In 2016, I bought a particularly desirable apartment building in one of the most expensive neighborhoods in the Greater Boston. Apartment buildings in good condition in that neighborhood were so competitive, some of them got 20-30 offers. Most were already priced for condo conversion and I have seen investor buyers (themselves also experienced brokers) pay next year's price for them. I knew about that building before it went on the market. In fact, in my experience some sellers often asked for an incredibly high price when they sell the property off-market in the "pre-market" stage, before they finally put the property on MLS for all to see and to bid on. They put it on the market because they couldn't get the high price they want during the "pre-market" stage.
In a competitive market, off-market deals are a myth, or sometimes a hype used by savvy agents to attract buyers. I myself have access to some off-market deals, and I have helped buyers with off-market deals. However, the truth is, there are often some special reasons why the seller chooses to sell the property off-market. Every seller knows that they can get the most money by putting the property on MLS. Why wouldn't they want to do so? In some desirable neighborhoods, it is extremely rare or almost impossible to get a good deal, because the inventory is so low. Buyers pay a high price thinking that the property will appreciate, and between 2012 and 2017, they have profited a lot from the rapid appreciation in those areas. In 2016, I paid a high price for a condo I bought in such a neighborhood. There were 7 offers and half of them were cash. In just 6 months, the neighborhood has appreciated so much the price I paid seemed cheap later. In 2017 similar properties in that neighborhood were getting 10+ offers instead of 5-10 like the previous year. In fact the rapid appreciation was the reason why I was able to refinance that property to pull out the extra equity to fund my next property, also purchased in the same rapidly appreciating neighborhood. That condo turned out to be the cheapest 2 bed condo sold in that neighborhood that year and appreciated over 10% in the next 12 months.
How do you justify the price you pay? It depends on your business model. There are many ways to make money from real estate besides the traditional long-term buy-and-hold. Other times, it's better to use specific strategies to buy a property at below market price. Real estate is a dynamic industry with changing needs and technological advancements. That's why we always try to adapt to the market and think critically about every situation. Every deal has a story behind it.