we stop that.
“The moment an agent promotes a property in any way that may be taken to indicate it’s for sale, the property is very much on market. A more appropriate term would be ‘marketed quietly’.”
According to Mr Driscoll, in the past a lot of high-end homes in affluent areas sold ‘off-market’ as they target a niche buyer audience, but lately this has extended to outer suburbs and moderately priced properties, which he said is a concern.
“Some property owners are being told by agents that if they sell ‘off-market’ they can save on Vendor Paid Advertising (VPA),” he said.
“While this might be true, they are at risk of not creating enough competition for their property.”
While he was all for agents leveraging their databases, Mr Driscoll said they typically only represent a cross-section of the buying population.
“I firmly believe that the increasing popularity of ‘off-market’ sales – which seems to have become the new norm among some agents – could potentially be an early death knell for VPA.
“The more these agents continue on the path of solely relying on their buyer databases, the more they’re at risk of forgetting about latent buyers.”\
“The industry has developed some good habits over the last 18 to 24 months because the market conditions have been tough.
“Now, with property prices rising again, I’m already seeing the early signs of these good habits being abandoned.
“As an agent selling ‘off-market’, can you look your clients square in the eye and say with absolute conviction that you’ve achieved the best outcome?
“There is often a difference between a great price and the best price!”
Last year, Starr Partners’ new listings on social media reached an average monthly audience of 3,012 people per property. Also last year, the average property sold by Starr Partners had 3,173 views on just one of the major portals alone.
Mr Driscoll said this wide-ranging viewership is a primary reason agents should encourage vendors to invest in VPA.
“As effective as the portals are, part of the problem is the exorbitant costs of actually advertising on them.
“With ever-eroding margins, some real estate businesses are being forced to look at more cost-effective ways of selling properties; hence the nascent of this new ‘off-market’ trend.
“As much as it pains me to say it, unfortunately, the portals remain a necessary evil.”
Mr Driscoll is a firm believer in VPA, which he said is known to achieve the best price for vendors, regardless of market conditions.
“As agents, our job is to recommend clients to get their home in front of as many eyeballs as possible to create more opportunities for them and, ultimately, a higher price,” he said.
“To the best of my knowledge, Australia is one of only two countries in the world where VPA is regularly charged; therefore, it should be viewed as sacrosanct.
“We need to better educate clients into recognising that VPA is an investment, not a cost.”