Hamlet open house
To market or not to market? asks Charl Morkel.
  • Many sellers are being enticed into off-market sales in this hot market
  • Evidence suggests that significant value could be left on the table
  • Maximising competition can yield far greater results than an expedient sale
The market is certainly hot right now and listings are at a premium. One of the enticements agents might use to prospective clients is to suggest an off-market sale. This is where they bring qualified buyers from their database through the property privately to achieve a quick and quiet sale.
But, to paraphrase William Shakespeare:
To market, or not to market? That is the question—Whether ’tis nobler in the mind to suffer the slings and arrows of open homes, or to take arms against a sea of agents offering a quick and quiet sale to their apparent list of qualified buyers, and, by opposing, end a mediocre result?” 

The allure of off-market

An off-market sale can certainly look attractive to a seller. Save money on marketing. No open homes to strangers and sticky-beaks. Maybe even avoid some of the work they know they should do to present their property in its best light. A lot of headaches avoided to get a quick and stress-free sale. Done and dusted!
Sounds great doesn’t it? Well, it’s certainly attractive to the agent who avoids all the effort that goes into an open-market campaign.
But, is this really the right way to get the best outcome for the seller in this current market?

The agent’s fiduciary duty

As real estate agents, we have a fiduciary duty to act in the best interests of our clients at all times. This has legal ramifications and is not to be taken lightly. In short, our primary duty is to obtain the highest price for the property in the shortest possible time, on terms acceptable to the seller.
Now, the client may have their own reason for prioritising a quick or quiet sale over price. That is their prerogative and agents must follow their instructions at all times.
But, do sellers really understand that this is what they are potentially doing? Are agents properly communicating all the pros and cons when discussing sales strategy options? Namely, how much money could the seller be missing out on by not taking maximum advantage of the current competition in the market?
Let me illustrate with two examples that our agency was part of recently.

Same property, same agency

The first is a single property that I took off-market and then to open-market. When I met the sellers initially, I took care to outline the benefits of an open-market campaign versus off-market in stimulating competition for the best price outcome. However, they still instructed me to commence off-market since they had no urgency to sell. They wanted to test the water with the least upfront investment; a reasonable request.
I connected with my database including many buyer’s agents and was able to get 13 groups through in fairly short-order. This led to three expressions of interest but only one actual written offer. I was able to negotiate it almost 10% higher which was towards the top end of all the buyers’ opinions. It was also considerably higher than the recent comparable sales in the area. This would have been a very good outcome in a normal market. But, we are not in a normal market and my clients and I felt that there was more value out there. The offer was declined.
The sellers agreed to proceed to an open-market campaign and invest the equivalent of 2% of the initial offer. This went into cosmetic improvements of some painting and minor repairs plus a modest digital marketing budget. I launched to the market just six weeks later and attracted 102 groups over a 14-day campaign.

I used Openn Negotiation as the method of sale. An online auction platform allowing flexible conditions, I registered 10 qualified bidders from 31 that expressed serious interest. The property sold for 32% higher than the initial off-market offer after a bidding frenzy with 23 unique bids.
This equated to hundreds of thousands of dollars more for the sellers; who were obviously ecstatic.

Comparable properties, different agencies

The second example is of two comparable properties sold during the same week. Built within a few years of each other on adjacent blocks of similar size and placement, they both had pools, nice outlooks and were both targeted at large families.
Our agency concluded a strong open-market campaign for one of these properties with a great selling price. This was three days after the other agency put up a sign bragging about a quiet off-market sale for the other. We were shocked when we learned the result. We sold our client’s property for 45% higher than the one across the road! Again, a difference of hundreds of thousands.
So what’s going on here?

Restraining competition

Let’s use the Olympics as an analogy, given it’s still fresh in our memories.
Imagine you are in charge of organising a race event such as swimming, track, cycling or rowing. The participants attending are in the best form of their lives and waiting in the athlete’s village ready to compete for glory. Now imagine that you only tell those few that you have already met when the event will be held.
You know some really good athletes so you don’t bother with the rest of whom you’ve never met and know nothing about. Then, you tell these select few to show up at separate times. You instruct them to perform their event one at a time rather than lining up shoulder-to-shoulder. Each one races individually and blind to the others’ performances. Finally, you give them the chance of a second run and maybe a third. You certainly encourage them to give it all they’ve got but you don’t let them know the times to beat.
You then award the gold medal to the best time. At this point they all finally find out one another’s race times. This includes the athletes still in the village that missed out.
Ask yourself: do you think you would see any records fall at such an event? Would you even see any personal bests? Would many of the athletes that missed out be perplexed because they felt they could have raced faster times?

No competitive race runs this way for obvious reasons. Humans regularly surpass even their wildest expectations when they compete shoulder-to-shoulder. Just look at the Olympics.
Why then do agents continue to recommend off-market sales in one of the most competitive markets ever?

Acting in the client’s best interest?

Are agents oblivious to this dynamic? Maybe. Or, are they just following their tried-and-tested method that gets satisfactory results? Perhaps. But an agent must be wary that, if the result is better for them than their client, then they are not fulfilling their fiduciary duty.

The current market is certainly extraordinary and this is not to say that an off-market sale can’t have its place. But the wrong sales strategy can leave hundreds of thousands on the table.
To lend another quote from the famous bard: “On such a full sea are we now afloat, And we must take the current when it serves, Or lose our ventures.”
You May Also Like

Scarborough top selling suburb; Perth sales up 10 per cent last week: REIWA

Last week saw 763 sales transactions in the Perth Metropolitan Area according to data reported by REIWA members…

The Agency voluntary administration stopped by Federal Court

The Agency battle continues after court puts an injunction on administrators…