Off Market Properties
I have seen so many different meanings of "off market properties". I have seen the traditional buying a property with no broker, and I have also seen a property listed but says "off market".
Whats your take?
Is it just me or does the real estate industry like to stretch the definitions of various labels more than other industries? It gets so bad that I feel like it's gotten to the point where people are straight-up lying. - "we have a fund" = lie - "shovel-ready" = lie - "I'm an investment banker" = lie - "off-market opportunity" = lie
Do people do this in other industries like healthcare or technology?
It's probably much worse in other industries. Hard to say something is "shovel ready" when you can go to the site and see that there is still an existing building on site or something. Contrast that to a tech startup - who the hell knows whether their pitch is honest or accurate.
True. In much of the Bay Area echo chamber, the name of the game is create a minimum viable product, sell your “unicorn” before anyone wonders if there are paying users (how déclassé), leverage that acquisition into the next venture…
chiropractor - "call me Dr." = lie
I;m going to frame this, or put it on a plaque!
hahaha hilarious. SB'd!
Brokering an off-market deal (Originally Posted: 09/13/2015)
Had a couple of general questions regarding this:
The property is one I have knowledge and information of direct from the ownership. They have indicated pricing expectations and a willingness to sell, however they have indicated that they will not cover my fee and therefore I need protection from the buyer end with respect to the commission.
First thing, I have never worked on the brokerage side. Is there any sort of "acceptable" commission scale depending on the purchase price? I would imagine, for example, that a $10M has a higher commission % attached to it than, say, a $75M deal. My question, what do I ask for so that I am not coming across as being greedy, but at the same time not doing the deal too cheaply either. The purchase price of the particular property is roughly $25M, as a frame of reference.
Also, I have heard other independent brokers tell me horror stories of how after signing a non-circumvent and buyer-paid fee arrangement, the buyer tried to either retrade the fee in the middle of the deal, or altogether tried not to pay it, and then dared the broker to sue them. Depending on the size of the buyer, I imagine they might feel they have leverage over a one-man shop broker who probably doesn't have the capital reserves to deal with a long drawn out lawsuit to chase them for the fee. Is there anything I should be doing upfront to mitigate this, or is it simply a risk I will run into depending on how much of a d*ck the buyer wants to be.
The other question, because buyers often times talk to one another and it is likely that perhaps the deal I am working on has already been discussed by the ownership and their acquisition buddies at other shops, how much/little detail do I give to a buyer before making them sign my NDA and fee agreement. In other words, should I reveal the name of the property to assure they haven't seen it already? If I play coy and simply say "it's approximately x number of units, built in the 1980s, etc" to be vague enough so they won't know, and then if they point blank as me if it's a certain property because they have already seen it, then I can tell them and move on,
Again, I know there is probably protocol and a certain skill involved in presenting these off-market deals, I just want to make sure I have a little background knowledge before picking up a phone and dialing buyers who are active in the particular area for similar type of property.
Thank you
I'm a broker. Occasionally a seller says they don't want to pay your fee. Haven't seen that personally in years.
You've asked a lot here. But propose the following to the seller. If you get them their net price of say $25mil, who cares if you add on an additional 2% covering both sides of the deal. A fee of .75% per side with a max of 1.5% per side is common on deals this size.
75-100bps bps in a primary market. I've seen 2% for an $11 mil off market deal. Give them almost nothing and send them a confi for an "off market deal". They should be salivating. Get the confi signed and get the deal done by servicing to your best abilities. Stay in front of everything and add value to the process (DD war room collection etc). Nothing more you can do, make sure they know this is for their eyes only.
Find something better to do with your time.
"You're getting a first look" means that you, and the 10 other groups the broker works with frequently get to see the package.
I've heard of brokers intentionally making the marketing material look "off-market" as to drive it home.
Yeah usually a lack of one-or-more-of: an exclusive/listing agreement, full blown OM (sometimes an abridged version is created), and of course no widely distributed email blasts/notifications.
In my mind a 'true' off market deal is when a broker calls you up and says "hey, there's this dude in his 80's and he'd probably consider selling since he doesn't want to deal with ownership responsibilities anymore, but there's no guarantee. If he does sell to you, though, pay me a x% fee for making the introduction since I told you about it, even though I will do literally nothing to facilitate the transaction other than email you/call you about what price to offer."
MonkeyWrench perhaps a naive question, but why wouldn’t the broker keep that info in his back pocket, maintain relationships, wait until one side is ready to take meaningful action, and officially represent one of the sides? Or convince one side to aggressively take action, but either way represent one of the sides.
Edit: added last sentence
I mean each case is obviously different, but usually what happens is it's a 'show me yours and I'll show you mine' arrangement. What I mean by that is that, as an acquisitions guy, I have to know what property/opportunity we are talking about before I can even think about writing an LOI. Once the property address is given out, it's pretty easy to track down ownership info if you REALLY wanted to, and the broker knows this. What the broker has though, is asymmetric info ("I know something no-one else knows"). If you want to be in the broker's good graces going forward and in the mix on future deals/info, you don't want to burn the bridge and go behind the guy's back and do a direct deal. Typically, the implied agreement is that if you write an offer, the broker's fee is included formally in the LOI to seller (meaning that you as the buyer will take care of it on top of whatever the purchase price is for the property). So as a seller, if you accept a $40 M offer, the $40 M is net to you less any attorney/closing fees, etc.
I would describe it as a broker's pocket listing that isn't publicly listed on the MLS, Loopnet, or the respective broker's website...or a deal in which you are able to find a potential seller without using the services of a broker. In one form or another...it's an exclusive listing that isn't publicly known by the masses...it requires a special relationship of some kind in order to have knowledge of the opportunity. That's at least my definition.
I mean, "isn't publicly known" is a huge gray area. Most "off market" deals are still blasted out to dozens of buyers or developers, maybe not on an email chain blast, but still in enough numbers that you'll start a bidding war (which, after all, is the point).
Brokers seem to think "off market" means "I have an exclusive". Most acquisitions folks, and developers, that I know prefer to think of "off market" as "this is a deal only I (or a very small number of folks) are privy to".
I think off market means I have an exclusive and I'm looking to sell it at a high cap so I can close this deal out in 30 days rather than wait 6+ months in the market for the right buyer to come at an well negotiated price.
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