The term ‘off-market’ is cropping up more and more frequently in connection with large-scale property sales. But what exactly does it mean to sell a property off-market, and why do many owners deliberately choose this route? This is best explained using a practical example.
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Unlock content Accept the required service and unlock contentA little anecdote to illustrate the point
Imagine you were the owner of the Kö-Bogen in Düsseldorf, one of the city’s most famous buildings. For whatever reason, you want to sell this prestigious property. Of course, you could list it publicly on property portals or even advertise it in the classifieds. But this immediately presents a problem.
As soon as a property of this magnitude is offered for sale publicly, the rumour mill starts turning. Why is the owner selling? Are they in financial difficulties? How will this affect existing partnerships? Perhaps another company was just about to develop a plot of land with you, but is now hesitating because the sale could be seen as a sign of instability. As the owner, this is exactly what you want to avoid at all costs.
The solution is an off-market sale.
What is an off-market sale?
An off-market sale means that a property is not advertised publicly on the well-known platforms or portals, but is sold exclusively through personal contacts and a discreet network.
In practice, it works like this: you initially approach only a few selected contacts whom you know might be interested in principle. They are provided with basic details such as size, location and potential returns. Before detailed information is shared, prospective buyers usually sign a non-disclosure agreement (NDA).
In addition, you can engage estate agents who will also discreetly approach only a small number of investors. If someone shows interest, this is often followed by what is known as an exclusivity agreement. This stipulates that, for a specific period – say, three months – the property may only be negotiated with that one buyer. During this period, the buyer carries out a comprehensive review, known as due diligence. This involves analysing the condition of the building, tenancy agreements, legal aspects and potential risks.
An overview of the typical process
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Selection of a small number of potential buyers from one’s own network or via estate agents
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Signing of a confidentiality agreement
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Provision of key details, followed by more detailed documentation
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Exclusivity agreement for a specified due diligence period
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Conducting due diligence
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Price negotiations and conclusion of the contract at the solicitor’s office
The biggest challenges in off-market sales
However elegant and discreet the process may seem, it also presents its own challenges.
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Limited reach: If only 10 to 15 investors are approached, there is a high chance that none of them are currently looking to buy.
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Price risk: If there is no demand, the only option is often to offer a substantial price reduction in order to find a buyer after all.
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Stagnation: It is not uncommon for properties to gather dust because nothing happens for months on end.
It was precisely this problem that led to the founding of Off-Market 24.
A solution for greater reach
We ourselves were faced with the problem that, despite our best efforts, a property simply couldn’t find a buyer. However, we knew that somewhere in Germany there were investors looking for exactly that sort of property. So we began systematically collecting investors’ purchase profiles.
An army of student workers rang potential buyers and asked which properties they would actually be willing to purchase. This resulted in a large database. We then programmed a system that automatically checks whether a property matches the search criteria. This allows us to inform suitable investors anonymously and discreetly, without making the property publicly visible.
The result: for one of our projects, we received not just 10 or 15, but over 300 suitable matches. In the end, we were able to successfully close the biggest deal in our company’s history.
Today, this system is available not only to us, but also to other estate agents and property owners.
Conclusion
An off-market sale means that a property is offered discreetly and without a public listing. The advantage lies in avoiding speculation and ensuring a smooth, professional transaction. The disadvantage is the limited reach, which can lead to lengthy sales processes or price reductions.
However, with the right strategy, this problem can be solved. Databases such as Off-Market 24 combine the advantages of discretion with a wider reach. This allows owners to sell their properties away from the rumour mill whilst ensuring that enough potential buyers are reached.
So anyone considering selling a property off-market should not rely solely on their own network, but should also make use of modern systems and estate agents with the appropriate access. This turns what could be a protracted process into a successful sale.
