What is an off-market property?
Real estate investors keep talking about the off-market deal, always elusive and highly sought after. An off-market property is simply a property that is not listed on online listing sites. There are many ways to find off-market properties. In this article we present 10 of them.
Advantages for buyers of off-market properties
Many real estate investors, myself included, appreciate off-market transactions for several reasons.
First, and perhaps most obviously, there is often less competition. Most private sellers and agents list their properties on popular Belgian listing sites such as Immoweb.be or Realo.be. Once a property is on these high-traffic sites, it gets a high degree of visibility from both agents and potential buyers.
Sourcing off-market properties is therefore an appealing strategy for hoping to buy at a good price, allowing for more aggressive negotiation than on properties subject to heavy competition.
Advantages as a seller of off-market deals
Many people wonder why an agent would not list a property in the most visible place to attract the largest number of potential buyers and therefore the largest number of offers.
The answer is often privacy. If the owner of an income-producing building is looking to sell, they may not want to signal to their tenants that they are selling, risking losing them because the building would then no longer perform as well as advertised. If the building doesn’t sell, the seller has shot themselves in the foot.
In addition, many sellers’ agents will subsequently generate a lot of interest from buyers, many of whom are simply lowballing and are neither serious nor qualified to buy the property. This can be exhausting and confusing for the seller.
Let’s go through the different ways to find and secure off-market deals in Belgium.
The 10 main techniques for finding off-market deals
1. Real estate agents
Real estate agents often have a list of buyers and sellers. Some of these sellers may be motivated to sell if it can be shown that market conditions are favorable.
Agents often have exclusive sale mandates covering properties not listed on real estate websites (mainly for discretion). Relying on an agent to find off-market properties can be difficult, but usually only at the start. Indeed, once you start working with an agent, they are likely to bring you off-market deals in the future. Once you’re able to establish yourself as a serious buyer and investor, agents will take you more seriously and will genuinely want to bring you deals because they know you can close.
In reality, the term “off-market” is therefore misleading. It is more of a “grey” market, invisible to most people but accessible to serious investors.
2. Direct marketing
Direct marketing, as the name suggests, consists of sending targeted mail/email directly to an owner in the hope of being able to buy their property.
Direct mail can be an excellent way to uncover off-market deals. Indeed, until the owner receives your mail, they may never have considered selling. This means you might be the only person considering the deal.
The main challenge is that the response rate can be very low, which is why you should focus your prospecting on areas where the average property price is high. Indeed, if the median property price is double (one neighborhood compared to another), so will the commission. Potentially high commissions will allow you to invest more in direct mail while remaining profitable.
3. Construction contractors
Construction/renovation contractors can be an excellent way to find off-market properties, since they typically work with owners. A good contractor is not only skilled at the physical aspect of construction, but also has general skills such as listening and gathering information.
If an owner is preparing their property for sale by repairing it, they may mention this to the contractor. If you know the contractor, they may decide to share this information with you, giving you the opportunity to contact the seller before the property goes on sale.
In addition, an owner may volunteer and ask the contractor if they have other clients they work for who might be interested in buying their property. Having good working relationships with contractors can often prove more beneficial than it first appears.
4. Networking with other investors
Knowing other investors gives you immediate access to thousands of properties. Networking with other investors will likely give you insight into a few things:
- Their inventory
- Their strategy
- Whether they are looking to sell or not, for example to reinvest elsewhere
- Knowing them can put you in a privileged position to obtain off-market opportunities.
Let’s imagine that someone in my network makes an offer for a property in my portfolio. Even if the price were a bit lower than what I could get on the open market, I might still accept the offer for several reasons:
- I already know this person is interested
- I already have a relationship with this person, so negotiations can go more smoothly.
- I may not need to use a real estate agent for the transaction, saving thousands of euros in agent commissions.
5. Field prospecting
This is a method that involves proactively scouting a defined area. If you come across a property that looks appealing, you contact the owners, make them an offer, or at least start a conversation.
Keep an eye out for vacant/abandoned properties, which can be a sign that owners are facing legal or financial difficulties, or simply don’t have time to carry out the project they had in mind. These abandoned properties are often a mental burden for the owner, who knows they have tied-up, non-productive assets, without having taken the initiative to sell.
Sometimes, showing up with a concrete offer allows the owner and future seller to envision a way out of a complicated situation.
6. Wholesalers
Wholesalers are people who find deals, put them under contract, and then assign the right to buy the property under contract to another buyer for a broker’s fee. If you have a working relationship with a wholesaler, they may offer you an off-market house.
Even if it was not originally an off-market house, it is now technically off-market since someone has “locked it up” with a contract, effectively taking it out of the open market.
When buying from a wholesaler, make sure to use your own numbers to verify that the contract still works for you. Some wholesalers try to underestimate the repairs needed to make the deal more attractive.
7. Real estate auctions
This can be an excellent place to find off-market deals for a fraction of the price. Auctions are where properties are sold, generally for legal or financial reasons. In Belgium, public auctions are regulated and are the monopoly of notaries. The Biddit.be website lets you see all public sales in Belgium.
As with wholesaler transactions, these properties will sometimes need a lot of rehabilitation work. The poor condition of certain properties can often put off private investors. With a clear, quantified view of the work required and the resale price after renovation/repurposing, it is possible to uncover real opportunities because you were able to look beyond the property’s current condition.
SmartBlock.be can help you value a property as-is and after works, both in bulk and in detail. Thanks to a database of more than 600,000 properties, we find relevant comparison points that your competitors don’t have access to. This allows you to validate a project that your competitors describe as too uncertain due to lack of information.
8. Cadastral information
The land registry (cadastre) makes it possible to determine who or which entity owns a property. If you’re interested in a property, check the relevant registry to find out its postal address or to find another way to get in touch with the owner.
Knowing who owns a property is only half the battle. Once that step is done, you may need to convince them to sell their property. Again, the details of this strategy are beyond the scope of this article.
9. Alternative sites
There are online sites and resources such as 2ememain.be that list properties in a less structured way than the leading sites. This makes prospecting more complex and time-consuming, but it is also a great opportunity for you, since the competitive pressure to buy is lower.
10. Word of mouth
It has often been said that this is the best form of free advertising there is. People love talking about real estate. If the person you’re talking to has a sale agreement, or knows someone who might, you may have just found another source of off-market properties.
That said, always make sure to tell people what you do and what you’re looking to do. That way, your contacts will immediately think of you when they come across a property matching your description.
Conclusions
Searching for off-market properties is by definition proactive. It is also time-consuming since it requires using multiple deal-sourcing channels. We can split the techniques identified above into 2 categories:
- Relationship-based techniques: you talk informally with someone and they tip you off that a property will soon be for sale. This part of the work, closely tied to relationships, is core to the job of developers, land scouts and other real estate professionals.
- Non-relationship-based techniques: this involves scouring a website for opportunities, analyzing cadastral databases, sending out mailings, etc. These techniques are largely automatable. This is notably what we do at SmartBlock.be with opportunity-detection algorithms that alert you when a below-market-price property appears on a website. These algorithms work around the clock and act as sentinels of the web.
SmartBlock.be helps its clients identify, analyze and decide on opportunities that appear on the market thanks to a database of comparison points, cadastral and socio-demographic information.