Off-market apartment offers don’t always come with a lower price

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In recent years, competition for multi-family deals has encouraged investors to seek off-market deals. For buyers, the goal has been to curb competition, not necessarily to buy at a discount. For sellers, on the other hand, off-market deals get a bad rap that they automatically equate with a lower price. Thomas Foley, co-founder and CEO of Archer, says that’s definitely not the case.

“Off-market deals probably have this stigma of lower prices back when the industry was much less institutionalized,” Foley told GlobeSt.com. “In general, we’ve seen that most off-marketplace sellers, especially in the institutional space, sell because they get ‘an offer they can’t refuse’, which puts them well within their goals of yield much sooner than expected.”

In general, transactions that trade off-exchange are comparable to those that go through the full marketing process. “There is unfortunately no alternate universe where we can observe the counterfactual, but we can see the pricing by comparing these offers to similar marketed offers and in many cases find that the out-of-market offers tended to to trade at or even sometimes above the market trend price,” says Foley, adding that this has been especially true in his business. “In particular, with Archer’s clients, every off-market trade we have assisted with the acquisition teams has been above or above the market price.”

As off-market deals have become an expected norm for all players, private and institutional buyers are taking advantage of the strategy, they are becoming more common in secondary markets. “Off-market trades are even more common in secondary markets. This is partly because a secondary market attracts more attention from new inbound investors, the prices they are willing to pay, although it is still a significant discount from the gateway market prices they may be used to, are often significant premiums to what current owners have seen historically,” says Foley.

Overall, off-market deals prevail in areas with high competition and limited supply. According to Foley, “In general, these markets are lower supply, less liquid and less covered by the brokerage – so owners are more willing to take advantage of these advances – especially when they see offers at or well above their previous perception of the market.”

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