Content of the material
- Advantages for Sellers
- 2.) Networking
- Discover Off-Market Leads with Custom Lists
- Off Market Deals Vs. The MLS
- MLS Statement 8.0
- Benefits as a seller of off-market deals
- Limited Title Property
- Second Mortgage
- Why are properties sold “off-market”?
- 8 re asons owners sell off-market properties to investors
- Know the Process
- What Does Off Market Mean on and Zillow?
- Drawbacks Of Off Market Properties
- Where to Find Off Market Property Listings
- 1. Property management companies
- 2. Real estate wholesalers
- 3. HomeQT pocket listings
- 4. Roofstock Marketplace
- How to Find Off-Market Properties?
- Methods of Off-Market Home Search
Advantages for Sellers
Some home sellers opt for an off-market listing to test the waters while others want a more private sales process or the opportunity to negotiate a lower sales commission as there is only one agent involved.
Certain homeowners have thought that a pocket listing creates an allure that will get them a higher price. After all, if the home is listed and ends up sitting on the market for more than 30 days, there is a good chance that potential buyers will try to make lowball offers. Without the “days on the market” ticker going off, there isn’t as much chance that a seller will be undercut.
Networking is one of the most effective strategies to find off-market properties. Most off-market properties are bought and sold privately through personal or professional connections. If you want to be in the know of all local off-market properties, you’ll want to have people on your side. While networking can seem scary, especially for new buyers or investors, it’s worth it to put yourself out there.
Be on the lookout for real estate events in your area by checking your local REIA, bulletin boards, Facebook groups, or online networking groups to see when and where groups are meeting. Through these networking events, you will be able to easily connect with local real estate professionals and investors who may be able to help you to find off-market properties. If you’re a property investor, these real estate events will be especially beneficial to building out your network.
Discover Off-Market Leads with Custom Lists
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Off Market Deals Vs. The MLS
Now that we’ve gone through the numerous benefits of off market listings, it may be easy to see why so many investors prefer these opportunities. Off market properties, especially those in competitive markets, represent a chance to break away from the competition. Many investors prefer the chance to view a property and negotiate directly with the seller without added pressure of a hot real estate market. Off market listings can also lead to unique financing arrangements, such as seller financing that could allow investors to expand their portfolios more quickly.
With all of that being said, off market properties are increasingly hard to find. Investors waiting on off market deals will miss out on valuable opportunities listed on the MLS or even websites that pull from the platform. While MLS listings are affiliated with an agent, they should not automatically be ruled out. There are numerous opportunities available with these homes as well. Further, as investors build up connections with agents they may have access to early showings or a more transparent negotiation process.
MLS Statement 8.0
The National Association of Realtors (NAR) enacted a new policy at the end of 2019, called the MLS Statement 8.0 Clear Cooperation Policy, regulating off-market properties on the MLS. The policy took effect in 2020 and requires real estate brokers to submit all property listings to the MLS within one day of marketing the property to the public. Marketing is defined as posting the property listing on public-facing websites, yard signs, flyers, digital communications, and other platforms that potential buyers can access. The purpose of this regulation is to increase cooperation among real estate professionals. So, what does this mean for investors?
The passage of MLS Statement 8.0 does require brokers to post more properties on the MLS, but this does not necessarily mean the end of off-market real estate. Brokers are still allowed to create limited off-market listings to preserve seller privacy or create an office-exclusive listing. In these cases, brokers and agents can choose who can see the official MLS listing. For example, the listing can be shared exclusively with buyers working with the firm. Investors will need to leverage their existing real estate networks to find these exclusive listings, which may require more effort than before to access.
Investors can also market directly to motivated sellers, such as owners with distressed or vacant properties. These properties are often not listed, but that does not mean the owner isn’t ready to hear about direct offers. It is also worth noting that the new regulation is not a law, rather a regulation set forth by the NAR. This means For Sale By Owner (FSBO) properties can still avoid being listed on the MLS. Investors can find these listings through several marketing strategies.
Benefits as a seller of off-market deals
Many people may be asking, “why wouldn’t an agent list a property in the most visible place to attract the largest number of potential buyers and thus the greatest number of offers?”
The answer is often privacy. If the owner of an apartment building is looking to sell, they may not want to spook the tenants into moving out because then the building isn’t performing as well as advertised. If the building ultimately doesn’t sell, then the seller just shot themselves in the foot.
