Do You Really Think It Is a TRUE Off Market or Pocket Listing?

22 Replies

Brokers are probably the best resource when it comes to finding "off market" or "pocket" listings in most markets. Usually 2-3 brokers will dominate most markets when it comes to multifamily apartment syndication deals. 

Does anybody really think these are truely not marketed to anyone else? 

I believe that no deal is a true off market deal. 

It may be not marketed on loopnet but a broker would not be doing their seller a service by only giving a listing to one buyer. 

Right?

@Dan Handford im not sure i fully understand the question... there are always off market deals or Pocket listing that brokers may have. 

If a broker have a relationship with some owners he can approach the owner to try and do a "List and sell deal". It happens all the time. 

There are many reason why a seller will not want to go to market and if you approach them at the right time you could possible put a deal together. 

Many off market deals are done without a broker.

@Hadar Orkibi I am specifically referring to buyers that say they have an off market deal where a broker is involved. Even though the broker may not put it on a public forum like loopnet, they will still likely put it on their own "market" if you will which is there list of buyers.

Basically buyers have to understand that they are not the only person the broker is sending the deal to for making the offer. 

Obviously if you have found the seller yourself, and you are a buyer, then you would have a true "off market" deal where you are the only one submitting offers.

Originally posted by @Dan Handford :

@Hadar Orkibi I am specifically referring to buyers that say they have an off market deal where a broker is involved. Even though the broker may not put it on a public forum like loopnet, they will still likely put it on their own "market" if you will which is there list of buyers.

Basically buyers have to understand that they are not the only person the broker is sending the deal to for making the offer. 

Obviously if you have found the seller yourself, and you are a buyer, then you would have a true "off market" deal where you are the only one submitting offers.

It doesn't happen often but it does happen. I've experienced a situation where the seller was in a time crunch and went to the broker and asked them to find the best buyer that can close. The broker had one buyer who he knew was looking, who already owned nearby, and could definitely close and the broker brought it to that one buyer and it was closed quickly. Most of the time though, 'off market' deals just mean they don't market it broadly and keep it to 10-20 people or so. Usually these are people who already have a track record and a relationship with the broker. If those people don't buy it then it gets marketed even broader than that. If you don't have a track record and only kind of have a relationship with the broker, you might make it into this group.

You are correct Dan. Off-market deals on larger multifamily are typically put in front of a handful of buyer groups that the broker knows can close. We are are closing one next month that was only marketed to us and one other group. All of our 2018 acquisitions have been similar situation. 

@Dan Handford you are talking about what i call the "technical" terms.

Technically a broker maybe braking the law (in some states) if they do a deal without actually getting the listing. so yes, they have to get a listing. BUT they don't have to advertise it anywhere or tell anyone else about it.

I purchased few properties this way. - so it does happen. 

More often then not the sellers have a reason for not wanting to go through lengthy marketing campaign.

@Dan Handford yes there are off-market deals.  The basically fall into three categories.

The first is where the seller is trying to hire a listing broker, so they call all of the big brokerage shops to get a BOV (Broker's Opinion of Value), and they tell the broker that they can share the deal with their clients.  Here, the broker calls all of his clients to peddle this "off market listing" hoping one of them will buy it.  If one of their clients buys, the broker is assured a commission.  If they don't, it's a roll of the dice whether they get the listing or not--some other broker might get the listing and the other brokers get nothing.  These are sometimes good deals, more often they're just average because every broker that the seller called has called all of their clients and by the time it's all said and done everybody knows about it.

The second is where a seller wants to sell, but doesn't want anybody at the property to know it's for sale, or doesn't want a bunch of tours, or doesn't want to wait for the broker to make up a full package, market the listing, take offers, etc.--or whatever the reason is.  They just want the broker to bring the best offer they can from the best buyer they can as soon as they can.  So the broker calls a few of their best clients and finds one to buy it.  These are usually the best off-market deals and you'll only get these if you have bought from the broker before or have otherwise built a very solid relationship with him or her and have a verifiable track record.

The third type is the one that is overpriced and no broker wants to embarrass themselves by taking it to market, nor do they want to spend any time or money marketing it if they know it isn't going to trade.  So they call all of their worst clients, the most inexperienced, and/or the ones that are most hungry for a deal and see if they can find a sucker.  This is by far the most common "off market" deal and the one you are most likely to see bought by an inexperienced or relatively inexperienced syndicator...or a 1031 buyer that doesn't want to cut a check to uncle Sam.

@Brian Burke   in my albeit very very Limited experience at this.. I brokered ONE 80 unit 14 years ago.

but here in Portland the commercial brokers ALL try to double end the deal first and foremost.

then they may share with other brokers.. to me it was more about broker revenue than other factors.. 

although I can see some sellers wanted confidentiality and such... 

Just like when other high priced business's are sold they are not blasted all over the place.

My local commercial bank that I have been loyal client of since it opened and a stock holder.. they never asked me or told me they were selling LOL.. matter of fact the only two that knew were the president and head credit officer.. 

@Brian Burke   Also in my experience doing this the brokers did not want to deal with newbies and or brokers like me that did not really do this for a living.. so I can see them keeping the inventory available for pro's and those that don't' need hand holding and ask 15 million questions that an experienced operator should know.   

Also as a rookie commercial broker I learned also this is not resi RMLS  your co brok fee is protected I had to put a demand letter in.. and I was told that by a friend other wise the other side would have not paid me.. 

like resi agents they kind of automatically get paid and of course that could have been then and with that company.. but I learned its a big boy game.. but it was fun.. I made a 100k large check and that was nice commish.. :)

There’s exceptions to every rule but for the most part if you can get on a brokers “A” List or VIP List it simply means fewer eyes are on it but it’s being marketed. We’re working on 3 Opportunities right now that came to us “off market “.

