Before diving into how to find off-market properties, we need to define an “off-market property.” Essentially off-market properties are either properties that have not been listed on the Multiple Listing Service or properties that have not been listed at all even though they might be for sale. Typically in home sales, when a real estate agent gets a new listing, they put the listing on the Multiple Listing Service (MLS) which then distributes the listing to other real estate agents and online listing sites such as Zillow. In this post, we’ll take a look at ways to find off-market opportunities, but first let’s get into the use cases and pros and cons.
MLS listings are widely distributed to real estate agents and millions of potential buyers, so why would someone consider putting their house off-market in the first place? Here are some use cases and reasons:
Some sellers might not want their address put on the local multiple listing service or strangers visiting their home while they are trying to sell.
In a typical real estate transaction, the seller pays each real estate agent a whopping 3% of the purchase price. To save money, many sellers opt to forgo real estate agents and therefore commission by going off-market.
The longer a home stays on multiple listing services, the more buying power potential buyers have. Some sellers opt for pocket listings and off-market deals to stay ahead of the number of days on the MLS listings. Further if a property goes pending and then comes back on-market, the property is often cursed and scares away buyers.
Many real estate investors will list their rental property off-market, so that tenants will not have to do showings for countless potential buyers.
When selling a home, getting offers and negotiating contracts is only half the battle. Before even listing your home, you need to clean, make repairs, paint, etc. to get the property ready. You also usual need professional photos which can be time consuming and costly. Off-market listings enable sellers to show on a smaller scaler and get better deals for “as-is.”
Before diving in to go look for off-market properties, it is important to weigh the pros and the cons of this strategy.
Less Competition: In a market with bidding wars and short-listing periods, off-market properties provide far less competition.
Better Market Deals: One of the primary benefits of buying off-market properties is it increases your chances of getting better real estate deals. For this reason, many real estate investors are interested in off-market properties.
Faster Closings: Often, going off-market means closing faster since potential sellers are not taking the time to list their house and do several showings.
Lots of Work: Finding off-market property deals requires a lot more work and skill than simply scouring MLS listings.
Less Choices: Going off-market is far less common than simply working with a real estate agent and putting your listing on the MLS. For this reason, off-market deals are limited.
If you’ve weighed the pros and cons, consulted your counsel, and decided to move forward, here are some ways to find 0ff-market deals.
If there is a certain neighborhood or house you are interested in, letting the property owners know of your interest in buying is key. Here are some ways to do this:
Direct Mail Marketing: Send direct mail to an address of a home you would like to buy. Explain your interest in the home and willingness to buy the property. The key to effective direct mail marketing is send mail more than once. Change something small with every piece of direct mail, whether it be the message, color of ink, or photo. Keep in mind, this is a numbers game. The more consistent you are, the more successful you’ll be.
Knock On Doors: A more aggressive approach to contacting owners is door knocking. This tactic isn’t for everyone and can make some real estate investors uncomfortable.
Talk with Neighbors: If you are looking at distressed properties, consider talking to neighbors. Distressed properties can bring down values of nearby homes, so often neighbors are willing to give you information about the property owner. Some signs of a distressed property include boarded up windows, unmaintained yard, or city codes and notices taped to the front door.
One way to be successful at finding off-market deals is to network with other investors and real estate professionals who might know of them including:
Real Estate Agents: A real estate agent could be very helpful at finding off-market listings, exclusive listings, or pocket listings. Local agents also might know motivated sellers who do not want to do any repairs or marketing of their homes.
Real Estate Wholesalers: Wholesaling is a real estate investing strategy where the real estate investor signs a contract with the seller below market value and then sells the contract for a slightly higher price. Real estate wholesales are fantastic at finding off-market deals and then reselling them to other real estate investors. Connect with real estate wholesalers and property auctions or real estate events.
Property Managers: Property managers could know of a real estate investor looking to sell their rental property off-market.
Local Builders: Sometimes, homeowners have to abandon a job mid-project and sell a home. Contractors and builders are often in-the-know in these situations.
Finding off-market homes could be great for real estate investors. Though there are many properties on the MLS, there is also more competition and a higher chance of paying above market value. To find off-market deals, many investors will network with mortgage industry professionals and do outreach to property owners. Driving for dollars and direct mail campaigns are also good techniques. Finding off-market deals involves more work and time yet can save money. Before purchasing any property on or off-market, be sure to do your due diligence.