Are you looking to score a great deal in the hot real estate market? Learn how to find off market properties and stay ahead of the competition.
The US real estate market features rising home prices and record-low inventory levels. If you’ve been struggling to find an investment property, off-market homes are the way to go. Off-market properties are also called “quiet listings” or “pocket listings.” These homes are put up for sale by their owner but are not listed on multiple listing services (MLS).
As a result, homeowners have to put in an extra effort to sell. In turn, buyers have to be resourceful to find hidden gems like off-market homes. To help you with this task, we created a complete guide on how to find off market properties. In this blog post, we will discuss:
- Why do sellers put up homes for sale off-market?
- Why should investors consider buying off-market homes?
- The recent roadblock to selling off-MLS listings
- Three effective methods on how to find off market properties
- The one significant difference in the off-market home buying process
Why Do Sellers Put Up Off Market Homes for Sale?
Selling your home but not listing it on MLS may be counterintuitive. Especially now that we are in a hot market, would you not want your property to be the subject of a bidding war? So why do some home sellers do it, and how do they find buyers?
Before you figure out how to find off market properties, it would be best to understand the home sellers’ motives for not listing their homes. Some test the waters: they want to see if they could sell their property at a price as good as they would if they listed it publicly. Such an approach can be effective in a seller’s market, where highly motivated buyers would exhaust all resources to find a house.
Other homeowners want to sell discreetly. Either they do not want to put up their address in a public domain like MLS websites, or they do not want their neighbors to know that they are selling their homes. There are also those who sell their homes off-market so they can negotiate a lower sales commission with the real estate agent. In a sales transaction for an off-market property, only one agent—known as a dual agent—is involved.
Meanwhile, some homeowners think that selling their home off-market creates an allure among buyers that would let them command a higher selling price. This can be true, but only if the property is unique, well-known but difficult to find, or owned by a celebrity.
Selling a property off-MLS listing can also prevent lowball offers. This is because nobody knows how long they have been trying to sell their home, unlike in the open market, where buyers can see the number of days since it has been listed.
Why Should Investors Look for Off Market Property Sales?
It is also important to know why you should consider looking at these types of listings before learning how to find off market properties. In general, buying an off-market home has its advantages.
Advantages of Buying an Off-Market Property
If you have been looking in a very hot property market to no avail, you need to be creative and exhaust all possible resources to find an investment property. This is why investors should know how to find off market properties.
Off-market home listings give you access to additional inventory that only a few people would know about. By removing the element of competition, you can find and buy the perfect property at a price you can afford. You can also take your time in your search. If you think you won’t be able to find a house in a seller’s market, think again. More off-market properties are sold in competitive locations.
The seller may also be willing to offer you a unique deal since they are paying a lower commission to the real estate agent. The transaction becomes smoother in general, as well. Since you do not have other buyers trying to outbid you, you will not feel pressured to close the sale as soon as possible.
Lastly, since you intend to make money in real estate and are not looking for a place to live in, you may be able to score a low-priced home in a desirable neighborhood off-market. What’s important is that the property can be repaired and remodeled at a reasonable cost and has the potential to generate a high profit.
Disadvantages of Buying an Off-Market Property
There are, however, disadvantages to buying an off-market property. If you are in a rush to buy a property, an off-market home may not be for you. Sellers who listed their house off-market may not be as motivated to close quickly.
Determining the house’s fair market value may not be easier, either. When a property is listed for sale on MLS, you will immediately find comps and calculate the price per square foot and other important metrics. If you are looking for an off-market property, be ready to do a real estate market analysis on your own. The good news is that there are tools like Mashvisor’s Property Analysis Report that can help you accomplish this in 15 minutes.
Click here to learn more about how we can help you make faster and smarter real estate investment decisions.
MLS Statement 8.0 Clear Cooperation Policy
The National Association of Realtors passed a new policy that significantly restricts off MLS listings, effective January 1, 2020. It requires brokers to submit a property listing to the MLS within one business day of marketing it to the public. These public marketing activities include but are not limited to:
- Displaying flyers in windows
- Putting up yard signs
- Promoting on public-facing websites
- Putting up ads on brokerage websites
- Communicating digitally, such as email blasts
- Uploading the listing on MLS networks
- Advertising on apps accessed by the general public
There are exemptions, however. If the home seller refuses to allow their property to be disseminated by the MLS, the realtor may make it “office exclusive.” It means the agent will still take the listing and file it with the MLS but will not disseminate it to the other members of the service. The seller will have to file a certification stating that they do not want their listing disseminated by the MLS.
How Has the New Policy Impacted Buyers and Sellers?
