Off Market vs OTM

Australians who opt for off-market property sales can face a reduction of up to $60,000 in their property's value, particularly in certain states and regions where the impact on returns is most pronounced.

On a national scale, the recent PropTrack analysis found that, on average, off-market houses sell for 4.3% less compared to those sold through realestate.com.au in 2022. Similarly, off-market units tend to sell for 1.2% less.

For instance, in Sydney, this translates to an average loss of $60,000 for houses, while Melbourne sellers encounter an average loss of $30,000.

During the period of slowed property price growth in 2022, off-market sales in areas where median prices exceeded the national median of $725,000 performed the least favorably. The report demonstrates that houses in regions and suburbs with above-average property prices could see reductions of over 5%, with properties above $1 million experiencing even higher percentages, surpassing 6%.

Conversely, although areas with houses selling below the median property price had smaller losses, off-market sales still yielded 3.5-4% less.

The states most impacted by selling off-market are New South Wales (NSW), Queensland (QLD), and Western Australia (WA). Sellers of houses in regional NSW saw the most significant impact, with returns being diminished by up to 10.3%. In city areas, Perth experienced the most substantial loss, with off-market house sales declining by up to 4.9%. The difference in average selling prices due to off-market sales was over 4% in NSW and 3% or more in QLD and WA.

The analysis underscores that deciding to sell off-market can lead to substantial financial consequences. The report emphasizes that, although some sellers might try to save money by avoiding online advertising, the potential earnings lost in the final sale price far outweigh the initial advertising costs.

Off-market properties encompass two categories encountered by buyer's agents at Metropole Property Strategists:

1. True "off-market" opportunities: These involve instances where vendors choose not to publicly advertise the sale of their property due to various reasons.
2. Pre-market or pre-sale opportunities: This involves situations where an agent's database gets to inspect and make offers on a property before it's listed on the internet or the general market. Typically, agents present these opportunities first to their high-priority clients, gradually broadening their reach if the property remains unsold.

Investors should exercise caution when considering off-market opportunities. While they might seem like a good way to secure a bargain, most pre-market and off-market deals are not necessarily favorable. Some agents artificially inflate property prices to secure the listing and then gradually adjust expectations to the actual market price. For investors, it's advisable to focus on identifying investment-grade properties in prime locations instead.