How To Find Off Market Real Estate Deals
Are you finding that it is difficult to find profitable real estate deals? You are not alone. With the market being as hot as it is, we see multiple offers on almost every house that hits the Multiple Listing Service (MLS). And they are selling for more than they were listed for. How can you separate yourself from other real estate investors without paying too much for a deal? The most successful real estate investors don’t try! They simply find deals that other investors don’t know about.
Let’s Start By Knowing What Off Market Properties Are
Off-market properties are properties not listed in an MLS. The MLS is the largest platform for buying and selling residential real estate. All houses listed with an agent are uploaded to the MLS, and many for-sale-by-owner properties are as well. Because the MLS is so massive, it is the most common way to advertise a house for sale, and it gives the house the most exposure. Once a property is on the MLS, all your competition knows about it.
Why Off Market Properties?
If you want to find the best real estate deals, you need to look where others are not. Here are some of the advantages of taking the time to search for off-market deals.
There’s Less Competition
Anything on the MLS is going to be extremely competitive. There are great deals on the MLS but relying on this alone limits your opportunities. Finding sellers wanting to sell before they list their home in the MLS gives you a massive advantage over your competition. Less competition almost always means a better price.
Selling Prices Are Generally Lower
There are many reasons a seller will not list their home in the MLS. It could be the house needs a lot of work, or they are embarrassed by a situation. It also could be that they need to get it sold as quickly as possible because of a divorcee, death, or foreclosure. All of these motivations create an opportunity for a lower sale price. Also, with no agents involved, there will be no commissions to pay.
Negotiations Flow Smoother
Agents play a vital role in real estate investing, but sometimes they slow things down. I find that I get the best deals when I can sit down with the owner. Engaging directly with the owner allows me to build a connection and find out their true needs. I can often craft an offer that satisfies their needs and makes me money. Not all offers need to be based on price. Sometimes the seller will carry some financing, participate in a rehab, or offer other incentives. Without a direct conversation, it isn’t easy to find these hidden advantages.
More Flexibility In Transaction Times
One big selling point in working with off-market deals is picking the closing date. If you are prepared, you can close in a few days or delay a closing for a few months. What is best for the seller, and what is that worth in a price discount?
Selling Opportunities Crop From Unusual Circumstances
If you are always on the hunt, you will run into deals for various reasons. There are many reasons sellers are motivated to sell and do not put their home on the MLS. Here are ten clever ways to locate off-market real estate deals.
1. Build And Utilize Your Network
Your network might be the most overlooked source of leads. Do you tell people what you are looking for in casual conversations? You will find that your network will be one of the most valuable resources in your investing business. It’s why they always say, “your network equals your net worth.” As such, I believe that building your network should be your number one priority. Meet new people as often as you can and nurture those relationships. Making your connections goes way beyond just going to networking meetings. I was recently at a business meeting with an investor who is shifting his focus to judgment and note buying. He is planning to start networking with local banks, so he will make direct contact with banks and try to get them out for coffee. If he stays consistent with this strategy, he will grow a strong network of banks that may rely on him to buy their defaulted notes.
Know as many people as possible, but nurture the ones that can help you get where you want to go.
2. Use Direct Mail Marketing To Your Advantage
Hands down, direct mail marketing is my favorite way to use paid advertising for my real estate investing business. The reason I love direct mail is that you can pinpoint your audience. I also love it because it can be mostly hands-off, as many companies will do the entire campaign for you for a fee. Some of my favorite direct mail lists are expired and stale listings, free and clear homes, and out-of-state owners. Other lists that I know work include foreclosures, bankruptcies, and divorces. There are many tricks to help increase your success with this, but more than anything else is a good list and consistency. Some sellers will need to hear from you 5-7 times before they will call you.
3. Leverage Online Resources
I recently purchased a lien to redeem a property after the foreclosure sale. I found this deal by looking at the county trustee site. In the deed of trust states, the trustee handles the foreclosures and publishes this information for the public. In this example, I found the foreclosure and did a quick title search, and discovered the lien. I then reached out to the attorney and asked if their client had any interest in selling that lien. Who knows, they could say no, but it is always worth a call. I would never have found that deal if I did not look at the county website’s foreclosure information.
There is also a lot of information you can get from the recorder’s website for the county. You’ll find things like mechanics and HOA liens, and sometimes you will see evictions, bankruptcies, and divorces. City websites are often worth a look as well. Aging permits can be found here as well as code violations and sometimes condemned or vacant properties. Each city and county publish different information on their website. Some sites are easier to navigate than others, but it is certainly worth seeing what you can find.
