Making Money in Real Estate: On-Market vs Off-Market Properties
If you’ve watched my videos or talked to me before, you’ve probably heard me talk about off-market properties. But what are off-market properties? In easy terms, an off-market property is a property that isn’t listed on the Multiple Listing Service (or MLS), meaning it is a property that is usually for sale by owner.
But off-market properties usually come with a lot more caveats that can make them attractive to investors.
My name is Brian Oen, and today we’re going to talk about off-market properties and where to find them.
Off-Market Versus On-Market
If you have bought or sold a home before, chances are you have seen one (or many) properties that were listed on the MLS. These properties are considered on-market.
The MLS is an expansive database for available properties that is strictly limited to licensed agents and brokers who pay for an exclusive membership. It is an amazing real estate tool, and as much as 92 percent of real estate listings in the United States can be found on the MLS. That means more exposure for a listing — which also means more competition. Homes listed on the MLS sell for an average of $39,000 more than homes that aren’t listed (thanmerrill).
So an off-market property would include the roughly eight percent of US listings that aren’t featured on the MLS. Inherently this means they have less exposure to potential buyers, leaving you more room at the negotiations table. But less competition isn’t the only thing that makes an off-market property so attractive.
Benefits of an Off-Market Property
Off-market properties are typically sold by the owner, which in most cases means that they may not have a crystal-clear grasp of what their home is worth compared to others on the market, and may not know how to barter for the best price. Purchasing directly from an owner, and not a bargain-savvy realtor, could save you thousands at closing.
Less competition is a key benefit to off-market properties as well. Especially in today’s fast-paced real estate market, homes can receive dozens of offers overnight, giving the bulk of the negotiating power to the seller. An off-market home will typically receive much less attention, giving you the upper hand in negotiations.
Off-market listings last longer on the market on average as well. And no professional realtor means no professional photos, no marketing push, and significantly less exposure. The longer the property is for sale, the more motivated the seller may be to lower the price.
And lastly, off-market properties don’t necessarily mean lower quality. You’re bound to find distressed homes that would work perfectly for a flip, there is a chance you may find a diamond in the rough that is selling lower than it would on-market. Keeping an eye on off-market properties could land you with some great deals.
Where to Find Off-Market Deals
As I said before, roughly eight percent of listings in the United States are off-market, making it a much smaller pool of properties than what you’re going to find on the MLS. That being said, there are plenty of ways to locate off-market properties in your area.
- Direct Mail Marketing: Snail mail may be one of the most effective ways to find potential sellers. Many people may be interested in selling their home but need a push to get to that next step — offering to buy their home or connect them with a motivated seller could be all it takes to encourage them to sell.
- Shop Online — there are plenty of websites and resources that off-market sellers can list their homes on for free. Zillow, for example, allows users to list their homes on the site one month before they are listed on the MLS, giving investors a large window of opportunity to find a good deal.
- Networking — let your network know that you are in the market to buy. Talk to people in the real estate industry, your neighbors, your co-workers. Chances are someone has a connection to someone who is looking to sell but hasn’t listed their home yet.
- Real Estate Agents — if you have realtor friends, why not ask them to keep you in the loop of any upcoming home listings? Real estate agents tend to be the first to know when a home is going up for sale.
- Wholesalers — wholesalers could be a great resource as they typically bring the off-market deals directly to you. Having a relationship with some wholesalers may take most or all of the work out of finding great off-market deals.
- Public Records — Information of delinquent homeowners is public record, and investors who know where to look may be able to find sellers who are currently in distress over their mortgage. Buying their home may offer them a way out of their financial stress without having to list their home.
- Auctions — Assets placed up for auction have already been repossessed from their owners. The auction is an attempt by the lender to recoup lost costs. That said, auction homes are not listed, and can actually represent a great buying opportunity.
- Ask Me — I purchase off-market property all the time to flip, and know where to find the best deals. I’d be happy to add you to my investor list, and you’ll be the first to hear when a new off-market property goes live.
Off-Market properties are often better deals than what you can find on the MLS, helping you to turn an even greater profit when flipping.
Less competition means smoother negotiations.
Just because they aren’t on the MLS doesn’t mean they’re impossible to find — check for off-market deals online, in-person, and through snail-mail.
If you’re interested in finding off-market deals but don’t know where to start, sign up for my mailing list to get the most up-to-date off-market deals.