How To Find Off-Market Properties

Last Updated on April 10, 2024

The conventional way of finding properties in real estate is through listings on the Multiple Listing Service (MLS) or other similar platforms such as Zillow.com and Realtor.com. However, not all properties that are sold or bought every month are solely from these platforms, those that are not are known as off-market properties or pocket listings. These properties are not publicly known to be for sale and one might question how they can find such properties. In this article we let you know the tips and tricks of how to find off-market properties and turn them into deals.

What are Off-Market Properties?

Off-market properties are essentially real estate opportunities that are sold without public advertising. Sellers may opt for off-market sales to maintain privacy, avoid the hassle of public showings, or expedite the sale process. For buyers, off-market deals present less competition and the potential for better pricing, given the reduced buyer pool.

Reasons for not publicly listing a property

Various property owners have their reservations as to why they would not publicly advertise their properties for sale. This might beat logic because “why wouldn’t an agent have their property publicly listed to get more interested buyers and quickly sell off the property?”

The most common reason is the convenience that comes with off-market properties. Having a property listing attracts crowds, it is time-consuming to weigh out who is in it to actually buy the property and who is just wasting your time. To avoid this most of the property owners keep the sale of their property private.

Property owners may also want to keep the sale of the property private in the case of the tenant to landlord scenario. The tenants are able to live peacefully before they move out as there will not be as many incoming potential buyers as would a publicly listed property.

Benefits of off-market deals to a buyer

The prime benefit of looking for off-market properties is rooted in the reduced competition. As opposed to properties listed on MLS and other platforms, off-market properties have less visibility attracting fewer buyers thus it is easy for one to argue out their qualifications of being the better buyer. This is also the reason as to why most investors opt to look for off-market properties as they stand a higher chance of being selected as the buyer.

How To Find Off-Market Properties

Now that you are aware of the benefits that both a buyer and seller get from off-market deals, let’s delve into how you can find these off-market properties. Given that these properties are not publicly listed you will be required to put in more resources in finding them and picking the one that best suits your needs. We advise that you try at least two of these methods at once to make the whole process as efficient as possible.

Networking is Important

There has been a lot of talk about networking in different professional fields and the same holds true in real estate. Networking in real estate is a way to get more information about off-market deals, so how exactly do I start networking?

Well, the very first thing to do is look out for real estate events near you, join the relevant Facebook real estate communities, or ask a friend who is well versed in real estate and has a lot of connections. Through networking you will be able to express your interests early on to investors who are looking to sell their properties or initiate a conversation with a property owner of your desired location and inquire their thoughts on looking forward to selling their property.

Given that off-market properties are not publicly visible you ought to make yourself visible to investors and this is best achieved through networking. Give it a try, you just might be the next property owner.

Leverage Real Estate Agents

Realtors are the go-to-guys when it comes to off-market properties just as they are for properties listed on the MLS. They are well versed with information on pocket listings and approaching any realtor can prove very helpful if you are looking to get an off-market property.  Real estate agents and brokers have well defined the markets that they often perform real estate deals in, therefore, all that is needed of you is to find the real estate agent that best fits the market you want to buy-in.

It may be difficult at first to gain the trust of a realtor or be approached if there is a new deal in town. This is because they probably have a list of buyers and sellers they are well conversant with, this should not scare you off it always takes some time. All you have to do is pose as a serious buyer who has key intentions of investing in properties and before you know it you’ll be the first one to be called if a good deal comes around.

Bonus Tip: While a real estate agent may not have the deal that fits your current search, be sure to leave your contact information for future communication on similar properties and deals.

Contractors

Contractors interact often with property owners making them a viable source for off-market deals. They are often in the know of buildings that have stalled due to lack of financing and of properties that are set to be sold out. Building trust between various contractors can come in handy when looking for off-market properties.  Once you have established trust with contractors, you are likely to be approached when they have good deals from property owners. Be sure to let them know of the properties that you are out for investing in, your prime locations, and the market. This eliminates a scenario where you constantly decline deals because they do not fit your needs making you an unreliable investor to a contractor.

Direct Mail Marketing

Just like networking, direct mail marketing is an effective way to put yourself out there as a potential investor in off-market properties. This is a strategy where you send targeted mail to owners of properties that you are interested in, most of the time the owner might not have considered a sale until you approached them with the enticing offers. We advise you to do your research on the owners of the properties to understand their traits and the best ad venues to reach the ideal customers. Your communication might not always be accompanied by a response, or if it does, it might not be an acceptance call. Despite this do not give up and take some time to reorganize your marketing strategy.