Now, you may be wondering: how to find off market properties with this policy in place? Because the National Association of Realtors (NAR) is a governing association and not a legal entity, only MLS, brokerages, and agents that are members of the NAR are required to follow the policy. Licensed real estate agents who are not members can assist homeowners in selling their property off-market.
Sellers can also opt to have their homes filed as “office exclusive” instead. In this case, the listing agent can share the property with other agents in their office and one-on-one with a buyer.
How to Find Off Market Properties: 3 Methods
Despite the new policy restricting properties from staying off MLS, there are still ways to find such properties.
#1: Contact a Real Estate Agent
Even if NAR-member agents are required to list properties on the MLS, that does not mean they have no leads to give you. Networking still works when it comes to finding houses not listed on MLS, and realtors may have the perfect rental home that they filed as an office exclusive. You can also reach out to a licensed agent who is not a member of the NAR for more leads.
The quickest way to do this is to decide on the neighborhood where you wish to buy a house. Then, look up the top agents who specialize in the area and ask them about any office exclusives and off-market homes in their database.
#2: Search Online
Not all real estate websites are MLS. Mashvisor has tools like Property Search and Property Finder that show both MLS listings and off-market properties. Sellers themselves list their homes for sale here for thousands of serious buyers to find. Paired with our comprehensive analysis of the property and neighborhood, you can find an off-market listing on our website in 15 minutes.
If there is a particular home that you are interested in but are not sure if it is for sale, try typing in the address in the search bar. If the owner has listed it on our platform, you will definitely find its listing, which contains the property description, as well as the contact information of the seller. You can contact the seller directly on the website as well.
The listing also includes a detailed data analysis pertaining to your chosen real estate investment strategy. You will be able to estimate its rental income, running expenses, occupancy rate, and cash flow. And if you use the investment property calculator, you can forecast your return on investment for that property.
#3: Talk to Homeowners Directly
It may require some legwork, but talking to homeowners is also an option. Aside from literally knocking on their doors, you can send out mailers to the properties you are interested in. However, this may cost you a significant amount of time and money, and the success rate tends to be low. You are better off trying out the first two methods above unless there is a particular property that you really want to buy.
Working With a Dual Agent to Buy an Off-Market Property
Knowing how to find off market properties is half the battle; the process of closing an off-market home sale is slightly different. In a traditional home sale process, both the buyer and seller each have a real estate agent representing them. When buying an off-market property, however, a dual agent is usually representing both you and the seller. While this practice is legal in most states, it may be difficult to figure out if they have your best interests in mind.
After all, the bigger the amount that the home sells for, the bigger the commission they will earn. Savvy real estate investors like you would want to get the best price possible. Thus, it is crucial that you find someone who will help you achieve this, even if they are also representing the other party. You can protect yourself by requesting appraisal contingencies and other conditions that may prevent you from being put in a bad position.
Working With a Dual Agent: Pros and Cons
Real estate agents who have represented both parties in one transaction said that the process is more streamlined compared to having two agents navigating the sale. This is because the agent can prepare documents for both the buyer and seller simultaneously and communicate with either of them quickly. Oftentimes, a home sale gets held up when the other real estate agent is being too difficult or lacks enough experience on the job.
If the dual agent has originally been hired to sell the off-market property, then they usually have more information about it than a buyer’s agent would. This may be helpful to you as a buyer since you can gain more insights into the home. You will also get answers to questions you may have more quickly, which could help move the transaction forward.
The one big disadvantage that worries buyers and sellers the most is the potential conflict of interest. A seller’s agent aims to get the highest possible price for their client, while a buyer’s agent tries to get the lowest possible price. So as a dual agent who represents both sides of the transaction, getting both clients the best price is very challenging. The agent may unintentionally end up favoring one side over the other without realizing it.
Find Your Next Investment Property Off-Market Using Mashvisor
Industry insiders expect the US real estate market to remain hot this year even as mortgage rates rise. But that does not mean you will have to hold off buying an investment property. You just have to be smarter with your search and learn how to find off market properties. Leveraging your network and talking to homeowners are some of the options to get you started.
But if you want a more efficient way to find hidden gems in your local market, consider using Mashvisor. Our platform has been helping both beginner and expert real estate investors in finding their next lucrative investment property. On the website, you can:
- Get an overview of the average performance of neighborhoods in any US city;
- Search for the best property that meets your criteria in up to five cities all at once;
- Analyze a listed property’s projected performance if it was turned into a traditional rental property or a short-term rental home; and,
- Download Mashvisor’s analytics report on your selected property in PDF format so you can show it to your partners and prospective lenders.
That’s just scratching the surface. To access all of our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.