In the early 1990s, marketing and advertising in real estate looked very different than it does today.
No online property portals. No Facebook. No ratings and reviews websites.
Agents used mainly offline channels to market their properties and services to buyers and sellers, and even though the media companies had access to an audience, real estate businesses were still largely in control of their data – and ultimately their brand.
As online property portals shot to fame in the mid to late nineties, we as an industry started handing over our listing data with the promise of more reach to potential buyers. In the late 2000s and into the 2010s, agents and offices started creating profiles on these platforms with the promise of more “eyeballs” on their brand.
With the adoption of more sophisticated technology and the advances in computing power in the 2000s and into the 2010s, collecting data became much easier to do on a large scale. And so we all started collecting lots of data and storing it in our CRM platforms. But for most businesses, still to this day, they’ve largely not known what to do with all that data.
You might recall the term ‘big data’ was thrown around at real estate conferences quite a bit around 2014 to 2018 – the concept of data that is so large, fast or complex that it’s difficult or impossible to process using traditional methods.
Why don’t we hear about ‘big data’ much anymore? Well, it’s been largely due to the adoption of AI (Artificial Intelligence) – the tools that actually make sense of ‘big data’ and tell us what to do with it.
Agents and real estate business owners today have a much clearer understanding of the benefits, and how to use, their own data largely thanks to the tools that have become available to capture, optimise, interpret and automate data from their own CRM and agency website. Before the portals came along, we actually did this. It was a little archaic (remember the Rolodex?), but it worked for the time. REA came along and we did away with our old systems and willingly handed over all of our data.
In the early days of the internet, the portals owned access to the audience and we’ve had to pay them for the privilege to access their audience. But today, we can reach the exact same audience ourselves before they ever get to the portals, with any number of digital mediums, enticing them back to our own websites.
In more recent years, many real estate businesses have turned their focus toward their own data, their own website, their own social media channels and their own CRM platforms to reach potential buyers. With a growing list of exciting new website integrations, agents can now provide buyers with an experience on their own website that they cannot get anywhere else online and offer them exclusive access to listings that aren’t advertised anywhere else.
Enter the “off-market” phenomenon – the idea of selling a property with zero advertising on the major portals.
Back in 2018, we reported on an agent in Sydney who sold $127,970,000 worth of real estate that year, representing 50% of his overall sales for that year. Many thought this trend would not last or it was only a strategy used in certain markets.
But since 2018, off-market sales have risen substantially and the growing consumer awareness and popularity of the off-market concept has spawned entire off-market platforms within agency websites. And it’s starting the grind the gears of the major property portals, well at least one in particular.
In the report, REA says that “Houses sell for less off-market”.
Using (Warning! Lots of big words coming up…) hedonic regression analysis to estimate the average sale price of off-market sales relative to other sales over the 2019-2020 period, REA states that “Losses from selling off-market far exceed listing costs”.
The landing page for the report featured not only the report itself but also the video series that REA shot in 2018, and ran on prime-time television in Australia, featuring actors essentially making fun of real estate agents for even suggesting the off-market concept.
REA’s report, evaluating sales in the 2019/20 period, does provide a number of disclaimers including:
“Some features that affect the value of properties, such as the quality of finishes, have not been accounted for. If these are systematically more or less common in off-market transactions, it may affect the results.”
The methodology used as the basis of the report is something to note as well.
There are many variables in off-market transactions that REA is simply not privy to, such as fixtures, fittings, finishes, renovations etc and so hedonic regression analysis “can be used to assess the value of a property, in the absence of specific market transaction data”.
The hedonic pricing method “is considered implicit because the price function is indirectly revealed to us by what the people are willing to pay in order to obtain better quality or quantities of the characteristic”.
While hedonic regression is a respected method of estimating the demand for a good, or equivalently its value to consumers, there are a lot of assumptions and gaps in the data and real estate agents should be excited and buoyed by the fact that REA does not have access to off-market sales data (yet!) and have relied on complex algorithms to estimate the data used in their argument.
Based on the conversion data from our client’s own websites, and sale prices being achieved pre-2020 and throughout the pandemic, the off-market concept is more popular than ever and consumer awareness is only growing stronger. Almost every new website project we launch today is coupled with a robust off-market property portal, providing real estate agents with a platform to drive an effective off-market strategy and build a significant following in the process.
Something that REA’s report and videos fail to mention is that competition can occur with just two people. If an agent can find those two people in their own database, and many can, the notion that you need exposure on the major property portals to sell for the highest price becomes significantly harder to argue.
As the off-market concept becomes more popular, and I have no doubt it will, REA will likely continue investing resources into counteracting the loss of its revenue as a result of these deals happening off their platform.
And it might just work against agents in a listing presentation if…
- They don’t have a database of in-market buyers of their own and an effective system to communicate with them
- They continue to send all of their traffic to the major portals instead of their own website
- They don’t use a CRM (properly)
- They don’t have a robust off-market portal on their own website
On the other hand, real estate businesses that have invested in these areas will continue to build larger databases, drive more traffic to their own website, generate more off-market buyer interest/competition and transact more deals with zero (or much less) advertising dollars spent on the major property portals with a positive impact on their bottom line.
REA didn’t bank on real estate agents getting smarter about the use of their own data and devising ways to use their owned channels to transact deals outside the major portals, with who they’ve had a love/hate relationship with for years. The real estate industry has found a way, via the off-market concept, to compete with the dominance and rising costs of the major portals and take back some control of their own data.
Despite these attempts by REA (and agents who don’t believe in “off-market” sales) to spoil the off-market party for agents, off-market deals will continue to grow as more real estate businesses invest in the tools and teams to leverage the data that sits in their CRM and their own agency website.
REA, on multiple occasions, have attempted to paint an over-sensationalised view of real estate agents in their videos and they’ve attempted to discredit the advice given by agents to their clients. While this rhetoric (and let’s be honest… that’s what it is) might work with some vendors, it will not work against agencies that have established trust in the community and a highly engaged database. So my friends, stay the course.
Off-market, pre-portal, silent listings or whatever you want to call it, certainly doesn’t replace traditional methods of selling.
But if I was to reflect on why it’s growing in popularity, I’d suggest it’s based on four factors:
- The increase in consumer awareness of buyers’ agents
- Real estate agents/agencies getting much better at database/CRM management and categorisation
- Vendors desire to sell ‘quietly’ and without the costs of a full-blown campaign
- The change from ‘industry jargon’ to mainstream consumer awareness about the off-market process
One thing is for certain, however, as buyers and vendors become more aware of the off-market process, more will be asking agents about it. So you best be prepared with the tools to facilitate what the market is asking for, in addition to the traditional forms of selling real estate.