Content of the material
- What is an off-market listing, and why would a seller want to go this route?
- Health concerns
- Living conditions
- Investors with tenants
- Unusual or unique properties
- 3. Build Your Inventory With Homebuilders
- 1. Know When & Where New Developments Are Being Built
- 2. List Builders’ Future Inventory on the MLS
- 3. Solicit a Local Builder to Create a Custom Home for Your Buyer
- 4. Take Advantage of the List-assist
- 3. Use direct mail to target motivated sellers
- 5. Surf Craigslist
- Approach Homeowners
- Find Foreclosures and Short Sales
- Ask friends and family
- Explore The Neighborhood
- 6. Convert Rental Properties Into Listings
- How to Convert Rental Properties Into Listings
- Knock on doors
- It Just Got More Difficult to Find Houses Before They Hit the Market
- Find Funding For Your Off-Market Property
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.
“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.”
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.”
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.”
3. Build Your Inventory With Homebuilders
Homebuilders are another great hidden resource of listing inventory. Here’s why: Some builders don’t list any of their inventory on the MLS. Almost none list all of their inventory. Like an FSBO, many homebuilders rely on drive-by traffic and a website to drive buyers. To avoid oversupplying the market, they rarely list all of their inventory on the MLS. Therefore, homebuilders can be a great source of hidden inventory. Here are four ways to start working with homebuilders to get hidden listings:
1. Know When & Where New Developments Are Being Built
Many agents don’t know that most larger homebuilders plan communities three to five years in advance. Keeping apprised of the builder’s future communities will give you an advantage over the other uninformed agents. In some cases, they will presell homes long before the first shovel is placed in the ground. Ask your homebuilders about future projects and check with your city or county for newly filed zoning variances and permits, and then build relationships with these builders.
2. List Builders’ Future Inventory on the MLS
Another hidden listing opportunity is to list the builder’s future inventory on the MLS. Many larger homebuilders have onsite sales people who are not active real estate agents. Therefore, they either do not have any of their homes on the MLS or they are only listing some of them with a real estate agent. Even if the builder has properties being marketed by another real estate agent, in most states the agency agreement is property-specific. This means that you cannot solicit them on properties that are currently listed, but you can solicit them to list the properties that are not listed with an agent yet.
3. Solicit a Local Builder to Create a Custom Home for Your Buyer
Some homebuilders will build a custom home specifically for your client. In my market, Denver, Colorado, like many areas, there is very limited inventory in an extremely competitive market. So resourceful real estate agents work with local builders to build their clients a custom home where an obsolete home currently sits or on an unimproved lot.
Your buyer may not have even thought of having a new home built, or might have assumed it was out of their budget. If you develop relationships with builders, you can then educate your buyers on the process and offer them another option to get into a new home.
4. Take Advantage of the List-assist
Sometimes, homebuilders have buyers who have homes they need to sell in order to qualify to purchase one of their newly built or to-be-built homes. This technique is traditionally called a “list-assist.” The homebuilder pays an agent a commission on the home the buyer is purchasing and in return, the agent lists and sells the contingent home for a deeply discounted commission.
There are great rewards for agents who take the time to meet and develop relationships with homebuilders. Learn how to develop relationships with homebuilders in our course How to Survive and Thrive in a Shifting Market.
3. Use direct mail to target motivated sellers
Direct mail offers a great way to extend your reach and let potential sellers know that you are a friendly face. Of course, direct mail efforts need to be very targeted if you want to avoid wasting money.
The best group to target could depend on the area where you’re looking to find real estate deals. For instance, a person looking to scoop up properties in the Northeast might want to focus their direct mail efforts on retirees who are planning to move. Targeting homeowners who are 65 or older would be a smart approach in this case. You have the choice to mail a postcard, a printed letter or a written letter. Written letters tend to have the highest response rates. That’s why sending them out to a select group may be a smart approach for getting the biggest return on your investment. Simply introduce yourself, ask your audience if they’ve ever considered selling, and provide a phone number.
5. Surf Craigslist
Many sellers want to skip the need to pay fees to real estate agents or go through the traditional process of staging a home. Some sellers just want to unload a property in as few steps as possible. These are the sellers that post their homes on websites like Craigslist. In fact, many of the best real estate deals in the United States can be scooped up online once you find people who are eager to unload their homes and move on.
Take a look at the property listings on Craigslist in your targeted region if you’re looking for a low-investment, low-commitment method for how to find off-market real estate deals. You can save lots of time and money by negotiating directly with a seller instead of dealing with a local real estate agent.
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.
Because of the Clear Cooperation Policy by the National Association of Realtors, it got a bit more difficult to find houses before they hit the market, at least with the help of a licensed realtor that is also a member of the National Association of Realtors.
The other option is targeting and reaching out directly to potential sellers.
There are many existing marketing methods and channels to reach these potential sellers and using ppc campaigns on social media or search engines and direct mailing campaigns is the 80/20 in terms of least time intensive, most scalable and easier to test.
Find Foreclosures and Short Sales
You can also find properties under foreclosure or up for short sale before they hit the market. Many people use word-of-mouth to find out about these homes, or you might participate in a courthouse auction to buy a property that’s under judicial review. You can use public records to find auction information.