Additionally, many sellers’ agents will subsequently get a lot of interest from buyers, many of whom are simply kicking the tires and are not serious nor qualified to close on their property. Thus, keeping a property as a pocket listing will allow a seller’s agent to pick and choose whom to market the property to, which often makes the job of selling the property much easier for all parties involved.
In no particular order, let’s jump into all the various ways there are to find and source off-market deals.
Limited Title Property
Are you buying, investing in or building a limited Torrens title? Discover how to get approved for a limited title property home loan.
Which lenders will allow a second mortgage behind your current home loan? There is very strict policy when it comes to 2nd mortgages but it is possible.
Why are properties sold “off-market”?
Investors targetoff-market opportunitiesto enjoy less competition, avoid commissions, and obtaina discounted price. Sellers extenda discount and leave equity on the table because of the benefits unique to an investor offer, including all-cash, fast closing, and an as-is conditionsale with no contingencies. Whether you’re looking for off-market residential, commercial, land, industrial, mixed-use, or other types of property, you’ll find it in PropertyRadar. Why limit yourself to what is listed on the MLS when you have unlimited opportunities in off-market real estate?
8 re asons owners sell off-market properties to investors
It’s essential to separate investors and agents when looking at off-market opportunities because the benefits in the eyes of the owner are very different. There are a variety of reasons a seller would prefer an investor offer, including:
Speed. A fast sale is a standout benefit that an investor offers. Gone is the need to deal with financing and stacked sale contingencies. An owner knows that an investor is buying the property as-is, all cash, and can close in as little as a week if needed.
Cash. An investor’s offer is rarely contingent on financing. While an investor may choose hard money or private money, speed often occurs because financing is not part of the equation. No financing means no appraisal is necessary, and the property can close quickly. The seller can use the cash for their next transaction or solve a current life situation.
Condition. Selling a property that needs heavy repairs isn’t easy. A property can be in such disrepair that a new buyer may have issues obtaining financing. Whether a property needs massive updating, or structural repairs, is a hoarder home, or has experienced a fire, sellers turn to an investor offer because they lack the experience, time, money, or will to handle the repairs on their own.
Privacy. Off-market sales allow owners to maintain privacy. Far from being a pandemic-driven concern, some sellers dislike strangers walking through their homes. Off-market properties offer a more private and discreet transactional process. There won’t be a sign advertising the property is for sale, no nosey neighbors will come poking around, and there’s no judgment on the property condition. The investor will buy the property in as-is condition with no contingencies.
Distress. Investors often discuss the five Ds of distressed real estate: death, disease, drugs, divorce, and denial. Numerous life events cause distress where the owner may ultimately decide an as-is cash offer is the best and fastest solution. In many cases, finances will have changed where a sale is required, but the owner doesn’t want to list the property on the MLS for various reasons, and an investor option is the best option.
Title and legal problems. Sophisticated investors may help owners who cannot sell their home due to clouded title or pending legal actions. This can be a win-win, allowing the owner to cash out and move on while the investor can make significant returns by using their resources, knowledge, and patience to resolve the problem.
Flexibility. Timing and creativity are two essential benefits of an investor offer. A seller may be trying to time another real estate transaction or business opportunity, and an investor offer may be able to create out-of-the-box proposals that meet their needs. This can include seller leaseback, seller financing, or an extended closing period.
Tenants. Selling a property with a tenant in place is difficult as it limits potential buyers. An aging landlord may have difficulty timing an exit if the tenant recently renewed their lease or perhaps is trying to time the tax ramifications of a sale. Maybe the seller wants to see a long-term tenant remain and would prefer to sell to a fellow landlord. There’s also a chance the current tenant isn’t paying, and the landlord is willing to leave equity on the table to not deal with the issue, especially if the tenant is a family member.
Investors are facing increased competition from iBuyers and institutional Wall Street players. These Wall Street players have attempted to scale the investor offer in major metropolitan areas, but these players aren’t always willing to offer the same eight benefits local investors can. Local investors are far more inclined to take on properties needing heavy repairs with unique people issues. Most Wall Street offers only address speed, cash, and privacy out of the eight points listed. A local investor that understands this can use data – which we will cover later – to better connect with those opportunities that Wall Street doesn’t want.
Know the Process
Finding an off-market listing is only half the battle. Seeing a deal go through is the endgame, which is why buyers of off-market listings have to know the ins and outs of the process. Once you get to contract, it is a standard deal, but as the agent is likely representing both of you, it can get a bit murky.
