Most real estate markets in the United States are considered to be hot – the prices of homes for sale are increasing with more demand than inventory. This makes it more difficult for real estate investors to find great investment opportunities due to the intense competition. For an investor in a hot housing market, it’s also frustrating to bid on home after home after they’ve hit the Multiple Listing Service (MLS) only to lose the deal to another buyer who has outbid you. If you’re looking for a way to avoid this situation, consider investing in off market properties.
What beginner real estate investors might not realize is that the MLS doesn’t account for every house on the market. In fact, a lot of properties are sold every month without ever being listed on the MLS. These off market deals are a great source for savvy investors looking for great investment opportunities – for those that know how to find them! By now you must be wondering: what are off market properties, what are the benefits of investing in them, and how can I find one to buy as an investment property? Keep reading to find all the answers.
What Is an Off Market Listing?
Let’s start off by explaining the off market definition. In simple words, off market refers to property (it can be land, a house, or commercial real estate) for sale that is not listed on the Multiple Listing Service. This means that the listing agent didn’t advertise this property and would have to do the legwork to find buyers. As a result, these real estate properties are not seen by the public, giving you a greater chance of closing on a deal if you know how to find them.
There are a few reasons why properties are not listed on the MLS. It could be that the real estate agent is holding onto it and waiting for the right offer. Another reason could be that the house is in the early stages of becoming a foreclosure and hasn’t been advertised yet. It could also just be that the homeowner has considered selling, but hasn’t listed the house for sale yet. Whatever the reason may be, savvy real estate investors understand that these off market deals would make great investment properties. Why?
Benefits of Buying Off Market Homes
1) More Time to Look Over Properties
Off market properties for sale appeal to real estate investors for a number of reasons. First off, time is on your side as the buyer. Some sellers expect a quick sale, forcing the buyer to rush to place an offer and close the deal before it’s gone. As a result, this leaves little time for you to do the necessary due diligence before buying an investment property. Off market homes for sale, on the other hand, are different. Homeowners of these properties are usually not in a rush to sell (unless they’re distressed, of course). In addition, because the competition is lower, real estate investors have the chance to take their time and thoroughly look over the property before making an offer.
2) Stay Ahead of Competition
Buying real estate investments in a hot housing market means competing with hundreds of other property investors. By the time a house hits the MLS, the chances of you getting a great deal go down. Here comes another benefit of finding off market deals. It gives you access to inventory that your competitors are not seeing. Therefore, buying a house taken off the market means you’ll be competing against only one or two other prospective buyers. In effect, having access to an off market listing means you’ll increase your chances of purchasing and closing on the property.
3) Negotiations Can Be More Flexible
Because there is no time pressure on you and the seller, both parties will feel more relaxed and reasonable when they come to the negotiating table. This is why negotiations in off market transactions tend to be friendlier, smoother, and more flexible. Having said that, buyers usually have the upper hand – especially if the seller is distressed. In this case, it’s in the seller’s best interest to offer something that appeals to the buyer. As a result, they’re unlikely to place as many conditions on the sale as they may in other circumstances. This can lead to the kind of contracts that would never be possible in an open market.
Related: 8 Negotiation Tips for Buying an Investment Property
How to Find Off Market Real Estate Deals
As you can see, off market real estate listings can offer a number of perks to investors which is why they are highly sought after. Due to their desirability, investors are questioning how to find these investment opportunities. Before, the only way for you to find off market property for sale was through word of mouth. Now, however, these properties can easily be located in many different ways. Some strategies come as no surprise to real estate investors while others are more creative. To ensure the best results, we recommend pursuing more than one strategy at a time. For those interested in investing in properties that are off the market, here are 9 of the best ways to find them:
1) Real Estate Websites
Thanks to online sources, finding homes taken off the market has never been easier. While real estate websites mainly feature properties listed on the MLS, they can also be used to find off market deals. How? Take Mashvisor for example. Agents and property owners can list their own properties as off market or “non-MLS” on the Mashvisor Property Marketplace. In addition, we feature foreclosed and auctioned homes which – as explained below – are considered off market listings. Investors can take advantage of this by regularly searching the Marketplace and using filters to pinpoint these investment opportunities before anyone else.
To start looking for and analyzing the best off market properties in your city and neighborhood of choice, click here.
2) Real Estate Agents
The first and most obvious way to start searching for off market listings is with the help of a real estate agent. While agents are most familiar with properties listed on the MLS, they are also savvy when it comes to finding homes for sale that are not listed there as well. So, once you’ve decided where to invest in real estate and pinpoint the neighborhood where you wish to buy, search for the top agents in that housing market and reach out to them asking for any off market listings they may be aware of. In addition, some real estate agents even have websites where they showcase their own off market houses for sale and/or services. Buyers can subscribe to such websites and get email alerts about new off market listings.
