Off-Market Real Estate Deals Vs The MLS

Is the “off-market real estate deals vs MLS deals” debate worth having in today’s real estate industry? In an era where distressed properties are the most coveted assets available, does it really matter how the deals are found?

Finding a real estate deal to “run with” in a market as competitive as today’s is no small task. However, there are things you can do and simple tricks you can implement to place the odds in your favor. Most notably, real estate is a numbers game. Simply increasing your buying options can go a long way in making sure you get the deal you want, but I digress. What does increasing the buyer pool mean in 2017?

If you want to increase the number of viable options you have to choose from for your next deal, may I recommend considering both off-market real estate deals and those on the MLS? While they are both essentially the same thing, there are subtle differences worth accounting for.

I want to make it abundantly clear: I am not advocating for one over the other, nor am I suggesting that you ignore either. In reality, both off-market real estate deals and those found on the MLS are equally important for investors to acknowledge. When all is said and done, a deal is a deal, no matter where it comes from. I simply what you to recognize each as a viable option moving forward. And, in order to do so, you must first be able to differentiate between the two. For it’s only in knowing the differences that exist between off-market properties and those on the MLS that you’ll be able to take advantage of each in a way that benefits your business.

Off-Market Deals Vs. On-Market Deals: What’s The Difference?

Both off-market real estate deals and on-market real estate deals play an integral role in the exit strategies of today’s investors. If for nothing else, no investor should be select enough to limit their searches to a single source. Real estate is a numbers game; the more leads one can generate, the better off their business will be. That said, a perfect marketing strategy will account for both on and off-market real estate deals.

To help differentiate between the two, it helps to associate on-market properties with the multiple listing service (MLS). In other words, all of the properties on the MLS are considered “on market.” Not surprisingly, most of today’s properties are “on market,” but there are still a great deal of off-market real estate deals to look for. It is worth noting, however, that off-market deals live up to their name; they aren’t available on the MLS. Investors will need to do a little more “digging” to uncover off-market properties.

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On-Market Properties (The MLS)

The multiple listing service, otherwise known as the MLS, is essentially what most people are referring to when they discuss properties that are “on the market.” In fact, it may be easier to think of the MLS as the “official” real estate market, in that it’s the one database fully endorsed by the National Association of Realtors (NAR). And while the endorsement of the MLS by America’s largest trade association involved in all aspects of the residential and commercial real estate industries doesn’t make it official, it may as well be. If for nothing else, you won’t find a more comprehensive, reputable gathering of property information anywhere else in the country.

But what exactly is the MLS? What makes it such a powerful tool for those with access to it? In short, the MLS isn’t a single database, but rather an amalgamation of approximately 700 different regional databases spanning the whole of the United States. Quite simply, it’s the most exhaustive collection of housing databases sanctioned by those with boots on the ground. Homes are therefore reported on properly and easily searchable. What else could you ask for?

It’s worth noting, however, that home sellers are not permitted to post directly to the MLS. As it turns out, access to the database is strictly limited to licensed agents and brokers that have elected to pay for an exclusive membership. It’s only once these licensed agents and brokers find themselves with a client that the magic happens. It’s the agent’s responsibility — once their services have been enlisted by a seller, of course — to gather the appropriate information pertaining to a subject property and post a listing on the MLS. That’s an important distinction to make: the agent or broker is posting the seller’s home on the MLS on the owner’s behalf.

The Pros Of MLS Real Estate Deals

Real estate investors with access to the MLS are awarded one of the greatest benefits in the industry. As the largest database of homes for sale, it is an invaluable tool for anyone looking for a home. If for nothing else, the MLS places the odds in investors’ favor. In addition to having thousands of listings at their disposal, investors may also benefit from the following:

• Easier To Find: Not surprisingly, those properties listed on the MLS are much more accessible to anyone looking for a property in a specific region.
• Accurate Information: Homes listed on the MLS are curated by licensed brokers and agents, so there is a better chance that the information provided is accurate.

The Cons Of MLS Real Estate Deals

The MLS is unequivocally a great tool in the hands of a trained professional. However, access to the country’s largest assortment of listings is also a double-edged sword. While it may show investors an infinite list of possibilities, anyone with access to the MLS is also granted the same benefits. As a result, there are a few downsides to the MLS:

• More Competition: Understandably so, properties listed on the MLS are seen by more prospective buyers than those off the market. As a result, increased exposure will certainly result in more competition.
• Higher Prices: More competition inherently results in higher prices. The more people that see the home and the more interest that is garnered, the more you will likely have to pay.

Off-Market Real Estate Deals (Everything Else)

The MLS is entrenched as our country’s greatest real estate search tool. It has the power to find homes based on very specific criteria in just about any market, but I digress. As I alluded to previously, the MLS is reserved for those that want to work with licensed agents and brokers.

But what about those sellers that elect to go about the selling process alone? What about those owners looking to sell that have essentially written off the idea of working with licensed brokers and agents? Where do their properties end up? As you may have already guessed, those homes that don’t end up on the MLS are essentially what we in the business refer to as off-market real estate deals. Quite simply, if a home for sale is not on the MLS, it’s “off the market.” But again, what exactly does that mean?

In the event sellers choose to forgo enlisting the services of an agent or broker, they are left with a secondary, but nonetheless viable selling option: the for sale by owner (FSBO) route. As its name suggests, FSBO means the owners are taking on the responsibility of selling the home themselves. Instead of the home being listed in a huge database like the MLS, the fate of the home is solely on the shoulders of the owner. In the right hands, an FSBO is an intriguing proposition. However, selling a home is no small task. If you choose to go this route, be sure you know what you are doing.

