The Term "Off-Market"

14 Replies

I here people always saying you should look for "Off Market" deals for better pricing on properties. I'm I missing something. I run into FSBO's all the time and doesn't mean the owner is not wanting the same offers as the properties that are on the MLS. They just don't want to deal with paying an aget commission. To them that more profit...not more money to give away by selling cheaper.

Off market properties just means properties that aren't currently listed. So a FSBO is technically on the market even though it's not on the MLS. Off market would be like mailing to a foreclosure or out-of-state owner who hasn't listed their house or perhaps a "pocket listing" that a real estate agent is bringing to good buyers before listing. This means you have less competition. Regarding most FSBO's, they're usually over-priced.

Hi there! Josh here from Atlanta, I am by no means an expert, but in my limited experience, here is what I have learned:

Hopeful FSBO sellers are the same as 'off-market' properties. There are many owners out there who would like to sell their properties, but they feel they can not for any number of reasons. Perhaps the properties are vacant, distressed, owned by family members of the deceased, or any manner of other situations. Through active marketing (door-knocking, advertising, yellow letter campaigns, etc.), reaching out to these owners can yield leads that in turn can lead to property purchases as a significant discount from market value.

The process of finding discounted properties, especially for the newer investor (like me) can be daunting. That said, with a concerted effort, you will be able to locate some great deals with solid numbers.

Wishing you all the best on your real estate ventures. Cheers!

@Xavier Randall the nice thing about Zillow is you can see the properties currently "On" the market (MLS, make me move, and FSBO) because the are exposed to the market (buyers looking for properties). Most people that put their house on the market (mainly in CA) are looking for as much appreciation as possible so rarely you will find home significantly below market. If a property does come ON the market "below" market value it usually get bid closer to actual market value.

If you are looking for inspiration on how to be successful @ finding those "off" market deals, take a listen to a variety of podcasts.  Many different ways are dicsussed (yellow letter, SEO/website, old fashion door knock (@Joshua Dorkin ). 

The main idea that most of them talked about is make a plan of what you will do and what it will take to invest in that plan and STICK TO IT!!! So many said they started, didn't see results and stopped.  Once they started again and stuck with it, they saw results.

Personal advice: start building your network and let them know what you are looking for and off market opportunities will come to you. @Brian Burke has a great forum post about his successful flip (filled with garbage and animal scat).  How did he find it?  Someone told him about the property. 

What you are looking for is opportunities that you can ad value to that aligns with your REI goals. Keep at it and you will find those deals. (BTW - podcasts are great motivators)

I sell a lot of my properties "off-market".  It is a real annoyance to have all the non-experienced buyers trapsing though the property disrupting the tenants.  I ask the agents to bring me a buyer without the circus. 

With that in mind, the inexperienced buyers do not get a shot at it.  So you want to be on the agents list of buyers that they go through when someone brings them a potential sale.

An experienced buyer should know how to look at a property without too much tenant disruption.  I have had people looking at my properties in the past just walk up to a tenant and say "I am buying this place, I would like to look inside your apartment".  There is a process that needs to be followed. 

I think what people are referring to when they say to look for off-market properties is to get a deal by approaching the seller directly.  This is usually accomplished by knowing someone, mailers, or fortunate contact.

Agents will do the same thing.  They will contact people and work on understanding what is needed to complete a sale.  Once they have some understanding, they start working off of their buyer list.  Although it is possible that they are contacting sellers with specific buyers in mind already.

Originally posted by @Steve Olafson :

I think what people are referring to when they say to look for off-market properties is to get a deal by approaching the seller directly.  This is usually accomplished by knowing someone, mailers, or fortunate contact.

Agents will do the same thing.  They will contact people and work on understanding what is needed to complete a sale.  Once they have some understanding, they start working off of their buyer list.  Although it is possible that they are contacting sellers with specific buyers in mind already.

This points to the importance of having a good realtor on your team who knows what you are looking for. Our realtor also knows that we have our financing lined up and can close quickly. When we complete a purchase and have worked well with the realtor, lender and escrow agent, we are in a better position. 

We also let the universe know when we are looking and have bought properties off-market on contract with the seller. Sometimes a builder or lender will give you a tip on a property as well. Network. Also, if you are open to buying properties from tired landlords and are skilled at dealing with tenant messes, put the word out. Some are ready to let go of their problems!

Off market means that the other participants in the marketplace do not know that the property is for sale. Sometimes this means that the owner doesn't even know that the property is for sale - use your imagination on that one!

Are you the real deal, Xavier? I mean, if I have a client who needs to sell very badly and instructs me to not worry about bidding the price up, and instead find a sure thing, someone who's proven that they will perform on a great deal, should I call you? Are you that guy? If you are, you'll get calls on off market properties that are listed, but are not - use you imagination on this one too :)

Good luck!

@Ben Leybovich : I appreciate your tone and remarks!

@Steve Olafson : I definitely see your reasoning by using an agent to screen buyers. Phoenix is an area of focus for my company and where we've purchased. We're looking for aparment buildings, approximately 20+ units in Phoenix.

@Joshua Feit : Thank you! I like the Atlanta market for apartments. Doing some underwriting on a couple opportunities.

Thanks to everyone for their input!

Off Market typically means not listed on the MLS. Off Market sellers have the added benefit of not being emotionally tied to the property. FSBO are very similar to listed MLS properties but, don't be discouraged. Build a relationship, continue to follow-up, and read as much as you can on BP about working with FSBO's. Eventually, they will sell the property and most of the time it will be at a discount.

@Xavier Randall

This post was started under the category of "Multi-family and apartment investing". I framed the answer around this assumption. Apartments that are listed with apartment brokers typically do not go on the MLS. They are typically (in order) marketed internally to the house they represent, marketed to other brokers city, state, and in some cases nationally. Then placed on loopnet.

Off market generally means that it is not mass circulated. 

One other way of doing this is to send the property information to multiple commercial agents.  Tell them that a sale will happen if a certain price is obtained.  Let them circulate it as a "pocket" listing to their clients that are looking in this area. 

I have found success with this on a couple of occasions.  There is no substitute for mass marketing on most sales though.  You usually want to get the property in front of as many people as possible.  Sometime though, there are properties that may get more individual attention if you let the buyers think they have an exclusive shot at a deal.

+1 on @Steve Olafson 's comments. We're doing this with one property right now. None of the brokers have a listing agreement but they know if they bring a buyer at price X or above they'll get both sides of the commission. We don't really want to sell it but cap rates have compressed in that market so much over the last six months that testing the market is a prudent thing to do.

Originally posted by @Giovanni Isaksen :

+1 on @Steve Olafson's comments. We're doing this with one property right now. None of the brokers have a listing agreement but they know if they bring a buyer at price X or above they'll get both sides of the commission. We don't really want to sell it but cap rates have compressed in that market so much over the last six months that testing the market is a prudent thing to do.

It is amazing.  I can't find anything to buy but the current properties are selling like hotcakes.

Yep, @Steve Olafson , selling at a 5.5 cap? Congratulations, now you're a buyer at a 5.5 cap. But hey we've got a 200bp spread over our 3 year fixed loan rate! What could go wrong?

That said I believe the Fed really is trapped and that we are turning Japanese which means low interest rates for much longer than most people suspect. Japan's 'lost decade' is old enough to drink and will be graduating from college soon. We're following the same economic plan and shouldn't expect a different result. Net-net the cycle peak will be extended, for an extended period of time.

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