Selling Off-Market vs. Listing an Apartment Building in San Diego
Buyers generally prefer less competition. Sellers generally benefit from having more of it.
By Nick Hernandez ·
If you own an apartment building in San Diego, you have probably received calls, texts, letters, or emails from someone wanting to buy your property.
Sometimes it is a broker saying they have a buyer. Just as often, it is someone presenting themselves as the buyer directly:
“I buy apartments in San Diego.”
“I’m looking for another property in your area.”
“I’d like to make you an offer.”
Some of these buyers are legitimate investors with the ability to close, and there are situations where selling off-market can make sense.
But there is a reason buyers spend so much time trying to find properties before they ever hit the market:
They would rather negotiate with one owner than compete against several other buyers.
As a multifamily broker, I regularly hear from value-add investors and private buyers looking for their next acquisition. Many specifically ask about properties that are not currently listed.
Why?
Because less competition generally gives the buyer more negotiating leverage.
That does not mean an off-market offer is necessarily a bad offer. It simply means an owner should understand the tradeoff before accepting one.
Why Buyers Prefer Off-Market Deals
From a buyer's perspective, the appeal is straightforward.
If an apartment building is broadly marketed, they may have to compete against local owners, 1031 exchange buyers, private investors and other groups interested in the same property.
That competition can drive up the price and improve the terms for the seller.
When a buyer approaches an owner directly, there may be nobody else at the table.
The same thing can happen when a broker approaches an owner on behalf of one specific client. Even though a broker is involved, that buyer may still be negotiating without competition.
For value-add investors in particular, finding off-market properties can be an important part of their acquisition strategy. Their business model often depends on buying well, improving the property and creating additional value.
Again, there is nothing inherently wrong with that.
But owners should understand that sophisticated buyers generally pursue off-market opportunities because they believe there is an advantage to getting to the property before everyone else does.
Why Owners Sometimes Prefer Selling Off-Market
There are legitimate reasons an owner may choose a private sale.
Privacy. Some owners do not want tenants, family members, employees or others knowing a sale is being considered.
Speed. A credible buyer who already knows the property may be able to move quickly.
Less disruption. A controlled transaction may mean fewer tours, inspections and access requests.
A uniquely motivated buyer. A neighboring owner, 1031 buyer or investor assembling multiple parcels may have a specific reason to pay more than the typical buyer.
If the price and terms are strong enough, an off-market transaction can absolutely make sense.
The Biggest Risk: You Don't Know What Someone Else Would Pay
The biggest disadvantage of selling off-market is simple:
You may never know what another buyer would have paid.
Apartment buildings are not commodities.
Different buyers can look at the same San Diego property and arrive at very different values.
One investor may focus heavily on current cash flow.
Another may see significant upside in below-market rents.
A nearby owner may be willing to pay a premium.
A 1031 buyer facing a deadline may be more aggressive than the rest of the market.
If only one buyer evaluates the property, the seller never gets to see those competing opinions of value.
The offer may still be excellent.
But there is less evidence proving that it is the best offer available.
Competition Can Improve More Than the Price
Suppose an owner receives an unsolicited offer for $3.5 million.
It seems reasonable, the buyer is credible, and the owner is tempted to take it.
But if several qualified buyers are given an opportunity to evaluate the property, perhaps one offers $3.55 million and another offers $3.65 million.
Another buyer may offer slightly less but provide a larger deposit, shorter due diligence period and no financing contingency.
Now the seller has something they did not have before:
leverage.
Price is only one part of an apartment transaction. Sellers should also consider:
- Deposit amount
- Due diligence period
- Financing contingency
- Closing timeline
- Buyer's available equity
- Experience closing similar transactions
- Likelihood of a retrade
- Overall probability of closing
Creating competition gives the seller the opportunity to negotiate both price and terms.
Be Careful With “I Have a Buyer”
Apartment owners hear this phrase from brokers all the time:
“I have a buyer for your property.”
Sometimes the broker absolutely does.
Good multifamily brokers maintain relationships with active investors and often know buyers who would be interested in a particular property.
But there is a big difference between:
“I know someone who may be interested.”
and
“My buyer has reviewed the property and is prepared to make a credible offer.”
If an owner is considering giving one buyer an opportunity without exposing the property to anyone else, I think there is one important question to ask:
What am I getting in exchange for eliminating competition?
Maybe the buyer is paying a premium.
Maybe they will put down a large nonrefundable deposit.
Maybe they will close quickly without a financing contingency.
Maybe privacy is extremely important to the seller.
There can be plenty of good answers.
But the seller should be receiving some benefit for giving one buyer exclusive access to the opportunity.
Off-Market Does Not Have to Mean One Buyer
There is also a middle ground between selling directly to one investor and publicly advertising a property everywhere.
A broker can conduct a controlled marketing process.
That may mean quietly contacting a targeted group of local apartment owners, private investors, 1031 buyers and other qualified groups without immediately launching a full public campaign.
This can give an owner meaningful market exposure while maintaining more privacy and control.
In San Diego's small and mid-sized multifamily market, this can be especially effective because many buyers are private investors rather than large institutions.
The buyer who ultimately values the property the most may already own nearby, be completing an exchange or simply have a stronger conviction about that particular neighborhood.
The important thing is making sure they know the opportunity exists.
When Does an Off-Market Sale Make Sense?
I would seriously consider an off-market transaction when:
- The buyer is credible
- The price is strong
- The terms are clean
- The seller understands the property's market value
- Privacy, speed or certainty are especially important
If those factors line up, there is no requirement that an owner run a full marketing process simply for the sake of doing so.
On the other hand, if an owner's primary goal is maximizing value, creating competition is generally worth considering.
That is particularly true when the property is in a desirable location, has below-market rents or could appeal to several different types of buyers.
Final Thoughts
There is nothing inherently wrong with selling an apartment building off-market.
Some of the cleanest transactions happen that way.
But owners should understand why buyers are often so interested in finding properties before they are listed.
Buyers generally prefer less competition. Sellers generally benefit from having more of it.
Before accepting an unsolicited offer on a San Diego apartment building, I would want to know what the property is likely worth, who else could realistically purchase it and what the buyer is offering in exchange for the opportunity to negotiate without competition.
Sometimes the answer will still be to take the off-market deal.
Other times, creating competition can produce a meaningfully better result.
The important part is knowing the difference.