Off-Market Sales
An off market sale is the preference of many investors; seen as an opportunity to purchase property for below open-market value, often with a tenant in-situ and requisite rental certifications in place.
The reality isn’t always straightforward - ‘deals’ are hard to access, often these properties are rented at less than optimum yields, and in a sellers’ market private investors are less likely to sell at bargain prices
But in a frantic market where properties are selling fast and competition led sales prices are commonly at eye-watering levels above Home Report values, an off-market sale can be a much more straightforward, transparent means of acquiring property.
Why Off-Market?
A seller may want to sell a property off-market for a number of reasons:
Discretion
For multiple reasons a landlord may want to quietly sell a property and discretely to avoid unwanted attention.
Cheaper Selling Costs
To save on selling costs. Marketing costs, which include photography (and commonly videography) plus listing costs can cost many hundreds of pounds. For sellers this also means paying pricey agent commission fees.
Ease of Sale
No need for multiple viewings and liasing with potentially inflexible existing tenants.
Minimal Vacancy Periods
Off-market sales with tenant in-situ means minimal loss in revenue for landlords. Typically an agent will recommend not selling a property with tenants in-situ in order to market the property in its best condition and achieve a higher sales price. This can mean 4 months or more in lost revenue while a property is marketed, viewed, then eventually (after the lengthy legal process), sold.
Efficiency
There is less ‘property tourism’ off-market with mostly just serious buyers to deal with. Failed lending is a major factor of many aborted property transactions and this sector of the market is less likely to be exposed to high Loan to Value, high-risk borrowing.
Moral Obligation
By selling with tenant in place you are not displacing existing tenants
The Off-Market Purchase Process
Purchasing off-market property in Scotland typically works a little differently to buying traditionally through an agent.
Crucially the main difference with off-market transactions is most commonly there will be no home report available or up to date valuation (at least initially). Home reports cost upwards of £400 and often off-market sellers are not actively courting sale. It is likely they will not want to pay for expensive home reports until they know that there is a serious buyer interested.
Typically, the process is (but not always) as follows:
1.Introduction
Buyer is given as much detail on the property/properties as possible but this will typically be limited (due to no marketing material) It will typically include: Address, Rough sq footage, brief account of condition , financial summary including current rent, ‘desktop valuation’, asking price (and ideally pictures/videos)
4.Valuation
Instructed by seller (or home report depending on sellers preference - sometimes seller will demand buyer pays for upgrade to home report)
2.Conditional Offer
An offer is discussed then formally submitted through lawyers SUBJECT TO VALUATION/HOME REPORT (This will cover assessment of condition and the official surveyor valuation) Offers are made at this stage (subject to conditions) to convey trust between seller and buyer that buyer is serious.
5.Decision
Sale either halts or proceeds based on above
3.Viewing(s)
Viewings if not already taken place (in person or by agent).
6.Lease Reassignation
If tenants are inherited with property
Portfolio Sales
Buying property in ‘bulk’ - as a portfolio - is an extremely attractive prospect to serious investors. Often offered at a discount, this offers additional considerable savings to buyers as under current UK tax rules any single transaction of 6 or more properties is exempt from ADS (Additional Dwelling Supplement ) - a 4% of sales price tax due on purchase of ‘second and additional homes’ (3% in England). Limited companies and SPV’s (Special Purchase Vehicles) will incur this tax on property no 1.
As of November 2021 we have access to over 300 off-market properties, both as portfolios of 6 or more properties and as individual prospects. We specialise in Edinburgh but our off-market opportunities stretch to high yield locations throughout Scotland.
We also represent multiple sellers who choose the Off-Market route to selling their investment properties.
For any more information on off market sales please contact us at: david@propertybeeinvestments.com