The ‘Grey’ market – where off-market deals are done.
Most people looking for a new home will register with estate agents to be sent suitable details (they hope!) of available properties, or they will trawl the internet looking at the big property portals like Rightmove, Zoopla and Adzuna or they will flick through magazines like Country Life and the local newspaper. Few appreciate that there’s a grey market – the place where off-market deals are done away from prying eyes.
“Off-market” is an expression used by agents to describe properties that may be for sale but that aren’t being advertised or promoted. These are the homes that agents have been to see, sometimes ones that they have pitched for but are waiting to be formally instructed on or they are the vendors that might consider selling if the right buyer with the right price came along. The point is, they aren’t in the agents window, on his website or in the paper!
In a piece for the BBC earlier this year I asked some of the countries leading buying agents what their experience of the grey market was and if it was an important area of business for them. Simon Pritchard Smith, Robert Bailey’s strong right hand was adamant “I would say at least 75% of properties we acquire for our clients do not hit the open market. When we have acquired off market it’s where we have approached property owners in specific streets or buildings on behalf of clients and gone to the effort of getting names or managed to get a personal introduction. But negotiations can be difficult and need to be handled carefully when you do not have a focused seller. “
As an example, I bought a property for an actor-client which agents John D Wood were marketing for an equally publicity-shy client. At £3.5m this was no small deal for either party but both buyer and seller were satisfied to be able to move without their business spread across the papers and both buying and selling agent were able to ensure that an equitable deal was done for both.
Hugo Thistlethwayte, head of Savills buying arm Prime Purchase is equally candid about the importance of off-market deals. “Our share of off-market purchasers has remained remarkably stable at around 50% of all deals done per annum. The number of properties is dominated by the fact that the grey market is abused by some selling agents, who quote inflated private market guide prices knowing they will have to be more realistic if the house fails to sell and a full blown marketing campaign is required.”
These days every property that is listed in the internet leaves a digital footprint. Google will index a listing within hours leaving a trail for all to follow over the years to come. Type an address into a search engine and back comes the web site or agent listing complete with price, floor plan often and photographs. If the house didn’t sell (and 50% of homes marketed do not) then this will leave the question “why?”. Was there a problem with a survey? Was the owner too greedy or the agent too ambitious? Perhaps the owner just decided not to move but the point is that the act of trying to sell is recorded for ever! The point is, when he does come to sell there may be a question mark in a buyers mind. A question mark that caused the buyer to down-value the property just to be on the safe side.
More and more sellers are nervous of making this kind of mistake and so estate agents – both selling and buying help to bring their respective clients together using the old fashioned method of actually talking. Sometimes the buyer will pay a premium for the chance to buy without competition. Sometimes the seller accepts a discount for the saving on publicity and the inconvenience of people traipsing through his house. It’s dull but in fact in most cases both reach an equitable deal and everyone’s happy!
There is no law in this country that requires either a buyer or indeed a seller to use an agent but the grey market is inaccessible to most private individuals. Many wealthy people see the merit of paying for a discreet deal done without fuss away from the glare of publicity and only agents and the tax man are aware actually how often these deals are done.
Robert Bailey Property - http://robertbaileyproperty.com/home.php
Prime Purchase - http://www.prime-purchase.com