The Pros Of Off-Market Real Estate Deals

Off-market real estate deals offer investors something the MLS will never be able to compete with: no competition. As their names suggest, off-market real estate deals are just that: off the market. Their distinct lack of inclusion on the MLS means fewer people know about them, which bodes well for investors. Additionally, off-market deals offer the following benefits:

• Less Competition: The mere fact that off-market real estate deals aren’t on the MLS implies an inherently smaller degree of exposure. As a result, it’s safe to assume fewer buyers will be vying over the same property.
• Better Deals: Since off-market real estate deals aren’t typically handled by someone with experience selling a home, it stands to reason they don’t know how to fetch top dollar. What’s more, their inexperience could be your greatest benefit, as homes sold by their respective owners sell for an average of $39,000 less than those on the MLS.
• Easier Negotiations: Traditionally, competition places the advantage squarely in the seller’s corner. The more people looking to buy a single home, the more someone is going to be willing to spend. Off-market homes, however, don’t typically see the same level of competition as MLS listings. The nature of off-market listings means they will inherently be exposed to fewer potential buyers. As a result, buyers will find slightly more room to negotiate at the closing table.
• Flexible Transactions: Again, the lack of competition will place a little leverage in the buyer’s hands. With less competition, buyers may be able to submit a lower offer than their MLS counterparts would typically call for. At the very least, they won’t be competing with as many offers as a home listed on the MLS. What’s more, off-market deals tend to last longer on the market, which may potentially increase the seller’s motivation to sell, giving buyers even more room to submit a lower offer.
• Unique Opportunities: Today’s off-market real estate deals are unique, in that they aren’t on the MLS. The mere fact that they have been excluded from the MLS is distinguishing enough.

The Cons Of Off-Market Real Estate Deals

Not unlike their MLS counterparts, off-market homes are a double-edged sword. They undoubtedly come with a number of benefits, but the same advantages they offer investors can also work against investors. Here are a few of the most common drawbacks associated with off-market deals:

• Harder To Find: Approximately eight percent of today’s homes are FSBO. That means that the pool of homes you have to choose from in this category is a lot smaller, and therefore harder to find. What’s more, they aren’t advertised remotely to the same extent as their MLS counterparts.
• Dealing Straight With The Seller: That’s not to say all sellers aren’t experienced in selling, but it’s safe to assume the process will be more drawn out if they aren’t assisted by a professional broker or agent.

How To Find Off-Market Real Estate Deals

Investors covet off-market real estate listings for a number of reasons. However, there’s no denying that off-market listings are harder to find than those on the MLS. That isn’t to say finding off-market deals is impossible, but rather that investors will need to devise a proper strategy before they go looking for unlisted homes. Below you will find some of the best strategies today’s investors use to find off-market real estate deals:

• Direct Mail Marketing: Investors can acquire lists of distressed property owners who may not even know they are ready to sell. As a result, the homes aren’t listed, and investors can simply send pieces of direct mail straight to the homeowners. First and foremost, the letters need to be respectful, but they should also state how selling could benefit everyone involved.
• Online Resources: There are a number of online resources investors can use to find off-market real estate deals. Zillow, for example, allows owners to list their homes one month before putting it on the MLS. Therefore, vigilant investors may be able to find deals before they hit the MLS.
• Networking: Real estate is a people business, and finding off-market deals is no exception to the rule. In some cases, finding off market-real estate is as easy as talking to someone in the industry. It could be an agent or another investor, but plenty of people know someone looking to sell who hasn’t listed their home yet. All investors need to do is ask whenever the opportunity presents itself.
• Real Estate Agents: Real estate agents are typically some of the first people in the industry to know when a home is going up for sale. Investors who network with agents could be made privy to their information.
• Builders And Contractors: A lot of owners will make upgrades to their homes before selling. More often than not, the same owners will hire contractors to complete the job. Not unlike their real estate agent counterparts, this knowledge will pass through them before the home hits the market.
• Wholesalers: Wholesalers typically have buyers lined up before they even sign their contracts, which means it’s never a bad time to network with local professionals. In the event you establish a relationship with a wholesaler, you might not even have to look for off-market properties; they could potentially come to you.
• Public Records: The information of delinquent homeowners is public record. Investors who know where to look in their local courthouse can find the information of homeowners behind on payments and send direct mail pieces offering to buy the properties. If the distress is taking a tole on the owner, there’s a good chance they will sell without ever listing the home.
• Real Estate 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.
• Driving For Dollars: Driving for dollars will have investors literally drive around neighborhoods trying to spot distressed homes. Unkempt yards, for example, may suggest the owner has lost interest in the home. This represents an opportunity to initiate another direct mail campaign. Investors can contact the owners of neglected homes to get a better feel for whether or not they want to continue owning the home.

Summary

The “off-market real estate deals vs MLS deals” debate is definitely one worth having. The differences between off-market real estate deals and those found on the MLS are glaring. However, I implore you to look past the differences and take each platform for what it is: an opportunity to find a deal. If for nothing else, it’s only when you increase your options that you will seemingly place the odds of getting your next deal in your favor.

Don’t hurt your business by limiting your search platforms to either off-market real estate deals or those that can be found on the MLS. In theory, the investors that stand the best chance at landing their next deal are the ones choosing from the largest pool of prospective properties. And what better way to give yourself the best odds of finding a deal than to target both on and off-market properties?

Key Takeaways

• The “off-market real estate deals vs MLS deals” debate doesn’t have a conclusive answer. Instead, investors need to maximize their lead generation strategy by looking at both.
• Off-market real estate is essentially listings that aren’t on the MLS.
• Off-market real estate listings may involve more searching, but they are ell worth looking into.