How to buy off-market properties

Off-market properties are often considered to be the pinnacle of property buying opportunities.

 

They are the properties that are not listed publicly or perhaps the owner has the intention of marketing it at some stage in the future but is open to offers from buyers right now.

 

Why do off-market properties exist?

 

It can be for myriad reasons such as they want to keep the sale off the radar or they need a quick sale because of a sudden change in circumstances.

The three Ds can often be an unfortunate cause for a quick sale, which include divorce, death or debt problems.

Perhaps they just don’t want the added expense of marketing costs or dozens of people traipsing through their home for weeks on end.

 

Whatever the reason, off-market properties do exist, and they sometimes can be secured for a good price – even under market value if the vendor’s motivation is a quick sale above anything else.

However, the thing with off-market properties is that most buyers will never know about them and therefore don’t often have the opportunity to buy one.

That’s because it is usually the selling and buying agents who are aware of what’s available off-market in their area.

Over the years, they’ve developed strong networks and relationships, so buyer’s agents are often the first to learn what’s on the market on the quiet so to speak.

 

A recent off-market purchase for our client

 

A prime example was a recent purchase we made for a client in Potts Point.

We had already worked with the client to establish her budget as well as the potential buying locations.

That is one of the must-haves when it comes to securing off-market properties – you have to be ready to make a solid offer quickly as well as have your finance pre-approved.

They are not called off-market opportunities for no reason after all.

 

We learned about the property, which ticked all the requirements for the client, from our existing relationships with selling agents in the area.

The reason why the property was off-market was that it was currently tenanted and originally the vendor was going to wait until the end of the tenancy before undertaking some cosmetic renovations and then sell it via the usual channels.

However, we managed to inspect the property before the end of the tenancy and were easily able to look beyond its minor wear and tear issues.

We then offered a solid price to the vendor, which meant they could avoid the costs of the proposed updates and marketing as well as the headache of listing and selling it publicly.

The vendor was happy with the price, so our client was soon the happy owner of a one-bedroom unit in Potts Point that may have been out of her price range if it had been on the market and therefore attracted competing offers from other buyers.

 

Pre-market opportunities

 

Sometimes a property might be “pre-market”, which means it is off-market until the vendor commits to all of the marketing costs and releases it publicly online.

Whether a property is pre-market or off-market, though, there is no question that they provide buyers with an opportunity.

They can potentially secure a good property for a reasonable price – especially if the seller’s motivation is privacy or a fast sale rather than price.

 

To be in the loop, though, buyers must develop good relationships with agents, have their finance organised, and be honest about their purchase budget.

That’s because, while a selling agent always wants to secure the best price for their vendor, they also usually want that to happen as quickly as possible.

If they end up wasting their time suggesting off-market properties to you that are clearly outside of your price range that goodwill will quickly dissipate.

The other option, of course, is to work with a specialist buyer’s agent who understands the local market, knows the selling agents in the area, and is one of the contacts that an agent will call when one of their listings is available off-market.

 

If you are considering purchasing a property in Sydney and would like the opportunity to access every property on the market as well as off-market properties, please get in touch with us below:

Buyer’s Agent or Selling Agent? Beware of the Double Agent!

New real estate legislation in NSW is likely to make it more difficult for property buyers to ascertain whether a “buyer’s agent” is working for the seller or the buyer.

 

Among a raft of proposed changes in the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 is a move to do away with the individual buyer’s agent licence by including it in an integrated licence model, which is likely to make the line between buying and selling agents extremely murky.

While many of the reforms are positive – including increased Compulsory Professional Development and education requirements, which will ultimately lift the standards within real estate – this one has the potential to confuse consumers and allow agents to cross an ethical line.

 

A buyer’s agent should only ever work for the buyer

 

Under the current legislation, a buyer’s agent means just that.

We work exclusively for the buyer and have no connection to any selling agent or sales agency whatsoever.

We are paid by the buyer only and we consider all properties for sale before recommending the best one for our clients’ needs and goals.

For example, if someone wants to buy a property in Manly or Mosman, we would investigate all the properties on and off the market, regardless of the real estate agency they are listed with.

With the Sydney market cooling, even before the proposed new legislation, there have been increasing instances of selling agencies offering “buyer’s agent” or advocacy services to try and increase their service offering.

Sometimes these services are being offered as “free” as the agent is still being paid by the vendor and sometimes they are being paid by the buyer.

The issue, in my opinion, is that if a “buyer’s agent” is operating within a selling agency there is a clear conflict of interest because which properties for sale do you think they’re more likely to recommend?

The ones that the selling agency has listed on its books, of course, because the agency is still being paid by the vendor to sell that property.

 

As a proud member of the Real Estate Buyers Agents Association (REBAA) whose accredited members follow industry best practice, our code of conduct requires that buyer’s agents are 100 per cent exclusive to the buyer and independent of any selling agency.

That means we act solely for the buyer and we don’t take any commissions from a selling agency, builder, developer or directly from a vendor.

We remain independent by searching every property on the market as well as off-market properties from any selling agency – therefore providing the very best opportunities for our clients.

Laws exist in every State and Territory that require all agents to act in the best interest of their clients, however, how can that happen when a “buyer’s agent” or similar is only recommending properties that conveniently happen to be listed by their agency – or worse by a developer who is offering commissions?

That is one of the clear differences between an exclusive buyer’s agent and someone within a selling agency who calls themselves a “buyer’s agent”, advocate or buyer’s liaison because they’re not beholden to the same code of conduct.

 

A buyer’s agent has a vastly different skill-set

 

The clear majority of sales agents and agencies do an outstanding job for their vendors as well as providing great customer service to buyers.

