Can real estate investors still find good deals on the MLS?
The short answer: Meh, sort of.
Yes, there are still deals on the MLS, even ones that hit the 70% (or 75%) rule. But they are very few and far between, and you have to keep your ear to the ground and act quickly to get a shot at those few diamonds in the rough.
That being said, while there might not be a lot of good deals to be found there, there are still good reasons to use the MLS (which you have to be a real estate agent to access), particularly for assessing a property’s value.
What Is the MLS and What Is It Good For?
The Multiple Listing Service, or MLS for short, is where real estate agents put all of their listings. Unfortunately, to get access to the MLS, you have to be a licensed real estate agent. (Which is something you should certainly consider as a real estate investor.) If you’re not a licensed agent, you can still ask an agent to comp a property for you and give you a CMA (comparative market analysis).
Indeed, the most important benefit of having access to the MLS is not necessarily the ability to find properties, but the ability to assess their value.
It is true that most of the data on the MLS gets filtered to other free sites that you do not need to be licensed to get access to, like Realtor.com, Zillow, Trulia, and Redfin as well as paid services like Prop Stream. That being said, they don’t have everything.
While Zillow, for example, gets its information on listed properties from a variety of sources, it gets the MLS listings from Realtor.com, which has about “98% of all MLS-listed properties.” So not quite all of them. It also doesn’t have as much information or any of the attachments that agents sometimes add to a listing (i.e. inspection reports or things like that). But more importantly, it’s just not as good for evaluating comparables. The MLS is simply the best for that.
Indeed, while Zillow and other sites allow you to search for certain features, the MLS allows for a very detailed search. Each part of the country has a slightly different MLS website, but they all look something like this:
And you can get a lot more detailed than that with your searches. Then you can look at the map feature and see each property that applies:
And then select the ones you want in any which way you choose, like so:
Of course, Zillow, Trulia, and the rest have map features, but it’s not nearly as easy to select the properties you want to search for.
Furthermore, the MLS allows you to export that list to Excel, where you can manipulate the data as you like. Or you can create a CMA for yourself like the ones real estate agents often provide their clients. These CMAs include all sorts of useful information like market trends, price averages, price/sq. foot averages, days on market averages, etc.
And of course, if you want to list properties and do business as a real estate agent as well as an investor, the MLS is a must.
But the question still stands: Are there any good investment deals left on the MLS, and if so, how do you find them?
How We’ve Found MLS Deals
Back in the good ol’ days (really the bad ol’ days for everyone except for real estate buyers) after the Great Recession, buying off the MLS was easy. There were REOs (bank-owned foreclosures) all over the place. Most of them needed work, but the banks were desperate to get them off their books and would quite often sell at a steep discount.
We would go out on a “property tour” and look at 15 or so houses, mostly REOs. Then we would make offers on maybe 13 and get two, or something like that. We continued this practice for several years and built up a very solid portfolio.
Those days are gone, however. Some think the COVID-19 recession will bring them back, but there has been no sign of that as of yet.
Nowadays, you are going to do far better with more active marketing campaigns such as letter campaigns or SEO marketing. Indeed, in the last few years, we have bought more deals from wholesalers than off the MLS.
But even still, we have gotten a couple of listed houses. The most common is a property that needs a lot of work but is, for whatever reason, listed too low. (This is usually by a bank, but not always.) These properties will almost always get swarmed and go “highest and best.”
There are two keys to those properties. The first is just keeping your eye out for them and being quick. You won’t have much time to make an offer.
The second is not going overboard and offering too much. (They will usually go for over asking price.) As with any auction, you must remember that buying the item for sale is not the same as winning. It’s only “winning” if it’s a good deal. Make sure your maximum offer is still a good deal that meets your requirements.
The other common MLS deal is even rarer and that is mislisted properties. We came across one last year that was listed as a two-bedroom house but only 432 square feet! Unless these bedrooms were for infants (or mice), that just didn’t make sense. I suspect many investors just skipped over it, as who would want a 400-square-foot house?
The price was really good (only $39,900) so, suspecting a mislisting, we immediately went to take a look. And lo and behold, the square footage given on the listing did not include the second bedroom, which was probably built as an addition years after the house was.
When the addition is not permitted, the additional square footage is not added to the county records and apparently, the Realtor in this case just copied and pasted the square footage from the county records. Now, of course, you need to make sure the addition was done right by performing your due diligence, but since it was put on many years ago, it was effectively grandfathered in (at least in the municipality we were buying in).
So yes, the house was still small, but it was more like 650 square feet. And at $39,900 (or the $37,000 we eventually got it for), it was a great deal. And we were able to get it without competing with any other offers.
On such deals, you just have to keep your ear to the ground and look out for anomalies. A tiny house with two bedrooms is one such anomaly. Another might be a home with more bathrooms than bedrooms. And while no picture on the listing usually means the property is in significant disrepair, every once in awhile, it’s just because the agent was lazy.
With such properties, you might be able to get in before anyone else has noticed and pick up a good deal. But you still have to act quickly. Sooner or later, someone else will notice the discrepancy.
That being said, while such opportunities exist, they are few and far between. If you are simply looking for some passive investments and don’t feel the need to find a particularly good deal, then sure, there are properties to be found.
But in this hot real estate market, most of the good deals will be found elsewhere.
Have you found deals on MLS or do you prefer to look elsewhere?
Tell us where you’ve been browsing in the comments.