3) Direct Mail Marketing
Investors who are experienced in finding off market listings still believe that one of the most efficient ways to do so is through direct mail marketing. This involves sending letters or postcards to homeowners who may be interested in selling. To create a direct mail campaign, you need to first pull a list of houses in the area. You’ll want to target absentee owners and those who have a lot of equity in their property. Send a letter or a postcard explaining that you buy investment properties and express your interest in purchasing their home. Some homeowners don’t even realize that they’re ready to sell until they’re presented with an offer. So, make sure to provide a phone number and make an attractive offer to increase your chances of getting a response.
4) Real Estate Auctions
Another great way to find off market real estate deals is attending house auctions. Real estate auctions always have a steady number of properties for sale below their market value which would make for great income-producing real estate investments. These could be foreclosures, short sales, or bank owned homes. These are considered off market properties in the sense that they aren’t listed on any major real estate listings services like the MLS. You can keep track of auctions at the county courthouse or scan different auction websites to find deals that have investment potential. Real estate investors need to keep in mind, however, that these properties may be distressed and require a lot of renovations. They are sold “as is.” So, research carefully before placing a bid on an auctioned off market property.
5) Real Estate Network
Real estate investing is a people business – the sooner you realize this, the better foundation you’ll have when looking for deals. Networking is one of the best ways to find investment properties for sale including those that are off the market. So, remember to reach out to professionals in your real estate network as you search for off market property listings. Also, consider joining a local networking community in your area to stay connected with investors, agents, and others who may know of unlisted properties for sale.
It’s also a good idea to attend real estate events in your area to grow your network. In general, building a network is important regardless of your investment strategy, but it’s especially important if you’re seeking off market real estate deals. Just be sure to be transparent and let people know you’re looking for off market properties. This way, you’ll earn the trust and build the respect of other real estate professionals in your market.
Related: How to Build and Maintain a Real Estate Investment Network
6) Real Estate Wholesalers
If you’re interested in buying off market properties, then a wholesaler is your best friend. Why? Because this is what real estate wholesalers specialize in! Their job consists of finding distressed homeowners who haven’t listed their property for sale yet, putting the property under contract, and assigning the contract to a potential buyer for a fee. As you can see, a wholesaler will technically do the property search for you – you just need to show up and buy it. However, real estate wholesalers don’t advertise their homes – they utilize a buyers list to sell them. Therefore, it’s recommended to have wholesalers in your real estate network and make sure you’re on their list of prospective buyers. That way, you make sure they’ll reach out to you whenever off market deals come their way.
7) Builders and Contractors
In addition to real estate agents and wholesalers, builders and contractors are also good professionals to have in your network to find off market property in your area. Local builders typically know about homes that were abandoned by the owner mid-project because he/she couldn’t afford to finish the construction. Of course, this is an unfortunate situation for the owner, but it can be a lucrative investment opportunity for a real estate investor who’s ready to dive in, finish the job, and turn a profit at closing. Moreover, contractors are constantly in touch with others in the real estate business. So, if you’re lucky, they can lead you straight to off market listings in your area.
8) Public Records
Another answer to how to find off market properties is by keeping up with public records like newspapers and state and local government websites. These often feature pre-foreclosures and short sale properties which, as mentioned, can offer profitable investment opportunities. Also, public records will occasionally mention real estate properties that are soon to be listed. Meaning, these are still off market properties and you can contact the owners and buy them before they hit the market and become public listings for others to see! Savvy real estate investors also check public records for expired listings (homes taken off the market after failing to sell). You can directly contact the seller and strike a good deal – especially if the property is distressed and the seller is desperate to sell.
Related: The Advantages and Disadvantages of Investing in a Distressed Property
9) Knock on Doors
The final strategy we recommend for finding off market homes for sale is walking door-to-door and asking homeowners yourself. For example, if there’s a vacant house in your neighborhood, chances are the owner wants to sell it but has yet to list it. It’s also likely that the house is in need of repairs that the owner doesn’t want to deal with. This creates a great opportunity for real estate investors. You can directly talk to the owner without involving a third party. This gives you the opportunity to ask about the property, establish trust, and get a great price. While door knocking is intimidating, the worst that could happen is being told “no.” But if you’ve found a motivated seller, the best thing that can happen is getting an amazing real estate investment property.
