How to buy an Off Market well.

OMS

(Our three part series from Market Insight July/August 2016)

In the beginning:

So you’ve heard about a whisper, a rumour, on the quiet just for you – nobody else knows and its come straight from your new “bestest” friend. Two of the above off markets started exactly like that for us, which we took to the client and one our client brought to us.

That was the opening line from the agents; with added commentary on the home’s greatness, rarity and the owners desire to sell at a reasonable price as soon as possible. All 3 were big on details of this nature.

Small on detail was land size, asking price and process for sale – nothing new here. Almost every off market starts the same.

The information flow at the beginning of an off market is a bit like an unknown weather event.

It starts with a whisper of something in the distance, turns into a torrent of info (almost all of which is not what you need to know) and leaves you in a desolate landscape, devoid of life sustaining facts around dollars, condition and process.

Not to worry – that’s what we do at James – find out the important info – more on that later.

Lets start with some general info.

Question One: Why do sellers sell off market, especially in this supposedly strong market?

1. Genuine – privacy reasons, well known to public, divorce, financial.

2. Genuine – in that there is only one buyer for the property and it may take a year to find them – so other campaigns will not suit, eg the home would look stale after 6 months in the Weekly Review

3. Not so genuine – but not disingenuine either, in that if the seller gets a huge price from you, then they will sell, otherwise they are staying put.

4. Not genuine – it’s not really for sale, but the agent has browbeat the seller into running a campaign. The agent is doing so in the hope he/she can change the sellers mind with a big offer from you.

5. Not genuine – a version of above, except they are selling next year no matter what; you are being used a guinea pig until then to get the agent the listing.

6. Not genuine – the seller has no intention of selling, but likes the attention and free valuation advice you are given them. Cup of tea anybody!!

Question Two: How do you find out if the property is really for sale?

With so many off-markets coming across our desk, we have developed what we call the OFF MARKET duck test – meaning if it doesn’t look like a duck, doesn’t walk like a duck or doesn’t quack like a duck – then it probably isn’t a duck.

Here is the OFF MARKET duck test and best to ask the questions in writing.

1. Have you got an authority to sell Mr Agent?

2. What is the asking price please?

3. What access can I get to look at it?

4. Are there ?

5. What is the process for selling this home Mr Agent please?

While in our business the JAMES OFF MARKET duck test doesn’t give you absolutes, it does provide you with a basis for a good foundation. And let’s not be too picky – 3 to 5 out of 5 satisfactory answers is OK but 0 or 1 satisfactory answers from 5 says move on.

Question Three: Mal, why worry about all this, before you even start.

1. Because life is short and more to the point market time is short – basically you have Pre Easter, Post Easter, Winter, Early Spring and late Spring markets in which to find a home – these are all short bursts of activity and if you are focused on a home you can’t buy, then you will be missing ones you can.

2. Because life is stressful. Don’t know about you, but for me personally the most stressful times I have found; have been chasing girls who simply have no desire of realizing my full potential. My time in the past has been a lot more enjoyable chasing the girls that wanted to be chased – and in my case the numbers have been small, so every chase counts.

3. Info – you know the “friendly” agent who you are looking at the home with? Yeah! Well she/he is sucking the info out of you by the gallon, on a home you’re never going to buy. Eg You’re asked would you pay $8m for the home you’re never buying – yep is your answer. Ok, so when you are looking at a $6m home you can buy, do you think the agent will ask you for $6m or $8m? Mmmm – what do you think?

Footnote: If any of the words come across as being derogatory to good agent work on legitimately for sale Off Market homes – then I’m sorry, I’m not making my point well. All three of the off market homes above we bought, would not have bought at the price we paid – if it wasn’t for the excellent work of the selling agent. Agents who can regularly sell homes ethically off market, are at the top of the tree as far as we’re concerned; as they do so without the advertising hype – meaning they use their databases and they need to provide personalized service on both sides or else it all falls apart.

Having said that, an off market agent is NOT working for you the buyer – he or she is working for the seller.