The brokers brought these opportunities to us because they knew/know we’re real players in the space and can/will close.

Commercial brokers, & our trusted relationships with them, have been really valuable.

Dino

Bottom line if you are a closer in the market and dont have a reputation of Re trader you can form solid relationsheep with Brokers. 

Keep in touch regularly, try to go out for lunch here and there to keep the ball rolling.

@Michael Le That's a good point...brokers will send their best deals to buyers that they know can close. That's the key!

@Ivan Barratt Did the broker tell you they only marketed the deal to only you and one other? Did you end up having a bidding war with the other buyer?

@Hadar Orkibi In most cases, brokers are going to secure an actual listing prior to marketing it to their buyers list unless of course they are not looking to get a commission and only want to close on the deal themselves as a buyer and not an actual broker. However, as @Brian Burke has stated in his post, sellers will sometimes have multiple brokers fighting for their listing. This causes the broker to send this type of pre-listing deal to a select number of solid buyers to try to secure the buyer prior to actually securing the actual listing. Once the seller knows that one of the brokers has an actual buyer then they will start negotiating on terms and finalize the actual listing.

@Brian Burke Great post! Very Thoughtful! I have definitely seen more of the third type of listing than anything else. The goal for any newbie investor is to get their first deal closed so they have the credibility to go in for more buys with a broker.

@Jay Hinrichs An on-market deal doesn't mean that it is blasted out all over the web. These types of listing can also become "on-market" by the listing broker just sending it to their list of buyers. Just because it is not on loopnet or some other commercial listing service doesn't mean that it is a true "off-market" listing. @Brian Burke's option two and three is what I would consider a true off market deal...nobody but a select number of solid, qualified buyers that the broker knows can close will get the information for those deals. Otherwise, in my book, it is not a true off market deal.

@Dino Pierce I agree. An off market deal is not truly ever "off market"...it just means fewer eyes looking at it. These deals though you have to act quickly otherwise they will get snatched up by the other guy. 

@Sam Shueh Off market does not just mean not publicly listed. This definitely helps in not having too many eyes on it but a listing is still technically "on the market" even if the broker only sends it to a handful of people. Semantics. :-)

@Hadar Orkibi I agree! You must build relationships with these brokers. Take them to lunch. Invite them to a golf outing or sporting event. Find out what they like and dislike. Find commonality between you and them. This is how building relationships work. Don't be fake! Be authentic! This is not an overnight, one-and-done business. You must be in it for the long haul.

There are plenty of times where a seller wants to sell but they don't want to list the house. They think they are saving on commission by just telling me it exists and they are willing to sell it. In that case I am representing the buyer, I let my buyer know it exists and I have to work in their best interest. Their best interest means that the less competition the better. As far as doing a disservice to the seller, they really did it to themself by not wanting to list.

@Dan Handford ; yes that's what the broker told us and for the record there's a high level of trust (on both ends) with that relationship. 

No bidding war now or ever. We instead have our line in the sand and we do not cross it.  If the other buyer can accept a lower return they can have the deal. We'll buy it next time after they F it up! :)

I'm going to look at an off market small MF today. I've know the listing broker for years, I bough my first MF from him. He knows what I'm looking for and that I can close. So, he contacted me first before it's listed.   

Yes I would agree, there are pocket listings... I am going through one now. A realtor had some previous listings up for sale, they were pulled from the market while back. He contacted them again recently when I told the realtor what I was looking for. 1 is under contract.

Just as we have things in our personal lives we aren't necessarily selling on craigslist / ebay / amazon, we would sell them to a friend or neighbor. I see this as the same kind of deal.

@Ivan Barratt I love it! LOL

@Dave Chapa Go get 'em. That's best deal to have when they send it only you.

@Jim Butterfield As long as you are the only one, or there are only a few buyers, then I agree that it would be a true off market listing. FYI-there is no comparison between selling a widget on amazon/ebay vs selling a multi-million dollar asset through an agent. Apples and Oranges.

@Dan Handford in some cases the broker is only sending the deal to one or a limited number of people. I have had my broker bring me deals in this manner and I have heard of people getting deals this way.  

Sometimes it works like this. The broker has a client that says they MAY be interested in selling a property. The Broker talks to a buyer they know would close on a deal like that. They float a theoretical price. The buyer expresses interest, so the Broker goes back to the client and floats the theoretical price. The client decides to sell and they write up the deal.

Often pocket listings are a "maybe I will sell" type of deal or it is sold before the listing goes official. There is not necessarily an advantage to marketing a property to a large group of people. If you have a qualified buyer willing to pay a fair price, many sellers will happily just take the deal. Of course the benefit to the broker, being the buyers and sellers agent, they get dual commission without any marketing expenses. 

Originally posted by @Brian Burke :

@Dan Handford yes there are off-market deals.  The basically fall into three categories.

The third type is the one that is overpriced and no broker wants to embarrass themselves by taking it to market, nor do they want to spend any time or money marketing it if they know it isn't going to trade.  So they call all of their worst clients, the most inexperienced, and/or the ones that are most hungry for a deal and see if they can find a sucker.  This is by far the most common "off market" deal and the one you are most likely to see bought by an inexperienced or relatively inexperienced syndicator...or a 1031 buyer that doesn't want to cut a check to uncle Sam.

 When I hear someone say they want to find an "off-market" deal I am going to show them the third paragraph of this post. It made me laugh but I don't doubt that it's true. 

@Brian Burke Thank you for sharing. I am very new to investing but I facilitate a Multifamily investors group. I now have brokers wanting to market their off market properties on the group Facebook page. I am very torn about allowing this. It seems now that what you suggest in # 3 is exactly what is happening.