Welcome to The Real Estate Venturist. Every other week, this newsletter will give you a behind-the-scenes look at what it’s like to be a real estate entrepreneur. As always, this is not investment advice and merely my opinion.

The reality of off-market deals

I’ve never understood the infatuation with off-market deals. We’ve done a few, but none were where we could flip the contract the next day for a huge payoff. Instead, we avoided competing with numerous other buyers, and had more time to structure our optimal deal. In each instance, there was a story—and a broker. While not advertised on the MLS or Loopnet, these deals were “marketed” in their own way. And the sellers were particularly well-suited to transact this way, too.

These deals were still marketed, just discretely. One was a stale listing, previously on the market but unsold. I knew the broker, we inquired, and we negotiated a deal off-market. In another case, a seller enlisted several local brokers to find an off-market buyer. He didn’t want to pay a normal commission and was under a self-imposed timeline to sell the asset. Our broker relationship gave us access, and closed the deal off-market. Another time, we placed second in a fully marketed deal. Months later, when that deal fell out of contract, we were approached, reaffirmed our prior bid, and secured the property. Had these deals been widely marketed at the time, I’m not sure we would’ve bought all three.

I will say, though, we were happy about our basis in each of these deals.

Benefits of selling off-market

We’ve never sold a property off-market, though we would consider it. All our sales have been formally listed. Some didn’t sell immediately, requiring a change in brokers, but each provided real-time market feedback. The main drawback of an off-market sale is not knowing what the open market might have yielded. To offset that negative feeling, you can name your price. If someone is eager and aggressive enough to pay that, then let them.

Another reason to sell off-market is to control the narrative. If your property (or company) is distressed, a widely marketed process may not work for your PR firm. Selling quietly allows you to shape the story. Alternatively, if you’re in a 1031 exchange with a specific timeline, an off-market sale can offer the necessary flexibility.

Then there’s the low-friction factor. An off-market sale where a buyer approaches you, pays your big price, and offers aggressive terms is ideal. No offering memorandum, no countless tours, no broker interviews, no prolonged negotiations. That’s one way to reduce friction. On the other hand, some sellers will take less money to avoid the hassle. Consider iBuyers in the single-family home market: many homeowners prefer to skip showings, repairs, and curious neighbors, opting for a quick close at at cost they’re willing to accept.

Navigating off-market solicitations

I don’t enjoy direct off-market solicitations. It’s one thing if a major broker who knows the market and my property reaches out. It’s another when a group in New York, with zero local context, finds my contact info online. These groups cast a wide net (understandably) but often waste my time. Mostly because they don’t get to the price I want, and they don’t have one buyer in mind—they intend to market it themselves on an “off-market” basis.

The bait-and-switch is what frustrates me. I have no problem providing a rent roll and a T12 to a serious buyer—one who knows the market, has the financial wherewithal, and simplifies the process. However, I haven’t found an effective way to identify a genuine buyer without asking for a letter of intent (LOI) before sharing financials. A buyer familiar with the market should be able to offer a price close to market value.

It also does more harm than good to have your property’s rent roll and T12 floating around. If buyers think your property is perpetually for sale, why should they pay up for it when nobody else is? I understand why potential buyers don’t want to offer on a property without receiving financials—valuing a property without them is challenging, and the risk of re-trading increases. So, the next time one of these companies solicits us to buy one of our properties, my answer might be, “It’s not for sale at this time.”