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Why investors are choosing to list in the Off-Market

Real Estate development in Jersey City has seen an explosion of new high rise buildings over the past two years which has not only transformed our skyline, it will also bring a whopping 45,000 new apartments to the rental market.  As each new high-rise building becomes ready for occupancy, developers are offering no-broker fees, parking incentives, state of the art amenities and anywhere between 1-3 month’s rent free. These are incentives that the individual landlord can’t compete with. Landlords are now opting to sell their investment and are doing so in a very interesting and cost effective way.  They are advertising their property for sale exclusively to other investors using “Off-Market” transactions.   Here are the top reasons why:

The Cost of Listing Your Condo

For the investor, there is more than just the realtors commission, legal fees and closing costs to consider when listing your condo on the open-market. There is the hidden cost of lost income.

From the listing to closing date, we see an average of four months in which a property can be unoccupied. This means four months of lost rental income, HOA fees and taxes.  Other things to consider are the costs of fixing any dings, dents, re-painting the walls or staging a condo with furniture to provide the best showing. These combined costs can often exceed $20,000 or more.

Listing your property in the off-market to investors avoids such costs and maximizes return on investment as buyers often look for investments that are tenant occupied so they have income on day one.

Time to Test the Market

An investor who is looking to sell their property often has a price in mind that may not be reflective of the market. Or, much worse, real estate agents are over stating the value of a property just to secure the listing only to reduce it over time when it doesn’t sell.  Listing your investment in an off-market listing gives the investor an honest reflection without the penalty of having their asking-price being recorded on a Multiple-Listing Service.

Luxury of Time

Time is what’s needed for both the buyer and the seller in an off-market transaction. For the seller, you want to keep the tenant in place until you hand over the keys to your buyer. For the buyer, time is often needed to complete a 1031 Exchange.   A 1031 Exchange allows the buyer to defer capital gains taxes when purchasing a new investment property. A 1031 Exchange is a very time sensitive option that often works best in the off-market where such flexibility is allowed.  For more information on a 1031 Exchange click here.

Reduced Rates

A Real Estate Brokers commission is typically 5%-6% when offered on the open market. The costs of marketing your condo on the MLS, social media, mailing flyers, holding open houses, managing negotiations and contracts all comes at a price. Off-Market listings are typically listed with your broker at reduced rates because the investor forgoes most of these costly and time consuming marketing techniques. Your broker will hyper-focus their marketing efforts to a very select and predefined audience of investor/landlords. Placing your trust in a broker to sell your investment in an off-market transaction can be a big deal for you.  So, it is very important to understand their methodology and their database of potential buyers.

With the recent explosion of rental inventory for both Hoboken and Jersey City we are seeing more landlords making use of off-market transactions to maximize their return on investment.

If you have any questions or want to discuss strategies, do not hesitate to reach out to me.

Rich Cronin – (201) 566-6049

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