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Updated over 4 years ago on . Most recent reply

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219
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Tyler D.
99
Votes |
219
Posts

What's the deal with off-market deals?

Tyler D.
Posted

I recently contacted my property management company about picking up more properties, and they hooked me up with one of their agents. After we talked for a bit about my goals, he sent me an off-market property that he would sell me for roughly 80% of its market value. It is rehabbed, tenant-occupied, good neighborhood and otherwise looks perfect. 

That being said, my internal alarm bells are ringing. Why they would send this deal to me, if they could throw it on the open market for a higher price? I've heard that off-market deals are the way to go, but why would a seller do this?

If it is truly a deal, why wouldn't the agent (who is also an investor) take the deal for himself? I think that because this is an agent that works with my management company, he would have a vested interest in sending me good deals, but I want to make sure I'm not buying a lipsticked pig, or otherwise being scammed.

Most Popular Reply

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512
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Will Pritchett
  • Rental Property Investor
  • San Antonio, TX
290
Votes |
512
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Will Pritchett
  • Rental Property Investor
  • San Antonio, TX
Replied

@Tyler D'Alessandro the previous replies give an interesting perspective from the seller’s perspective. I would be curious why agent and seller are taking less than market price for a property in this hot seller’s market. There could be a reasonable explanation. Your agent may not be buying now for personal reasons. Your agent may also buy only at bigger discounts than this. The agent may have an intermediary structure where he or she benefits by representing both sides of the transaction making it an easy, fast, above average commission for them.

I would just ask outright what the motivation is to sell at a discount. It is a very reasonable question. Also, on or off-market deals can work. Don’t let the term “off-market” distract you from underwriting the deal yourself. In the last few years we’ve bought a lot of off-market properties and only one on-market so I don’t mean to minimize the value off-market deals potentially.

You are wise to ask the question. Best of luck to you.

-Will

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