Note: Try our Heatmap Tool to see if the off market property is located in a good neighborhood for real estate investing. This tool lets you see how the neighborhood is performing compared to others and how investment properties in the neighborhood are performing in terms of your selected criteria (listing price, cash on cash return, rental income, and occupancy rate).
Sign up for a free Mashvisor account to use this tool and get access to more real estate data to find off market properties!
How to Buy These Properties: Step-by-Step
1) Approach the Homeowner
Buying off market properties is easy and you can get a great deal, but only if you find motivated sellers. After finding homes taken off the market, simply approach the owner and ask if he/she is interested in selling. You can be formal about this by sending out a letter, or you can be direct by door knocking and stating your interest in purchasing the home. They’ll be times when you’ll be told no, but it doesn’t hurt to ask. Maybe they won’t accept your offer, but they might know a neighbor who’s moving and thinking of selling – aka a motivated seller.
2) Get a Home Appraisal
This is a very important step. No real estate investor wants to overpay for a property as, in general, the less money invested, the higher the ROI potential is. This is where getting an appraisal will help. Having a professional home appraisal will show you the accurate value of the investment property. In addition, it’ll point out any work that you may need to do after buying. This is going to help you determine a fair price to offer for buying this property.
3) Draft a Letter of Intent
A letter of intent is a more official offer that clarifies the basic terms of the off market transaction. It’s mainly used when neither you nor the seller is represented by a real estate agent. It’ll also help to minimize any misunderstanding and to make sure both you and the homeowner are on the same page. Furthermore, it’s not a legally binding document, meaning both you and the homeowner can change your mind and walk away from the deal.
4) Get a Purchase and Sale Form
Once you and the property owner have agreed on the sale and are ready to take the off market transaction to the next step, get a purchase and sale agreement for the both of you to sign. Real estate investors can find forms to download online or can buy them at office supply stores. Just make sure to have an attorney look over the agreement before you sign it to make sure it’s legally valid in your state and that everything’s been covered.
5) Negotiate and Close the Deal
The final step is to negotiate and close the deal. Some homeowners will accept to sell right away and are willing to take any price you have to offer. Others, however, expect to sell their homes at full market value. This is why you need to have good negotiation skills and demonstrate that you want to pay less for the property to account for repairs that need to be made. After reaching an agreement, sit down with your attorney to review and sign the closing paperwork and complete the deal.
4 Quick Tips for Buying Off Market Properties
1) Check the Real Estate Market
You should always do your research before diving into any investment. However, for those interested in off market properties, it is even more important to do one’s due diligence. Just because you’ve found a deal, it doesn’t mean it’s a good one for real estate investing. So, before you start looking for off market property listings, keep an eye on the real estate market to check if you’re buying in a good investment location. For example, if you’re investing in an off market home to rent out, you need to see a rental demand in the area to make sure you’ll be able to find a tenant and make money from renting out the property.
For more details, read our guide on How to Identify the Best Places to Invest in Real Estate.
2) Secure Financing Early On
An investor who can pay cash for houses and close very quickly is the one who really feels all the advantages of investing in off market homes. This, however, doesn’t mean that you can’t get alternative financing to buy the property. You can get a mortgage loan for an off market property, but you’ll need to secure the financing before doing anything else. So, make sure you shop around for a mortgage and get a pre-approval letter before you approach homeowners. This will help in closing the off market transaction faster.
3) Analyze the Investment Property
Another task for real estate investors is to analyze the property before buying it. After all, you’re buying property in order to have a good return on your investment. No investor wants to buy investment properties that cost more than what they make. To avoid this happening to you, simply run an investment property analysis on the off market property to see what kind of profit you can expect in return. An easy way to do that is by using an Investment Property Calculator – like the one Mashvisor offers. This tool uses historical and predictive data analytics to estimate a property’s cash flow, cash on cash return, cap rate, and more.
Want to give it a try? Start out your 14-day free trial with Mashvisor now.
4) Do a Title Search Before Closing
A house’s title is the evidence of ownership. You want to make sure that the off market real estate deals you find have clean titles. To do so, have your attorney or a title company run a title search on the off market property you want to buy. This protects real estate investors by ensuring that someone else can’t appear later and claim ownership of the investment property. This is especially important if you’re dealing with a home that has been abandoned or sitting vacant for a long period of time.
The Bottom Line
It might take a lot of work on your part to invest in off market properties, but they definitely offer amazing benefits. Plus, investors who know what they’re doing have a high chance of finding lucrative investment deals this way – which makes all the work put into the investment worth it. Are you thinking of adding off market homes to your real estate investment portfolio? Let us know how you plan to find your first property in the comments.