A recent adventure with two investor clients took us on a trail in Melbourne’s inner west. We were on the hunt for a period two bedroom property in a pretty street offering easy accessibility to rail and cafes.
The biggest challenge we faced throughout our quest were the competing buyers out there; home-finders, investors, and other advocates.
Winter in Melbourne is notorious for peaks in the relative numbers of buyers per property.
Despite the fact that many buyers have diminished enthusiasm for trudging through the mud and rain to visit properties during the colder months, the reality is that the number of willing sellers during winter is considerably less. I am never joking when I advise sellers that the best time to sell is in winter.
Our first property which was shortlisted for auction was 6 White Street Footscray; a cute little white single fronted Victorian cottage in a really central location on a quiet street. We appraised the property at $800,000 and liked the opportunity longer-term for the improvements an investor could enable with some equity on hand. Although we applied a stretch budget to fight for the property, another advocate secured it above our limit for $832,000.
Commiserations had to be fast, because we got back into the search and shortly after, identified another cutie. This time, the semi-detached cottage was in Seddon’s Perry Street; a short walk from Seddon Station and surrounded by other similar era gems. The auction was scheduled for yesterday and with two weeks to plan and conduct due diligence, we knew all too well that we’d set up our clients for yet another competitive contest. What we loved about this property was the yard space, the location, the fact that it could readily rent as-is, and the potential for improvement it offered. This time we appraised the property at around $820,000 – $830,000, but instinctively knew from the competing buyer interest that we wouldn’t have an easy run on this property.
We put the urgent call out to several agents in the week prior for off-market properties and our luck and timing came together. A lovely two bedroom 1950’s house which had been tastefully renovated, rewired, re-plumbled, re-stumped and presented for off-market sale sat on a generous 360sqm allotment. Our clients inspected it and agreed, at circa mid-eights this property presented good value.
I’m often asked by buyers; “Cate, why would a vendor sell via off-market in this market?”
The answers may be surprising.
Off-markets can originate for three main reasons. The first type is the obvious reason, but applies to only a small percentage of them. Private people, awkward sales, upsetting reasons… divorce comes to mind. But a good agent who is discrete can avert the need for a sensitive vendor who wants their privacy to be protected. We don’t come across many off-market sales which are fueled by these reasons.
The second type is the time-wasting type. Agents who promote an off-market property under the guise of a special opportunity, yet the vendor has either limited motivation or a sky-high price expectation. These vendors often agree to the off-market idea because they don’t want to invest a cent in a campaign which is likely to be a big waste of time, but might catch that emotional buyer who is prepared to make an offer which knocks them off their chair. Some agents who are desperate for a listing may suggest this approach to stimulate dialogue with a prospective seller who isn’t all that motivated. We filter and define every opportunity so that we don’t get lured into any off-markets which fit this description.
The final, and most common reason for vendors selling off-market relates to time limitations. They have almost always committed to another purchase (or have alternative financial commitments) which require them to sell. Often, they need to sell by a certain date and by facilitating a series of advocate-inspections, the agent can present genuine offers at market-value which meet the vendor’s tiime restriction or nominated date. Many buyers who need to sell in order to complete their purchase underestimate the ideal time frame which can make the difference between being able to host an auction campaign versus being restricted to off-market or private sale.
A minimum of 120 days is required for an ideal auction campaign.
Factoring in the time required to tidy and present the house for sale, interviewing and selection of the agent, design, marketing and photos can swallow up several weeks… and this is before the four week campaign even starts. By auction day, any vendor would prefer to be in a position where they can accept a 30 or 60 day offer at the least; and many would like to think that they could say ‘yes’ to a 90 day offer.
Any pending purchase settlement time frame of less than 120 days for an aspiring seller means that the time-pressure they will feel could be intense, and it’s for this reason that we are privy to many genuine off-market sales
In our current Seller’s market, where upgraders, down-sizers and renovators are taking advantage of the record-low interest rates, the frequency of genuine off-market sales has been higher than past years.
On this bright, winter’s Friday just one day before the Perry Street auction, our buyers secured the beautiful 1950’s house in West Footscray (referred to as ‘Wefo” by the locals), and we all felt a sense of relief when we saw Perry Street Seddon fought over by buyers and advocates, sell under the hammer for $887,000.
Sometimes it’s more than just the opportunity of the off-market.
It’s also the timing.
Winter photo sourced from Chisholm and Gamon