Ask friends and family
Turn family and friends into your army of property scouts. Tell everybody you know that you are looking to buy and ask them to keep their eyes peeled and their ears open for any suitable properties about to come up for sale. Often you will hear through word of mouth that a suitable property is, or will soon be, for sale.
Explore The Neighborhood
One tried-and-true way to find off-market properties is to explore your desired neighborhood(s). Before you hit the road, make a wish list to get a good idea of your ideal home. Use that list to identify properties that meet your criteria.
Once you’ve identified a few properties of interest, identify the owners and ask if they’re willing to sell.
Pro Tip: Snail mail is a great method for approaching a conversation with a potential owner. Write a letter to the potential seller to express your interest in the home. They can read it on their own time, and it will catch their attention. You can use public county records to find an owner’s contact information.
6. Convert Rental Properties Into Listings
Wouldn’t it be nice if homeowners raised their hands when they wanted to sell? Well, guess what? Real estate investors do exactly that.
Most agents assume that every rental property is owned by a serious investor. They also assume those investors will list only the minute they are ready to sell. This is definitely not the case. Just because a house is currently being offered for rent does not mean that all homeowners who rent their homes are professional investors.
Some homeowners were not able to sell their home in time and decided to just rent it to cover the mortgage, some are just dabbling in investing, while others are the serious professional investors who you think won’t give you the time of day. That’s simply not true. There are many kinds of professional investors too.
Some professional investors are market cycle investors. They buy when the market is down and sell when prices are high, some are buy-and-hold investors with long-term goals of paying the properties off, while others are flippers—buying, updating, and selling for a profit.
When properties become vacant, all investors are faced with a choice to rent it or to sell now. Even long-term buy-and-hold investors may be looking to sell one or more properties in order to purchase others. The challenge for an investor is that there’s a big difference between prepping a property for rent and updating it for sale. Often, it is easier to just prepare a property for rent than it is to prepare it for sale.
Rent-ready may only require a deep cleaning. Updating the property for sale may require a new roof, carpet, paint, windows, and appliances. Many investors don’t want to take the risk of spending thousands of dollars on modernizing a property and having it sit vacant while they are testing the market. Simply put, investors may be interested in selling if you make it easy and low risk for them. Here’s how you can do that:
How to Convert Rental Properties Into Listings
Some investors rent properties on traditional long-term leases, others rent out homes by the night or week on sites like VRBO and Airbnb. The opportunity to contact them arises when the property is being advertised for rent. Look to websites like Craigslist, Rentals.com, VRBO, and Airbnb to find investors who are facing the decision to rent again or possibly sell. Rental listings sitting for a long time could be an indication that the owner is having a hard time finding tenants and may be open to selling.
Here is my simple script to pitch to investors:
“Hello, my name is __________. I see you have a property for rent at ____________________. Would you be interested in selling it for top dollar in as-is condition?”
This script gets right to their motivation. It doesn’t say that you are going to buy it—just if they are interested in selling.
When they reply “yes,” respond with:
“Great! I would like to see the property and discuss your situation. May I come tonight at 4:00?”
This simple technique can make you thousands in commission income. Trust me, many of my agents have gotten listings this way.
Knock on doors
If you have really narrowed down the area you want to buy in, consider just asking door to door:
- It may be awkward, but you could strike gold. It is far more diplomatic to say you are looking to move into the area, and asking if they know any properties that are likely to come onto the market soon.
- Go on a weekend, when more people are at home.
- Prepare for rejection.
- Take along cards/notes with your contact details on.
It Just Got More Difficult to Find Houses Before They Hit the Market
Finding houses before they hit the market got more challenging on January 1, 2020.
Well, there is a thing called Clear Cooperation Policy by the National Association of Realtors and its implementation became mandatory by May 1, 2020.
What needs to be implemented?
I better quote it to be more exact:
“MLS Participants must distribute exempt listings within (1) one business day once the listing is publicly marketed. See Section 1.01, Clear Cooperation.”
My first thought was “not so funny” for realtors that want to go with pocket listings.
But it’s not as bad as it sounds.
First, it’s not a law, but it’s binding for all brokerages, agents, and member MLSs of the association.
For example, this policy is not binding for licensed agents that are not members of the National Association of Realtors.
But if you take into consideration the fact that 88% of homebuyers use a real estate agent or broker in the U.S. and that most of these are members of the National Association of Realtors, you can conclude that at least getting access to residential home pocket listings via a realtor or broker got a bit more difficult.
Nevertheless, this new policy still allows brokers and agents in a limited way to have off-market listings.
So, there are still some loopholes.
According to statement 8.0, as a seller, you can have the respective agent not display your house on the MLS IDX or you can make the listing an “office exclusive”.
In the latter case, a realtor can share the property listing only with other agents or one-on-one with buyers.
Find Funding For Your Off-Market Property
Once you find your dream private listing, you’ll need the money to buy it before you miss this golden opportunity. But getting the right loans for purchasing your next house can be complicated.
If you’re interested in buying off-market real estate, make sure that you understand your financing options to take full advantage of the private listings you find. An easy way to get started is to contact the team at Associates Home Loan. We will give you information about which loans you’re eligible for while finding you the best interest rates and long-term benefits.
Find your dream home with off-market real estate strategies and get the financing you need from the Associates Home Loan team today.