4. Contact Home Builders And Contractors
Reaching out to home builders and contractors could be part of building your network. It is common for other investors or even homeowners to get in over their heads. They stop paying contractors, and the project stalls. The contractor can put a lien on the property, but really, they just want to get paid. If you let them know you are interested in buying houses that need to be completed, there is a good chance they will call you when the money stops flowing from the current owner. Such a situation provides a great opportunity and allows you to contact the owner and help them out of their situation. You can buy the project at a discount and complete it with the current contractor. There are some potential pitfalls here, but it is an excellent way to find off-market deals.
5. Browse Public Records
Anything public that is not online can be found at the government offices. I know investors that hang out in the recorder’s office once a week looking for leads. They browse for evictions, probate cases, judgments, and anything else that could lead them to a motivated seller. They use this information to set up direct mail campaigns, make direct phone calls, or even knock on a door. I know the employees in these offices are accommodating and will be happy to help get your search started. I have also heard that bringing in a box of doughnuts helps.
6. Take Advantage Of Word Of Mouth
You can see why your network was listed as number one. To further break down your network in finding great real estate deals, you can listen for deals from people talking about them, and of course, you can share what you are looking for with them. It is common to be at a real estate investing meeting and hear someone talking about a deal that you can help with. Many investors do not have the resources or know-how to complete complicated transactions and lean on more experienced investors or investors who have access to capital for help.
7. Make Wholesalers Your Friends
I absolutely love working with wholesalers. A wholesaler is a real estate investor that sells discounted real estate to other real estate investors. Their primary goal is finding fantastic deals, and frequently they find these before they hit the MLS. They do mark the price up a little to make a profit, but many times the deal is still strong enough to be profitable.
I would recommend getting on the wholesaler’s email list so you are notified each time they have a new deal. There are some downsides to working with wholesalers, so be careful. For example, your earnest money is non-refundable with most wholesale deals. As a result, you need to do all your due diligence up front before you put any money down. In a typical on-market transaction, you will have time to do your inspections before your earnest money is at risk.
Another example is that it can be challenging to close these deals with traditional financing. Many wholesalers are selling properties they don’t yet own. In such a case, this creates a challenge for many lenders because the wholesaler will need to either buy and accomplish the sale or assign a contract, both of which are confusing to many lenders. As a result, most wholesalers require that their buyers use cash or hard money. Let us know how we can help you close your next wholesale deal.
8. Driving… But For Dollars
Driving for dollars is a fun way to locate deals. You can be educating yourself with your favorite podcast as you hunt for your next deal. Things to look for as you drive through neighborhoods can include vacant and run-down homes, for sale signs, and homes under construction. Get out of the car and talk to people. You never know what you will learn or find.
It is also a good idea to call on the homes for rent. If nothing else, you will get a good sense of rental rates, but you could also find a motivated seller. Sometimes landlords are landlords by default and would much rather sell. There are many reasons why a house did not sell and why a motivated seller feels they need to rent.
The next time you are on your way to a meeting, take a few minutes to get off the main road and drive through a neighborhood.
9. Browse The Real Estate Auctions
There are two types of auctions: public auctions and private auctions, both of which are great ways to find off-market real estate. Public auctions are foreclosures handled at the county level by a sheriff or trustee. These houses sell to the highest bidder. It is most common that you pay for the house on the spot or within one day when you win a public auction.
A private auction is usually held online. I see this more in the commercial space, but you will see houses sell at auction as well. With these auctions, the winning bidder will commonly go under contract on the house for the bid amount, but with most of the same protections as a traditional sale. You will have time to line up financing and time to do an inspection. The most common online auction platform is www.auction.com.
10. Use Paid Ads
As I mentioned, direct mail is my favorite way to find deals with paid advertising. It is, however, not the only way. I am not sure how it happened, but I have started getting text messages from investors in Memphis. I own a handful of Memphis properties without loans, and I believe I made it on a text list that investors buy and market to.
I also know that larger investors pay to advertise with online ads, commercials, and signs or billboards. All of this works if you are consistent with it. I would suggest starting small and work your way up to a larger monthly budget for advertising. Maybe start with a website and start posting ads on Google or Facebook to direct people to your site. As you begin this process, you will learn and get better and then start seeing results. Stay consistent, or it will not work. Since paid advertising does not take a great deal of time, you may want to consider doing paid ads with some of the other strategies mentioned above.
There is no better way to locate great deals than to have motivated sellers calling you asking you to buy their home.
All It Takes Is Some Resourcefulness
I believe you will still locate profitable deals by looking at what is for sale on the market. I also think you should set up your filters on certain websites, such as Zillow and Redfin, so you are notified of new listings. And work with real estate professionals and let them know what you are looking for. All of that works!
With that said, I also believe you should have a plan to find off-market deals as well. If you are serious about real estate investing, having multiple sources of deals will only help, and I think you will find the best and most profitable ones off the market. It takes some work and some consistency. You will likely get some rejection, and it can be a little scary to talk directly to owners when you are new, but trust me – it is worth it!