by The Affordable Oracle

We hear it all the time, that a transaction was done “off-market”. Many real estate funds indicate that they will add value by seeking deal flow through “quiet” or “off-market” channels. As appraisers we are often told by buyers that they secured a transaction “off-market” and so it was bought below market price. But what are the reasons that transactions get done in such a fashion, after all the knee jerk reaction is that a market sale will undoubtedly procure the highest proceeds for the seller. I will begin the list and hopefully others can contribute their insight as to reasons why transactions get done “off-market”.

1. Some real estate requires extensive due diligence to arrive at a bid and so prospective buyers are hesitant to spend money pursuing a transaction knowing they are one of a large pool of bidders. So an offering to only a handful of qualified buyers will assure bidders that their pursuit costs are justifiable.

2. A situation where a property has one or two logical buyers a seller can solicit negotiations with those entities directly and possibly negotiate a lower brokerage commission

An excellent example of this is a conduit air right lot, in other words a lot that prevents 10-foot continuity necessary for the transfer of air rights in New York City.