What do you think honey?

What do you think honey?

  1. Dealing with Agents
  2. Limited Information

Your relationship with the selling agent and how you manage it; is a critical factor in whether or not you will be successful in buying an Off Market.

So lets say you have viewed the home and you are satisfied with the James Off Market Duck Test.

You have deemed yourself past Base Camp and ready to climb the mountain.

Next stop is dealing with or understanding the selling agent’s position.

By now you should know that the selling agent is not actually your friend and not actually working for you – he or she is a professional, working for the seller.

That is not to say the agent is not wanting to see a deal done or not being helpful or not a nice person – after all he or she is showing you the home, that you like and that you have now assessed as having some chance of buying. That’s 3 big ticks for the agent, but they are working for the seller – just giving you some perspective.

Dealing with Agents.

Is the agent the controlling agent in this deal?

You need this critical insight and it needs to be right.

Is it an open listing with a number of agents having access to the home? That’s usually a big negative for you, if you are new to the game.

So if yes, where does your agent sit in the pecking order in terms of information flow?

Why is this important?

Well if you are not speaking to the controlling agent, your information flow could be restricted and the home could be sold without you knowing;

or could be sold without you getting the right information (there is a lot more to this sentence than a few words,if you think about it);

or in fact it’s actually not for sale even though your agent, who is not the controlling agent, genuinely believes it’s for sale.

Some supplementary, but very important questions to information flow.

Are the other agents sharing commissions or is it dog eat dog – that’s an insight into the information flow?

Here is another issue to manage around – have you been told about the home by an agent who has access for a limited time; but then another agent has the exclusive listing? This puts you at a distinct disadvantage by actually going through with the non-exclusive agent – yes it’s better to not go through with the wrong agent – you will be locked into the wrong agent – you will have significantly reduced your chances of being the buyer.

OK let’s move from information flow to agent influence?

Does the agent have the skills to be able to influence the seller in a manner that will bring about a deal you (and the seller) can live with?

Anybody can buy an Off Market $2 million over the odds; we know because we see it and the almost finished (maybe it hasn’t) Asian stampede right at the top, proved that on a weekly basis in 2015.

A question is do you want to pay well over the odds? If yes then “Junior Agent” should be able to fumble your deal through, if not then “Junior Agent” won’t be able to get the deal through – so the deal won’t happen for you or the seller. And to be clear – a “Junior Agent” may be very experienced at selling under auction conditions, but not so at Off Markets.

If you want a win-win Off Market deal, you need to be dealing with high quality, experienced agents such as Ross Savas, , Jock Langley, Adam Cashmore, ie those we bought from in July and others such as , John Morrisby, Ian Jackson, Andrew Campbell, Rae Tomlinson, Michael Armstrong, David Wood to name a few more.

It’s not a matter of buying it cheap – it’s a matter of actually buying it. These guys will not sell you something cheap – in fact if you let them, they will sell you something very expensively.

No, it’s a matter of finding an agent who has the skills to manage the seller to “only slightly above unreasonable” – but still at a level you can afford, so as to get the deal done – if it is in the interests of the buyer and the seller.

With agents it’s the 3 I’s

  1. Is this particular agent in your best Interests to deal with on this home?
  2. What about his or her Information flow?
  3. Does the agent have sufficient Influence?

Limited Information for and .

I make judgments all the time.

Don’t know about you, but I will be walking down the street and look at a bloke’s trouser length and make some sort of assessment on his character, depending on whether I like that length or not!

Now in the absence of other information, I’ve assessed whether this bloke on the pavement is a man of decency, or a potential threat and I’ve made that assessment based on his trouser length!

Mmmm – Mal, you’re an idiot, who does that – well you do. Look at the judgments you make each day on limited information and how many times are they wrong.

At a public auction you have a lot more information to be able to and confirm the pricing of the home. You can see the numbers at OFI’s – you can see who is bidding and you can see what levels. You can get a feel on the mood. That is all very helpful (if your radar is tuned in the right way) to help you price and competitor strength.

