- Data shows properties went for 4.3% less, on average, when sold off-market.
- This equates to over $60K losses in Sydney, or $30K losses in Melbourne.
The report studied sales made in 2022 when there was a drop in real estate prices. Therefore, with home prices currently recovering, there is a possibility that the losses incurred when selling off-market will be more significant today.
The cost of going off-market
On average, properties sold for 4.3% less off-market — a difference equivalent to $60,000 in Greater Sydney and about $30,000 in Greater Melbourne.
Units had less of a gap, selling for 1.2% less on average, but there were variations across cities, with some making large losses. In Greater Sydney, the difference was almost twice as high, with units sold for 2.8% compared to their listed counterparts.
Off-market sales outcomes
PropTrack senior economist and report author, Paul Ryan, says, “Deciding to sell off-market may come at a significant cost to sellers.”
“While some sellers might try to save money by not advertising online, this analysis shows the potential earnings lost in the final sale price far outweighs the initial cost of advertising.”
“These results are based on sales in 2022, when home price growth slowed in many regions, reflecting the potential costs of selling off-market in current conditions, where strong buyer demand and limited supply is pushing prices up in most markets.”
The worst-hit regions
New South Wales was the worst hit state, with off-market sellers facing a 4% loss on average. Queensland and Western Australian sellers trailed behind, losing around 3%.
House off-market sale outcomes; average difference in price, 2022
Notably, off-market sales underperformed the most in higher-priced areas. Off-market sales in regions where the median selling price was above the national median price of $725,000 had more than 5% losses. Areas that had houses selling under the national median price has smaller losses, but were still estimated to be over 3%.
House off-market sale outcomes by price; average difference in price, 2022
Director of Richard Matthews Real Estate in Sydney, Matthew Everingham, says, “Opting to advertise a property for sale online has huge benefits. In this current property market fuelled by strong demand and a limited number of properties available for sale, a strong digital marketing campaign can help to secure the optimum outcome for vendors.”
“Week after week we see the obvious benefits of investing in an online marketing campaign, particularly at auction where competition helps our owners see substantially higher results.”
“While some owners like the idea of the potential savings on marketing expenditure, there is no doubt that a strong online marketing campaign helps drive heated competition and leads to the maximum price and outcome for our owners.”
Everingham recently sold a Strathfield home for $2,900,000, advertising on realestate.com.au. The same property drew offers of around $2,600,000 to $2,700,000 off-market.
“After a three week off-market period, we encouraged our vendors to invest in a quality, targeted digital marketing strategy. This four week on-market campaign resulted in a sale securing $200,000 more for our owner,” Everingham comments.
Simone Chin, Atria Real Estate Director, says, “When a property is sold off-market, it is securing a result for a vendor’s property that may be leaving a lot on the table.”
Why do people sell off-market?
While much time has been spent considering the cons of selling properties off-market, it is vital to factor in the pros of not selling homes publicly.
“There can be lots of reasons sellers may choose to sell off-market, such as privacy or less disruption and pressure from an on-market selling campaign, the results of this research allow sellers to weigh up the average financial differences in selling prices of different selling approaches,” says Ryan.
Sellers might list properties off-market because they want privacy or prioritise making a sale quickly.
For instance, in the case of divorce, death, or financial stress, a seller might not want other family members or their neighbours to know about their business.
Another reason a seller may sell off-market could be because they are trying to figure out the property’s likely sales price.
In markets that are fast evolving, or when selling a unique property, it can be difficult for a property agent to gauge the likely sales price.
Hence, offering a property off-market allows the agent to test the property in a closed pool of buyers to estimate the property’s price range, using the offers attracted off-market as a price guide should they decide to list the property on the market.
In addition, properties may be sold off-market because they might be a lemon. Having structural, cosmetic, or geographical problems, listing the property on the market may cause buyers to lose interest and nosedive.
On the other hand, selling the property off-market may generate interest and trick rookie buyers or investors into overpaying for a problem property.