Word of Mouth

Through both formal and informal conversations with others you can get wind of off-market deals. The other person may be looking to sell their property or know of someone who is putting theirs up for sale. Remember to always sell yourself during conversations by letting the other person know what you are currently doing and your future prospects in real estate.

Driving for Dollars

This strategy is where investors go out for a drive in an area where they have interests in purchasing properties. This is very efficient as an investor is able to see the actual state of a property and not just what is displayed on the internet.Most of the investors look out for properties that are not well-maintained, meaning that the owner may not be around or may lack financing to uplift their property. They use this to their advantage and reach out to property owners to propose a sale of their property.

Online Research

Despite having mentioned Zillow.com as a public listing site, this platform also has off-market properties that are not found in the local MLS. For example, a property that is not listed on the MLS is given a 30-day period to be advertised on the site.  As an investor you can use this to your advantage and reach out to the property owners to express your interest to invest in the property. Do your research before expressing your interest in every listed property you come across.

Real Estate Auctions

Live auction and auction websites such as RealtyTrac or Auction.com are where properties are usually sold for back taxes owed. These properties are usually not listed on the MLS therefore have less visibility.  You can also find these properties being auctioned through network connections or auctions at the country courthouse.

Public Records

Public records are a good source of information to get to know who owns the property. Using this information, you can reach out to property owners of properties you are interested in. Do extensive research on the property and the owner before initiating any conversations around property dealings.

9 Ways to Evaluate Off-Market Properties

Evaluating off-market properties is a multi-step process that requires diligent research and analysis to ensure a sound investment decision. Here’s a detailed approach to assessing an off-market property’s potential:

1. Comprehensive Property Inspection

A thorough property inspection is indispensable. It should cover structural integrity, roofing, plumbing, electrical systems, HVAC units, and potential pest infestations. Pay special attention to areas prone to wear and tear or those that may require significant investment to repair or upgrade. Consider hiring a professional inspector for an unbiased and detailed report. This step not only helps in understanding the immediate costs involved but also in negotiating the property price based on the repair needs.

2. Assessing Property Condition

Beyond structural assessments, evaluate the property’s aesthetic appeal and functionality. Consider the layout, natural light, storage space, and overall flow of the home. Assess whether the property meets current market demands or if it requires remodeling. Calculate renovation costs meticulously, considering both cosmetic updates and major remodels, to align the property with market expectations or specific investment strategies like flipping or rental.

3. Understanding the Local Market

Market analysis is crucial to ascertain the property’s potential value. Analyze recent sales data, current listings, and rental rates in the area to gauge market trends. Tools like Mashvisor provide insights into rental income, occupancy rates, and other vital statistics that can help estimate potential returns. Look into zoning laws, future development plans, and any factors that might affect property value, such as school districts, crime rates, and local amenities.

4. Financial Analysis and Return on Investment (ROI)

Calculating ROI is fundamental to evaluating an off-market property. Factor in the purchase price, renovation costs, ongoing maintenance, property taxes, and if it’s a rental property, management fees. Mashvisor’s tools can aid in projecting rental income and occupancy rates, crucial for assessing a rental property’s profitability. For flippers, calculate the after-repair value (ARV) to estimate the potential sale price post-renovations. Consider using the 70% rule, where the all-in cost (purchase plus renovations) should not exceed 70% of the ARV to ensure a profit margin.

5. Legal Due Diligence

Investigate any legal encumbrances, liens, easements, or pending litigation that could affect the property. Verify the property’s title is clear and transferable. Understand local regulations regarding rentals, if applicable, including any rent control measures, licensing requirements, or restrictions.

6. Engage with Local Experts

Consult with real estate professionals familiar with the area, including agents, brokers, and local investors. Their insights into the market dynamics and potential investment pitfalls can be invaluable. Additionally, a local appraiser can provide an accurate valuation of the property, considering all market and property-specific factors.

7. Environmental Assessments

For some properties, especially older buildings or those in sensitive areas, environmental assessments may be necessary. Check for the presence of hazardous materials like asbestos or lead paint, and assess the land for soil contamination or flood risk. These factors can significantly affect the property’s value, insurance costs, and usability.

