Off Market vs On Market

Published by: Tariq Suboh

The investment real estate market has seemed to have “cooled off”, in comparison to the frenzy the market was experiencing during the low interest rate Covid era. Prices have somewhat stabilized. There aren’t dozens of offers flying in on any halfway decent deal listed on the market. Interest rates essentially more than doubling since 2020 has really squeezed the margins out of a lot of deals that would have been slam dunks a couple of years ago. With all present-day variables considered, buyer’s have become more creative on approaching finding deals that “make sense” in today’s climate. There are various advantages to sourcing deals on or off market, along with some cons. So let’s dive in.

On Market Deals

An “on market” deal is simply a property that is listed publicly for sale. Various MLS’s (multiple listing service) are out there for sellers and buyers to list/view properties for sale, including local MLS’s (NIRA, MRED ect..), Zillow, Loopnet, Costar, Crexi,, brokerage websites, along with several other avenues. Each MLS ranges from local to national viewers, and has various advantages compared to others.

The main advantage to listing on the market is getting the absolute widest spectrum of potential buyers interested in a property. When it’s publicly listed, people actively looking to purchase will inquire, and if it’s in their “wheelhouse”, will likely make an offer. If it’s priced correctly, even in the current compressed market, listed deals are likely to receive multiple offers. In the back of every potential buyer’s mind will be the fact that there are other qualified prospective buyers interested in the same property. It is likely that will cause prospects to put their best offer forward right off the bat. The competition driven from listed properties can drive up price, and create favorable terms for sellers.

There are also cons to listing. One of the most difficult aspects to deal with when listing a property is gaining access to show prospective buyers. It’s never ideal for tenants to have someone poking around in their home, but it’s necessary when selling a property. Seller’s with a personal relationship with their tenants often battle with listing their properties. The risk of them becoming upset or wanting to leave is often pondered by the seller.

A large factor and risk of listing a property is potential time wasted. If a property yields multiple strong offers, it’s imperative to vet each prospect to ensure they are qualified to purchase. The risk of getting under contract, and then it falling out after due diligence is always a possibility. That will take up more time, and it will be tougher to approach the other interested parties who have offered and lost the first time around.

Overall, listing on the market will usually yield the highest price, but other factors that I mentioned may allow sellers to reconsider the on market approach versus the off market route.

The buyers also have some advantages when prospecting a listed deal. Typically, when it’s listed, the seller’s intention is clear: they want to sell, and they have a price. Whereas off-market deals have a lot of question marks surrounding seller intention, pricing, and how to compensate the broker who brought the deal forward. Listings also usually have clear and concise current and proforma data.

Off Market Deals

Everyone wants off-market deals nowadays. An opportunity to acquire a property without competition is attractive to most of the qualified investment real estate buyer base. Competition, as I’ve mentioned, often drives the price up. So, when investors are presented an off-market deal that fits the parameters of their buy box, they get understandably excited.

There are multiple advantages buyers have when acquiring real estate off-market, but are there any advantages for sellers? The answer is a resounding yes. At Ellsbury Group, most of our closed transactions are completed off-market. We have figured out, from sellers, three of the most important factors when deciding to sell their property off market, which are time, hassle, and certainty.

Sellers could have many reasons for selling, but as the old adage goes, time is money. When listing an investment property, the entire process on average is about 3-4 months. It usually starts with initial broker consultations and BOV’s, to the marketing process, to the buyer tours, to the offer period, the contract period, due diligence, inspections, appraisal, environmental, and then to finally (hopefully) to the closing table. Off-market deals skip the first few steps. They typically go something like this: informal offer, initial walk through, contract period, due diligence, appraisal/environmental, then closing. 45-60 days on average for most off-market commercial real estate deals, versus 90 to 120 days on market. The time factor is an obvious major point for sellers deciding not to list on market.

Coinciding with time, sellers avoid hassles. There are lots of variables in a real estate transaction. They take significant effort from the sellers to gather all documents needed, along with notifying and cooperating with tenants and property management to get the transaction to the finish line. If a buyer ensures to a seller that the transaction, from beginning to end, will be (mostly) hassle free, then the likelihood of the seller being open to do business is much higher. Some sellers may have personal relationships with tenants, which can be a sensitive issue buyers must recognize and empathize with. Listing  a property on the open market will sound the alarms, whereas dealing with a single prospective buyer will in turn be more discreet.

Early in my real estate career, I received some advice that I will always hold close. An investor told me “certainty, in itself, has a value”. In the real estate world, when a seller is confident about a buyer, they are much more likely to do business with them. Most savvy sellers will sniff out tire kickers, so it’s important to make the right impression with sellers. It’s a good idea to bring up recent or past transactions, ask the right questions, and ensuring the seller that you understand their product. Do your homework before interacting, and it will go along way in the sellers eyes. In order for the seller spend the time and go through the hassle, it’s imperative to portray confidence and certainty regarding the ability to close a real estate transaction.