Known as a dual agency sale—while perfectly legal—it can be hard for the buyer to tell if the agent has their best interest in mind. The higher the sale price, the heftier the commission for the agent. If you are buying in a market with little inventory, it may not matter if you get the best deal as long as you get the home, but it pays to be aware of any conflicts of interest.
What Does Off Market Mean on and Zillow?
When you see properties on the popular real estate portals Zillow and Realtor marked as “off-market,” it means they are not listed for sale. Sometimes there are mistakes made on websites, or the information has not been updated yet.
It is always worth speaking with a real estate agent to double-check if you suspect a home is for sale.
Drawbacks Of Off Market Properties
Off market deals are associated with so many benefits, it can be difficult to think about anything else. However, there are a few drawbacks associated with off market properties to be aware of:
Lack Of Availability: In light of the NAR’s new policies, there has been a significant reduction in the number of pocket listings that are bought and sold. While there are exclusions to the rules, availability is simply not what it once was.
Hard To Find: Given the availability changes, investors should ensure they are utilizing multiple lead generation techniques at once. Relying solely on off market listings could slow down your portfolio’s growth rate and make it more challenging to continue securing deals.
Inexperienced Sellers: One of the exceptions to MLS Statement 8.0 is for For Sale By Owner (FSBO) properties. These do not have to be marketed the same way as other listings; however, investors could find navigating an FSBO transaction more challenging depending on the circumstances.
Where to Find Off Market Property Listings
One way to try and find listings that aren’t being marketed to the public is by speaking with a real estate agent. Although the NAR technically prohibits REALTORS® from taking off-market property listings, they might still know if something is available.
While there are more commonly known tactics to finding off-market deals like direct mail marketing, auction websites, REOs, and short sales, there are several other ways to find off-market properties:
1. Property management companies
Houses and multifamily properties taken care of by property managers are owned by real estate investors who might be willing to sell.
The management company already knows the property condition, the tenant, and the financial performance of the home so that you know if the property is a good match for your investment objectives.
2. Real estate wholesalers
Professional real estate wholesalers spend their entire day finding undervalue property, estimating repairs, putting the home under contract, and assigning the contract to a real estate investor such as yourself.
One of the biggest advantages to buying a wholesale property is that even after the money has been spent on repairs and updating, the house should still be below fair market value, creating instant equity for an investor.
3. HomeQT pocket listings
Pocket listing services such as HomeQT are an online option for finding off-market properties for sale. The website lists property for sale that is not on the MLS and facilitates communication between property owners and sellers.
While the site may be a good place to look for private listings, the drawback is that you can’t complete the entire transaction online, which is a distinct disadvantage for remote real estate investors.
4. Roofstock Marketplace
The Roofstock Marketplace is the #1 website for buying and selling rental properties and investment real estate. Single-family homes and smaller multifamily properties are listed for sale on Roofstock.
Many properties listed on their marketplace come with inspection reports, neighborhood ratings, and financial pro-formas to help you evaluate and compare properties.
The site also offers real estate portfolios to diversify rental property investments in a single transaction.
How to Find Off-Market Properties?
Knowing how to find off-market properties will be key if you want to be successful. There will be off-market homes for sale, you just need to know how to locate them.
If you contact your local real estate agents, you might get lucky and find that they have access to pocket listings. However, not all agents will have a good selection of pocket listings available.
More experienced Realtors might be better able to guide you to a range of non-MLS listed homes.
Another option is to look for pocket listing services that market homes privately. You could discover other off-MLS sources as well as real estate auction websites in your journey to find homes not listed on the MLS.
If you find a good source of off-market homes and see a home that meets your requirements, you could get a great deal. You need to be more cautious and do more research, but it will have been worth the extra work if it pays off.
Methods of Off-Market Home Search
If you really want to be aggressive in finding potential off-market properties for sale that could be bought, there are several ways. Here are few methods:
- Sending out mailings to particular houses you have an interest in through direct mail marketing.
- Networking with friends and relatives to see if they know anyone considering selling.
- Speaking to real estate agents to let them know what you’re looking for with off-market properties.
- Knocking on doors if you really want to be aggressive.
- Hire a buyer’s agent to work at seeking out an off-market home to purchase.
- Word of mouth to the general public.
- Blasting your desire to purchase a home on social media.
- Looking on Zillow – the website allows sellers to list their homes 30 days before they will be officially listed for sale.
- Speaking to real estate wholesalers.
- Real Estate auctions can be a good source of finding off-market homes for sale.
- Do an online search for off-market properties near me – you may get lucky and see some for sale by owner properties.