Miami Beach, Florida, Biscayne Bay, Miami downtown city skyline. (Photo by: Jeffrey Greenberg/UCG/Universal Images Group via Getty Images)
Jeffrey Greenberg/Universal Images Group via Getty Images
In commercial real estate, off-market deals are often portrayed as opportunities for buyers. By definition, an off-market deal is one where the property isn’t publicly listed or actively marketed. Instead, a buyer may learn about the opportunity directly from the owner, through personal networks, or via a broker bringing it quietly to select investors. While these deals can sound exclusive, they come with both advantages and disadvantages for you as a buyer.
Advantages of Off-Market Deals for Buyers
Reduced Competition
One of the main appeals of an off-market deal is the opportunity to buy a property at below market value. If a seller doesn’t have dozens of buyers vying for the same property, you may be able to negotiate more favorable terms, structure creative financing, or secure concessions that wouldn’t be as likely in a highly competitive market.
Exclusive Access
If you’ve built strong relationships with brokers, owners, or investors, you may gain early or exclusive access to opportunities. Being the first to know can put you ahead of the curve. This is where your reputation matters, as sellers and brokers are more likely to approach buyers they trust to transact.
Bringing Value to Investors
If you’re raising equity or presenting deals to investors, an off-market opportunity can appear especially attractive. Investors may feel you’re bringing them something rare and unique in the market. This can strengthen your credibility and position.
Confidential Transactions
In some cases, sellers prefer discretion. As a buyer, you may benefit from acquiring a property without public attention. This can be helpful in certain situations to maintain tenant relationships or reduce market speculation.
Disadvantages of Off-Market Deals for Buyers
Lack of Transparency
One major drawback of off-market deals for buyers consists of limited information. Without a formal marketing process, you may not receive offering memorandums, detailed financial records, or third-party reports. This requires more due diligence on your end and can increase the uncertainty of your investment.
Risk of Overpaying
If they don’t have any opportunity for market feedback, sellers may have unrealistic price expectations. Normally, competition helps set a property’s true value. Without it, you risk paying more than the property is worth, especially if your data is incomplete or outdated.
Unclear Process
For buyers, off-market deals often lack structure. You may spend months negotiating, only to have the rug pulled out from under you when the seller decides not to move forward or finds another buyer. This uncertainty can waste significant time and resources.
Limited Benchmarking
In a marketed deal, you can gauge your offer against others and learn from market dynamics, even if you don’t win. With off-market transactions, you don’t have access to this insight. As a result, you might end up without a clear picture of how your valuation stacks up.
Concluding Thoughts for Buyers
For buyers, off-market deals can provide unique opportunities, especially if you value exclusivity and reduced competition. However, they require careful due diligence and an awareness of the risks. You’ll want to confirm whether you have true exclusivity, push for as much information as possible, and remain disciplined in your valuations. While off-market deals may feel like hidden opportunities, they are best approached with caution and a clear strategy.