8. Projecting Future Growth

Analyze the area’s economic and demographic trends to project future growth. Areas with increasing job opportunities, population growth, and infrastructure development can indicate potential appreciation in property values. Conversely, declining areas might pose risks to long-term property value.

9. Leveraging Technology for Insights

Utilize advanced real estate analytics platforms like Mashvisor for deep insights into property performance metrics. These platforms can offer predictive analytics on property appreciation, rental yield, and market saturation levels, allowing investors to make data-driven decisions.

Turning Off-Market Gems into Successful Real Estate Deals

Turning off-market finds into successful deals is an art form that blends negotiation, financial acumen, and a deep understanding of the seller’s motivations. When you’ve identified a potential off-market property that you want to acquire, moving from discovery to deal-making involves several nuanced steps. This detailed guide outlines how to navigate this process, emphasizing the unique aspects of dealing with off-market properties.

1. Establish Direct Communication with the Seller

The first step in turning an off-market find into a deal is establishing a direct line of communication with the property owner. Unlike listed properties, where agents often mediate interactions, off-market deals thrive on personal connection and trust. Approach the seller respectfully and express your genuine interest in the property. Emphasize the confidentiality of the transaction, highlighting the privacy benefits of an off-market sale.

2. Understand the Seller’s Motivation

Understanding why the seller is considering selling the property off-market is crucial. Some common reasons include the need for a quick sale, privacy concerns, financial difficulties, or the property’s condition making it hard to sell traditionally. Tailor your offer and negotiation strategy based on the seller’s specific needs and motivations. This empathetic approach can set the foundation for a mutually beneficial agreement.

3. Offer a Fair and Well-Informed Price

Determining the right price for an off-market property involves comprehensive market research. Analyze comparable sales in the area, understand the current market conditions, and assess the property’s condition meticulously. Offering a fair price that aligns with these factors, yet leaves room for negotiation, can demonstrate your seriousness and respect for the seller’s position. Utilize tools like Mashvisor to gather data on local market trends, rental income potential, and property valuation to inform your offer.

4. Present the Benefits of a Quick and Efficient Sale

For many sellers, the appeal of an off-market transaction lies in the promise of a quicker and more straightforward selling process. Highlight the benefits of working directly with a buyer like you, such as reduced paperwork, lower selling costs, and the absence of listing and staging hassles. If speed is a priority for the seller, assure them of your ability to close quickly, subject to due diligence.

5. Be Flexible and Creative with Financing Options

Financing off-market deals often requires more creativity compared to purchasing listed properties. Present various financing options to the seller to make the deal attractive and feasible:

• Traditional Mortgages: For properties that meet lender criteria, a conventional mortgage can offer a straightforward financing route. Ensure pre-approval to expedite the process.
• Hard Money Loans: Ideal for investors looking to renovate and flip properties, hard money loans offer fast funding based on the property’s value rather than the borrower’s creditworthiness.
• Seller Financing: In cases where sellers own the property outright, they may be open to providing financing themselves. This can be particularly appealing if they’re looking for a steady income stream or wish to defer capital gains taxes.
• Lease Option: Offer to lease the property with the option to buy it at a predetermined price after a specific period. This can be attractive for sellers not in a rush, providing them with rental income while securing a future sale.

6. Negotiate Terms Beyond Price

While price is a significant factor, other terms of the deal can be equally important in an off-market transaction. Discuss and negotiate aspects such as the closing timeline, contingencies (like property inspections), and any items included in the sale (appliances, furniture). Tailoring these terms to meet the seller’s needs can make your offer more appealing.

7. Finalize the Agreement with Professional Assistance

Once you and the seller have agreed on the terms, enlist the help of real estate professionals to finalize the deal. A real estate attorney can help draft or review the sales agreement to ensure all terms are accurately captured and legally sound. A title company can assist in ensuring the property’s title is clear and manage the closing process.

Now, turning off-market finds into deals requires a combination of strategic thinking, empathy towards the seller’s situation, and financial savvy. By approaching each deal with a well-rounded strategy that considers the seller’s needs and offers flexible, creative solutions, you can successfully expand your real estate portfolio with off-market properties.

Conclusion

Off-market properties will get you to close deals more quickly than conventional property listings. They offer less competition and flexible negotiations to investors who eventually make a profit off of it. Using a combination of the suggested techniques you will increase your chances of finding these properties. Keep in mind that research is important to get more information of the properties, owners and deals prior to initiating deals. If you are thinking of investing in real estate, think of off-market properties they are a really good venture to get into.