What is an off-market listing, and why would a seller want to go this route?

Simply put, an off-market listing, commonly referred to as a “pocket” listing, is one that hasn’t been put on the MLS. That means that not only is it inaccessible to many buyers, but their agents might not know about it, either.

While it makes sense for a motivated seller to list their house on the MLS as soon as possible, there are some situations where a seller wouldn’t want to put their home on the database. Pocket listings exist to accommodate those needs.

Privacy

Chicago agent David Dominguez, who sells homes more than 42% faster than the average agent in his area, says that there are several reasons a seller might not want their home on the MLS.

“What I’ve been seeing is that people are concerned about privacy and comfort,” he says. “If a person is a celebrity or an executive, they don’t want their property out there on the market. And especially with COVID-19, sellers often don’t want so many people going through their house.”

Health concerns

Like Dominguez, Virginia agent Jenny Maraghy, an eight-year veteran of the industry, says she has seen more sellers who keep their house off-market because they are concerned about COVID-19 and don’t want a lot of people passing through their home.

“Some sellers are concerned from a health standpoint, especially if they’re at an increased risk for infections or viruses,” she says. “They don’t want a large volume of people in their home.”

Living conditions

In some circumstances, sellers might actually find themselves in a position where they are embarrassed about their home’s condition.

“Maybe it’s a hoarder situation,” explains Maraghy. “The seller wants or needs to sell, but they’re embarrassed to have the house open to the general public.”

Investors with tenants

For those sellers who are looking to put a rental property on the market, they may be concerned about tenants finding out that the property is for sale. Having tenants in place, especially long-term ones, can be a strong selling point for rental properties, and sellers aren’t going to want to disrupt that edge.

“Investors who have tenants in place often don’t want the property on the open market,” says Maraghy. “They aren’t willing to upset the tenants or have them get nervous about it being sold.”

Unusual or unique properties

Living in a home that is notable (or notorious) in some way can also bring sellers some potentially unwanted attention.

Houses that have historic significance, are purported to be haunted, or were once owned by someone famous might bring in a lot of curious window-shoppers as opposed to serious buyers. Homes that are considered unique on the market in other ways, such as a specific architecture design that might only appeal to a certain type of buyer, might be another reason sellers don’t want to put the house on the MLS in order to avoid a surplus of “lookie-loos.”

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Approach Homeowners

If there's an area or neighborhood you're particularly interested in, one option is to check in with homeowners directly. You may be able to find a lead by door-knocking or sending out mailers. Though it will cost you time and money—and won't guarantee success—there is a small chance at least one person will respond.

Don't rule out neglected properties, especially if you know you can afford to do repairs. Perhaps there's a homeowner who's so overwhelmed with the costs of upkeep—and one who never believed he could ever sell—that an unsolicited offer would be considered a blessing.

Just so you don't end up breaking the bank, make sure you print mailers that are both cheap and effective. After all, you want to seem as professional in your approach as possible. And you never know until you ask.

2. Phoning homeowners

Call those same homeowners, asking whether they or anyone they know in the neighborhood might be willing to sell you their home.

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.

The Bottom Line

Buying a home that’s for sale by owner (FSBO) won’t always mean savings for you. While the owner will most likely save by not using a listing agent, it may introduce some problems to the home sale process.

As the buyer of a for sale by owner home, it’s up to you to scrutinize the property carefully and do your research to make a fair offer. Working with a real estate agent can protect you from overpaying for the home and running into problems with the purchase agreement and other documents.

If you’re looking for a real estate agent who can help you navigate the home buying process, our friends at Rocket HomesSM can help match you with a real estate agent who understands your goals and concerns.

11 Best ways to find off market properties

1. Real estate agents and brokers

Realtors and brokers  often have both a buyers and sellers list. Some of these sellers may be prompted into selling if shown that market conditions are favorable. Additionally, hungry agents may actually cold call homeowners in the area and turn them into sellers.

Furthermore, many of these professionals have pocket listings. A pocket listing is a listing for which an agent has exclusive rights to sell and which is not listed on the MLS. Many local real estate agents may keep the listing in their proverbial “pocket” to keep word from getting out, which can often have a benefit to the seller.

Using an agent to find off-market listings can prove difficult, but usually only at first. This is because as you initially start working with an agent, they likely have a built-out buyers list that they market their off-market deals to. Once you’re able to establish yourself as a serious buyer and investor, agents will take you more seriously and actually want to bring you deals because they know you can close.

2. Roofstock

We’d be remiss to not mention our own marketplace that contains hundreds of exclusive investment property listings at any given time. Roofstock is the #1 marketplace for buying and selling investment properties, with over $3 billion in transactions completed in less than six years.

Properties with the “Roofstock Exclusive” tag are only available to Roofstock users so anyone combing their local MLS listings will not find them.

The online bidding process allows for a very fast

The online bidding process allows for a very fast turnaround on offers submitted since you don’t have to submit an offer through middlemen. This speed allows these off-market properties and portfolios to be put under contract very quickly after hitting the marketplace.