You don’t have that vindication in a private Off Market – and to some extent neither do we – although we will often have a fair bit more information than you.

This is where, in our case, professional peer review and James Council plays a critical role in helping to assess  and pricing.

Without independent professional 2nd opinions you are flying completely solo; judging everything on “trouser length” without 2nd opinions – it can be an expensive way to live your life.

Aha you say, but you have the agent – in fact he or she is your beacon – he is your second opinion – she is your default professional? Really?

Please, because an agent rings you up twice a year for five years does not necessarily make him a close friend – does not make her somebody you “owe”.

What it makes him/her is a diligent professional agent working for the seller and ……. you are the buyer.

Repeating this, we are of the opinion you don’t “owe” a selling agent anything, just because he or she maintains regular contact with you. Our human condition is we all naturally tend towards friendship – but in real estate it’s friendship that often costs you the most.

The advice of “friend agents” is often

* not as robust,
* your fees are often higher and
* in a world where the poorer buying and selling agents can have an attention span of a nat, the care factor lower (if allowed to get away with it)

However in the absence of no other person to speak to – your selling agent becomes your lean to, your adviser.

May I suggest a different adviser – may I suggest an experienced in Off Markets, professional buyer advocate. We are no friend either – but if I was going to court, or having my tax done, or in for open heart surgery – friendship would be secondary to competence, skill and area of expertise – in buying a home friendship should be secondary to getting the best outcome – because often after the transaction is done, your “friend” is gone.

The seller has his professional agent – why don’t you get your professional buying agent or advocate.

100m

Welcome to part 3 of the 3 part Off Market Series.

Beginning the Off Market negotiation – below is a combination of three Off Market negotiations that James Buyer Advocates completed in July 2016.

  • One in the $10M+ range
  • One in the $3m to $7m range
  • One in the $1m to $2m range

In other words, the three Top End $M+ Market segments we operate in – Lower, Middle and Upper.

All three were family homes and all three were Inner Melbourne – Scotch Hill, Grace Park and near Gascoigne – but they just as easily could have been Golden Mile, Beachfront, Tara or Sackville precincts.

Involved were four agencies Kay and Burton, RT Edgar, Jellis Craig and Abercrombys.

So we begin at the beginning. Actually for many Off Market buyers, the beginning can be the end, even though it should have just been the beginning.

It’s the end for some Off Market buyers, because you have given a narrative of how much you will spend and how you will be doing things with/to the agent. You will have done this via opening your mouth, in the one brief conversation that introduced you to the potential Off Market.

Game Over…

  • You either won’t be the buyer on a home you could have been or;
  • You will be the buyer on a home you shouldn’t have been or;
  • You will pay a very different amount to what you could have paid

and you haven’t even been to the home.

Here is a typical conversation we have;

G’day Mal

Hi RAJJ (Ross, Adam, Jock and Jeremy) how is the market treating you?

Not bad – have you still got that $7M buyer looking for land in Hawthorn?

RAJJ we got a few new clients at all price levels. What have you got that may be of interest? You know the routine just give us the PPP’s – Address, Land Size, One sentence on description and Price Guide ………………………………..

RAJJ there are a couple of goodies on that list, when can I get through D, E and maybe A. I’ve been through B and C and they are not really for sale and F doesn’t make sense to me on the price you are talking about. And I won’t bother with J or K, as not enough detail …..

Mal, how about Wednesday at 10 and we can do all three D, E and A. Who is your client and are you bringing them?

Sounds good RAJJ, no just me to begin with – let’s see if they are as good as you say they are.

This is a conversation we like to have weekly with key selling agents in Top End Melbourne.

It’s a good initial conversation and one an Off Market buyer without a buyer agent cannot usually have:

  1. no closed minds
  2. some filtering
  3. no real price giveaways

Fast forward – we’ve been through the home (without clients) and during the visit, we liked what we saw and one home passed the JAMES OFF MARKET DUCK TEST.

