In my young investing journey, I see investors mostly ignore any listings on the MLS and I often ask myself, why? When I first started Shipwash Properties, I usually looked for all of my potential properties on the MLS. This could be unique to my area, but many of the Facebook groups I am in related to real estate have buyers that ignore most of the MLS postings. They instead spend thousands of dollars in marketing for off market properties. In my opinion, it is an under-utilized resource for investors. I'm not sure of the percentage right off, but I can safely assume most homes are sold on the MLS.
Possible Reasons Why
- Too Much Competition?
The last 18 months has been like nothing I have ever seen in the real estate industry. Homes receiving multiple offers, most selling for over list, etc. When a home is listed on the MLS, not only do you have other investors as your competition, but you also have retail buyers as well. In this market, retail buyers are driving the price up due to the demand. This is certainly a win for the homeowner but creates a challenge for investors. This shouldn't hold you back, though. If you are a cash home buyer, you will stand out to sellers, even if you offer a lower price. You can't assume a homeowner’s motivation solely on a listing description.
- Having to Use a Third Party for Negotiating?
Many investors hate having to go through a realtor to do the negotiating on a home. Many depend on their well-tuned negotiating skills to get a home at a better deal, and this is usually done by talking directly to the seller. Most realtors are heavy hitter negotiators as well, so most can see right through an investor's tactics. This shouldn't limit you, though. I have successfully negotiated many deals through a seller's representation. I explain to their agent what I can do, what I can offer, why my offer is better, and so on. It doesn't worry me that it has to go through them, neither should it you. You can access most of the answers about your seller through their agent. For example, their motivation for selling, within the legal rights of course.
- Assumptions?
I see many investors "assume" that just because a house is listed, it means that the seller just wants top dollar. This isn't always the case! They may just be looking for someone to buy their house as fast as possible, or they may want someone to buy it without asking for a ton of repairs. You should investigate the motive of the seller and stop assuming! Do your due diligence as a real estate professional and learn how you can solve the seller's problem instead of assuming.
These are my theories on why many investors ignore homes listed on the MLS. I still scratch my head as to why many wastes this golden opportunity for their next investment property. I purchase my very first flip off of the MLS and made great money by doing so. I didn't care that it was listed, and I successfully negotiated a deal that worked for me and for the seller. Numbers are numbers. If the numbers work for you, it shouldn't matter that the property is listed.
Final Thoughts
Establishing business relationships with some Rockstar realtors in my area has been an excellent opportunity for me. They know I am a cash buyer that loves to buy home that need a little TLC. They know I can produce when I make an offer. Many reach out to me first when they go under contract with a seller that has a home that meets my criteria. Many of the other heavy hitters in my area have failed at this. They view agents as their competition. I view them as members of my core team. If you don't have solid relationships with your top producing realtors, you are simply missing out as an investor.
Like I stated above, real estate deals are done by solving a problem. Every single home sale involves a problem. Seller needs to sell their house to buy a bigger one. Seller needs cash. Seller needs to move for their job. Seller is tired landlord. This includes listed properties as well as off market. So why are investors underutilizing listed homes? What is your opinion as to why many only buy off market properties? I'm curious to know how things are in your market.
Comments(2)