Conversely, when a property is traditionally listed on the MLS, sellers may hold out until a certain date to review all offers, which allows for numerous offers to be received. With numerous offers obviously comes more competition, which can often drive up the purchase price.

3. Direct mail marketing

Direct mail marketing, just as the name implies, is sending targeted mail directly to an owner in hopes of being able to purchase their rental property. 

Using direct mail marketing can be a great way to uncover off-market deals. This is because up until the owner received the mail from you, they may have never previously considered selling. That means you may be the only person entertaining the deal. 

4. Contractors

4. Contractors

Contractors can be a great way to find off-market deals because they’re usually working with property owners. A great contractor is not only good at the physical building aspect of the role, but also possess some soft skills, such as listening and data gathering.

If an owner is prepping their property to be sold by fixing it up, they may share that with the contractor. If you happen to know the contractor, they may choose to share that piece of information with you, allowing you the opportunity to get in touch with that seller prior to the property being listed.

Additionally, an owner may volunteer and ask the contractor is they have any other clients they work for who would be interested in buying their property. Having a great working relationships with contractors can often prove to be more beneficial that it may seem on the surface.

5. Networking with fellow investors

Knowing other savvy investors immediately gives you access to literally thousands of properties. If you know or meet someone who has a property that you would like to buy, who’s to say you shouldn’t make them an offer right then and there to buy it; it’s real-life Monopoly! 

Of course there is absolutely a time and a place where doing that would be appropriate, but if a deal makes sense, who cares where it comes from? 

Networking with other investors will likely give you insight into a few things:

  1. Their inventory
  2. Their strategy
  3. Whether or not they’re looking to sell

Knowing these can put you in a prime position to pick up off-market listings. 

If someone within my network came to me with an offer to buy one of my properties, I would probably take it in a heartbeat if the price was right. Even if the price was a bit under market value, I may still take the offer for a few reasons:

  1. I already know this person is interested
  2. I already have a relationship with this person so negotiations may be smoother.
  3. I may not have to utilize a real estate agent for the deal so I may be able to save thousands of dollars on commissions.
  4. I like helping those around me, so if I can get someone a great deal, it’s a win-win.

6. Driving for dollars

This is a method in which you literally drive, or have someone else drive, in an area and look for real estate deals. If you come across a property that looks appealing, you get in touch with the owners and make them an offer or at least get the conversation started. 

Something to keep an eye out for is distressed properties which could be a sign of out-of-area owners who are behind on their maintenance. Maybe they can’t afford the upkeep on the property and you reaching out to them is the save they need to offload it easily.

7. Wholesalers

Wholesalers are people who find deals, get them under contract, and then flip the right to purchase the property in contract to another buyer for a  “finder’s fee.” Wholesalers are putting properties under contract all over the place.

If you have a working relationship with a wholesaler, they may be able to put you on the contract for an off-market home. Even if it wasn’t originally off-market, it’s technically off the market now since they have it under contract. 

When buying from a wholesaler, there is often rehab that is needed so just make sure you run your own numbers to verify that the deal still works for you. Some wholesalers will try to underestimate the needed repairs to make the deal look more attractive.   

8. Real estate auctions

8. Real estate auctions

These can be a great place to pick up off-market deals for pennies on the dollar. live auctions and auction websites are where properties are sold, usually for back taxes owed. 

Depending on the jurisdiction in which the auction is taking place, you may be able to purchase a property for just the delinquent taxes owed. That’s a topic for another article, but just know that if a property is at the auction, it’s definitely not being listed on the MLS. 

Like deals from wholesalers, these properties will often require a lot of rehab.

9. County/public records

It’s typically public record to determine who or what entity owns a piece of property. If there is a piece of property that you’re interested in, check the public record in that county to see if you can determine what their mailing address is or another way to get in contact with them.

Knowing who owns a property is only half the battle. Once that’s accomplished, they may need to be convinced that selling their property to you is a good idea. Again, the details of that strategy are beyond the scope of this article.

10. Online resources/sites

There are online sites and resources, like Craiglist, that may have properties not listed on the MLS. 

Additionally, there are other sites like Zillow.com that allow a property to be listed a little prior to being listing on the MLS. If you set up alerts and filters online, you may be able to get notified when a deal that fits your criteria is posted online. 

However, it’s important to note that anyone can list properties for sale in these places, so be sure to do your homework about any listing you consider. 

11. Word of mouth

This has often been referred to as the best form of free advertising out there. People love talking about real estate. If someone you speak to either has a deal or has a contact who may have a deal, you may have just found another source for off-market properties. 

With that being said (no pun intended) make sure you’re always talking to people about what you’re doing and what you’re looking to do. Of course, don’t be that person that only talks about real estate.

Final thoughts

Whatever vehicle you ultimately use to source your off-market deals, remember to thank the provider. You are now starting to formulate your competitive edge and are able to purchase deals that many around you never even saw as available. 

Also remember that just because a deal is off-market doesn’t qualify it as a great deal. You still need to run your numbers and do your homework just as if it were listed on the MLS.

Now that you’ve got tons of ways to find off-market deals, go forth, purchase away, and happy investing.   

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