Next step is to send photos and a JAMES HOME RATING to our client. Here is a sample of a number of James Home Ratings – click here

Confidentiality for our buyer is an important commodity on three fronts:

  1. Not becoming an Open Book on $
  2. Privacy
  3. Management of Contact from Agents over a longer time frame

Hi Kellie and Ben, Mal here; I think we have one, possibly two OFF MARKETS that are worthwhile having a look at.

If you could check out the JAMES RATINGS, the pics and videos I sent you and do a drive-by (if overseas Google link) both 14 Tara and 33 Greystone, Armadale in the next few days that would be great.

Ok Mal.

Next day I’m giving some feedback back to RAJJ and asking some more questions – my main focus is to confirm the JAMES DUCK TEST and to give the agent the heads up that we (client and I) maybe wanting to go through.

This new Agent Conversation we can guarantee you will also contain:

  1. A very high Client Dream Price and a very low Agent Buyer interest figure – giving you a “wide as” price range and as definitive as a politician’s pre-election promise. If you bothered to record the initial conversation, you will also notice a change in the figures from RAJJ’s first price indication – the change will be in a northerly direction.
  2. You will also hear about how the selling wife wants X and the selling husband wants Y and that they are not quite on the same page. This is the standard wide range price justification technique. It’s sensible work from the selling agent, whether you agree with it or not – personally, I have no issue with it. To be too narrow on price is not representing the sellers’ interests, as well as a good selling agent should be doing.
  3. There will also be ‘another buyer lurking in the wings’ conversation. A standard time pressure and fear of loss agent technique. You need to have a three-sided strategy to deal with this to:
    *Actually deal with another buyer if real.
    *Deal with your emotion of another buyer whether real or not.
    *Return serve, so as not to be always on the defensive.

 

off markets poster2

Fast forward – Clients have done the drive-by and felt comfortable with the area.

We have supplied more information re land size, past sales and/or sales campaign history (eg when offered in the recent past and for how much and with which off market agent), owners and our initial thoughts on value and market interest from others. Eg sometimes these homes have been on the market for two or more years with two or more agents– its all useful information if you know what and who to ask.

And so fast forward – we’ve been through the home – have been really careful again, not saying too much – not to be tricky, just to be prudent.

Out the front of home D with the clients.

Hey Mal, I really like this home – me too.

OK, let’s give it the sleep test and talk tomorrow.

Next conversation

Hi RAJJ. We have some interest in D, mild interest in A and no interest in E. Talk tomorrow.

Fast forward and Ben and Kellie confirm interest via a coffee meeting or phone call.

Ok, great Ben and Kellie – can we please frame what might happen from here.

We still don’t know that this home is really for sale and we won’t until they return our first serve – meaning they:

  • counter or
  • accept or
  • choose not to respond to

our initial offer.

Why don’t we wait till the agent has made the first offer, Mal?

Well they have via their quoting and conversation – and if you are holding your breath for a firm figure, then in almost all cases you will expire prior to hearing a firm selling agent figure.

So our best advice is, this is what works in Off Markets – having bought hundreds – you are going to have to make some of the running or you will be run over.

Here is the Buyer Big 3 at the start:

  1. You need to have clear goals, as you are going to be stress tested by the other side, either accidentally or deliberately (almost always the latter with good agents) and it’s easy to move off track and not achieve what you set out to achieve. Eg snatch defeat from the jaws of victory.
  2. You need to have a good internal expectation management system right from the start; that can help regulate your emotions, so as you can actually keep sight of your goals.
  3. You need a play book – not a rule book – a play book of what to do when this happens or that; or this and that; or this without that.

So what I personally use is a good old-fashioned notebook. And in that notebook I record:

  1. Key conversations
  2. Goals
  3. Expectations
  4. Additional facts
  5. Insights and gut feels
  6. Possible scenarios – flow charting doodles etc

It’s like a dear diary, and it has helped many a difficult deal stay on track with a review from time to time.

Hope you enjoy. If we can help you buy, please give us a call and lets get stuck in – 9804 3133.

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