It’s just unfortunate that a few are offering services that are clearly just a masquerade of what a buyer’s agent would do.

There is also a significant difference in the skill-sets of a sales agent and a buyer’s agent.

As professional buyer’s agents, we have a strict process that we follow to ensure that we are always working in the best interest of buyers, not sellers.

We always consider which property, in which location, will be the best one for them for their long-term property strategy.

A buyer’s agent should be focused on the long-term outcome of the client and not just the immediate transaction that is taking place.

 

Without a clear definition being made in the new legislation, there is a distinct risk of conflict occurring with agents possibly acting for both buyers and sellers.

In fact, in Australia, it is illegal to operate on both sides of a transaction where the agent takes a fee from the seller and the buyer for the same property.

REBAA, in conjunction with the Buyer’s Agency Chapter of the Real Estate Institute of New South Wales (REINSW), is currently lobbying the NSW State Government to ensure that consumers have a clear understanding of whether they are working with a professional and exclusive buyer’s agent versus an advocate or buyer’s liaison who is being paid by the vendor.

 

The definition of a Buyer’s Agent

 

In our opinion there should be a clear definition of the term “buyer’s agent” in the Act, which describes an agent who is doing the following:

  • Working on behalf of the buyer only.
  • Being paid solely by the buyer.
  • Has a valid exclusive buyer’s agency agreement in place.

 

Time will tell whether we are successful in achieving these important changes – I certainly hope so – but in the meantime, it is vital that consumers are wary of any double agents out there.

A buyer should always ascertain how an agent who is offering to help them is being paid.

Many selling agents provide great customer service to purchasers and do genuinely help them through the process but remember that they are still being paid by the vendor.

If they are acting as a “buyer’s agent” but say their service is free because they’re being paid by the vendor, then you should run a mile.

 

Buyers should seek the services of an exclusive buyer’s agent only as well as one that is a member of REBAA to ensure that they receive a professional and independent service.

 

STRAND Property Group is proud to be an exclusive and independent buyers agency based in Sydney. If you are a busy professional and would like to save time, stress and money with your next property purchase, please get in contact with us below:

How to use your home equity to grow wealth

Remember in the “old days” when everyone spent decades paying off their home and then retired on the pension and then, well, departed this mortal coil?

 

It might be surprising to some that such a philosophy is still very much in the play for baby boomers and, unfortunately, some younger generations, too.

Of course, there is a much better way, which can not only improve your financial position but also ensure you don’t end up trying to survive on the pension in your twilight years.

 

Home is where the wealth is

 

Let’s consider a Generation X couple who bought in Sydney when they were in their late-20s.

They’re now in their mid-40s and thanks to two strong market cycles, their home is probably worth about $1.5 million or even more.

The thing is, they’re been diligently paying off their original mortgage over the past two decades so the debt on their home is now only $250,000.

So that means they have about $1.25 million in equity in their property that is not really working for them in any way – apart from looking good on paper – because they have no intention of selling anytime soon.

 

Sophisticated property investors understand that equity can be their best friend and they regularly access it to grow their portfolios.

Our Sydney-based couple, who probably have one or two children as well as being busy professionals, not only have equity money at their disposal, they are also the type of borrowers that lenders find attractive.

That’s because they have a strong, stable history of paying off their home loan, high incomes and staying in one spot, too.

 

Equity reality     

 

So, lenders are likely to look favourably on their application to extract equity, but before they submit the paperwork they need to understand how much they can withdraw as well as which locations might work best for their budget and their financial hopes and dreams.

You see extracting equity involves a calculation that many novice investors get wrong.

In our example, the couple has $1.25 million in equity but that doesn’t mean they can use all of those funds.

The maximum they can probably extract is up to 80 percent because of the current tighter lending restrictions which generally require the retention for at least 20 percent of the equity in the property.

 

In other words, accessible equity is the maximum loan available less outstanding debt or…

Property Value = $1.5 million
Maximum LVR = 80%
Maximum Loan Available = $1.2 million
Outstanding Debt = $250,000
Accessible Equity = $950,000

 

So that means that they could potentially use up to $950,000 for the deposit and purchase costs for a number of investment properties.

However, because this is their first investment, I would recommend they start with one property first – you never want to bite off more property than you can chew in the beginning!

Subject to getting help from an investment-savvy mortgage broker to ascertain their borrowing capacity, they could extract about $350,000 of equity. This would allow them to buy a great quality, two-bedroom apartment on the Lower North Shore of Sydney, perhaps in Cremorne, Waverton, or even Neutral Bay.

The money they have extracted will be enough for a 20 percent deposit as well as other buying costs such as stamp duty and legals.

Their outstanding debt on their family home would now be $600,000 but they own two properties with a combined value of $2.5 million or more.

In another year, if they wanted to keep growing their portfolio, they could potentially buy something else – and so on and so forth.

 

Financial nest-egg

 

Given they are investing in blue-chip locations, the portfolio’s potential capital growth in the years ahead will ultimately mean that when they come to retire – which they could possibly do much earlier than 65 – they could have a significant financial nest-egg to live off.

Conversely if they just continued to pay off their home, in 20 or so years, they might have a nice house that’s paid off and a roof over their heads – but one that’s too big for their purposes since the children have long since flown the coop – and very little cash flow to supplement their meagre pension or insufficient super payments.

 

I know which financial situation I’d rather be in.

 

If you would like to find out how you can release the equity in your home to buy an investment property to grow your wealth, please get in touch with us below:

Contact Us

If you would like more information regarding our Investment Advisory or Buyers Agency services, then please get in touch.

(02) 8324 7438

info@strandpropertygroup.com.au

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GPO Box 575, Sydney NSW 2001

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