On-Market VS Off-Market Development Sites?

Pros and cons of on-market and off-market sites

It’s no secret that the most profitable property developments and investments are those that were bought at the best price, with the greatest opportunity to add value. On-market sites are for sale and owners are actively looking to sell. Typically off-market owners are not looking to sell and nobody else is looking to buy their property. 

If you are a developer or an investor looking for your next site you might know what your requirements are, but should you look for on-market or off-market opportunities? I’ve been an investor, turned developer, turned development consultant and I’ve progressed well over 250 development schemes in the last 5 years. The answer is there are pros and cons of buying on-market and off-market. Here’s what you need to consider…. 

The pros of buying off–market sites: 

• You can select the type of property that matches your requirements. You can select the location, the size of the property, filter out any restrictions such as sites in a flood zone or listed properties. (see how you can select you next site using Nimbus Maps Filter) 
• There’s no competition, you don’t have to worry about being gazumped and you are in control. This also means the property is exclusive to you and you get to explore more buying options such as subject to planning or other creative purchasing strategies without being discovered by the market. 
• You are more likely to be able to buy at the right price or even below market value. 

• As the property is not on the market, there is no agent involved so you will be dealing directly with the vendor and avoiding any agent fees.
    

The cons of buying off-market sites: 

• Finding the right opportunities with a willing seller can take time. They may not be initially looking to sell. If they do sell, the transaction will probably be slower to complete as they may not have all the info required or may even start off a chain. Success rate can vary between 10 -15%, so a lot more leads need to be generated. 
• You may have to disclose your plans/ideas for the place, which may lead to managing the owner’s expectation on price who would often want a higher price.
     

The pros of buying on-market sites: 

• You have a choice of opportunities, each with a willing seller and all the information prepared plus a known market price so you know what price range to expect. 

• In some circumstances, the sale is guaranteed such as buying at an action or a forced sale so you’ll have more success in placing your money. 
• An agent will already be dealing with the property, so you don’t have to pay an introduction fee to an agent.  
• More stock means more opportunities for you to do more deals. 
  
  

The cons of buying on-market sites: 

• Agents can overprice property to secure an instruction so its important you look at comparable property data. (check out how you can export price paid data for comparable properties)
• With the property being on the market, there is a high chance of competitive bidding amongst other interested parties, creating a possible risk of overpaying to secure the deal.  
• With all the interest generated, it is very unlikely to sell below market value giving the sellers the advantage on choosing who to sell to. Having proof of funds available may help them look more favourably towards you. 
• You have less control over any potential development ideas that require planning before you have secured the deal.
• Currently, there is no central location showing all on-market properties, therefore there is a risk of missing potential opportunities.  

I hope you now have a better understanding of the pros and cons when buying on and off-market development sites. For more valuable content, check out our free resources page to help you reach your property goals.

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