Why The MLS Is A Goldmine For Real Estate Investors

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I was reading one of the real estate forums in the last couple of weeks and I came across a piece of advice that made me shake my head.  I think I may have asked out loud when someone was going to come up with a forum that had a delete button for really bad advice.  That is the power – both good and bad – of great forums where the readership, uncensored, is giving the advice.  The good is that the advice is real and unfiltered.  The bad is that you really have no idea who is giving the advice and sometimes…it can be wrong!

Making Offers on MLS Listings

The forum that I happened to read was from an investor looking for advice on how to buy property in a market that I happened to have a little insight.  Before I could comment, there were already a couple of responses and one was giving advice on not even looking at the local MLS for real estate deals.  The commentator is a relatively new investor (I think he says he has been investing for under one year) and the advice was pretty emphatic about the MLS being a waste of time in this market.

I am sure that is the case in some markets around the country.  Days on market may be low.  Discount percentages from list to sale price may be low.  Properties may receive multiple bids above list price.  All of these factors make buying on the MLS more difficult but certainly not impossible.  For new investors asking where or how to get started, getting advice to ignore the MLS is a sure-fire way to delay or possibly even stop your progress as an investor.

The advice given on the forum listed a few reasons why the local MLS was a bad place for new investors to find deals.  Among those reasons listed, if a property sat for more than 45 days it was a dog and not a good deal.  If a property was a good deal every big investment company in the city immediately bid and a price war would ensue.  If the property were listed on the MLS in the first place, more than likely it would have fees and other costs associated with it that would make it a so-so deal while buying directly from a local wholesaler who is buying from owners would be a much easier route to find deals.

Forget about buying from local wholesalers for this article, because I really want to focus on why every investor should have buying off the MLS as part of their strategy.  Even in markets where factors make it look like a bad idea.

My company makes hundreds of offers a week on properties to get to the 10-15 that we want to buy.  I did not say that we make a handful.  I did not say that we make dozens of offers.  I said that we make hundreds of offers every week and vast majorities are made in the one location where most properties are found…on the MLS.

Not every offer is a pretty one and rarely are we offering list price.  Sometimes we are over list and most times we are well under list price.  We do not care how many days they have been listed and we know from years of experience that days on market is not always a reflection of whether the deal is good or not.  We know in each zip code and often by neighborhood, the exact price per square foot that we want to pay.  That makes it very easy to make offers.

Buying Real Estate On The MLS Is A Numbers Game

The reason that I thought the forum advice was so bad is that buying real estate is and always will be a numbers game.  With very few exceptions, the best real estate investors are looking at and offering on a lot of houses every week.  Investors know that for any given reason houses are priced wrong.  A listing agent did a high BPO to get a listing.  A seller wants to hold out for a higher price than the market is willing to pay.  A seller places a low value on the work that needs to be done.  There are so many reasons that a property will sit on the MLS.

Experienced investors who are buying a lot of property know that they need to make a lot of offers on a lot of properties and sometimes WELL below the listed price on the MLS to get to the pricing they need to make an investment a good buy.  It is way too difficult to be absolutely precise and make offers only on the exact house you want to buy.  Putting all of your activity on ONE property is risky in that if you do not get the property or if the price is above what you want to pay, you have some tough choices to make.  Pay too much or lose the ONE property you had identified as your deal.

Active real estate investors who are on the streets each day looking at houses are constantly offering on listings and they know they will lose more offers than they win.  Because they are offering at aggressive pricing and across a lot of properties when a property is bought, it will be bought at the right price and will be a good deal.  Many of us have been told what we can do with our aggressive offers only to have listing agents come back sheepishly in 60 days and ask if our offer is still good.

Why does this happen?  Two reasons.

One – new investors listen to bad advice on MLS listings.  They fail to make offers on properties for all kinds of reasons.  They think it is priced too high or it has been listed too long or the worst reason of all…they think they know more than they do and they are embarrassed to make a low offer on a property.  This leads to fewer investors making offers on properties and listing agents have fewer options when they get down to the day that they really have to sell it.

I cannot tell you the number of times we have bought properties for half or less of the listing price on MLS because we were the only offer.  The houses have always been fantastic buys for us, but they were listed too high to begin with and no one wanted to embarrass the listing agent with a low offer…except us.

Guess who bought the house?

Two – because, we close on the houses we put under contract.  There is nothing wrong with making a lot of offers on houses.  There is something wrong with making a bunch of offers and not closing on what you get.  When you close on your MLS offers, listing agents will take your offers seriously, even when they are low.  You have to earn the right to make a lot of offers and you have to earn the right to make them at half price.

We purchase roughly 30 houses a month across three markets on the MLS and probably make 300 offers or more to get those 30 houses.  Realize that we fail on 9 out of 10 offers we make.  For us, that is a good thing!  Sometimes we are in situations where highest and best will win a deal and the pricing goes above list.  Sometimes we are contacted months after making an offer and asked if our price of .30 cents of the listing price is still good.  In either case, we get to decide if we move forward and actually put the deal under contract and we only purchase deals that are good for our company and ultimately good for our clients.  That failure rate of 90% means that we are only buying the deals that make absolute sense for our company.

The other offers were either rejected, sold at a higher price or are simply sitting out there waiting for a future time when the seller may want to take our offer.  That is the absolute best scenario possible for an investor.  To have the ability to pick and choose which deals work for you and not worry about the ones that don’t.  The advice given to that new investor to stay away from MLS listings and the reasoning behind that was so far from reality that I had to write this particular article.

The MLS is full of great deals and we are proving that across three markets now.  Each market has a ton of investor activity and even has the dreaded “funds” buying up property.  That does not mean that an aggressive and active investor who is willing to close on the contracts they win, cannot find great deals on the MLS.  If you are a new investor, the MLS is the FIRST place I would start to make offers on houses and I would be making a lot!

Photo Credit: Rantes

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.

66 Comments

  1. Michael Woodward on

    Excellent advice Chris! I especially agree what you said about closing on the offers you make. Your ability to do that is a testament to your ability to raise capital…..congrats…..that’s not easy to put together. I have to be very careful not to get my offers ahead of my available cash because I never use financial “outs” on my contracts. If I make an offer, I intend to buy it. I think that this subject is part of the reason for some of the bad press given to real estate investors. Thanks for the article!

    • Chris Clothier

      Michael –

      Thanks for taking the time to read the article and to leave your comments. I want to point out to any readers something you wrote that I think is critical if you really want to get your head on straight and move in the right direction as a professional investor. You said you do not use financial “outs” to keep from closing. There are SO many people who advise investors to put “outs” in contracts, which I can understand. But in the next breath, too often, investors are encouraged to use those “outs” as a strategy rather than as a safety net.

      I was very encouraged to read that you do not use such a strategy. It can really damage your credibility as a buyer.

      Chris

      • Chris
        The issue I have found was the catch 22 in Real Estate Investing. Most advice consists of :If you have a good deal the money will come- Don’t submit offers you can’t close on- Tell agents ” You always close”, and Private Lenders who say ” Show me the deal and I’ll see if I’m interested”.
        That pretty much takes investors that don’t have the guarantee of funds available out of the MLS / agent system.
        Although I did not read the initial article you are referring to I would have to agree that if the advice was from a relatively new investor to another relatively new investor if would be correct. It is possible that his wording or context was not appropriate.
        Ken

  2. Chris, I think for Real Estate professionals who are in the business, it is easier to snag deals off the MLS and make them into a great deal. Kevin’s blog I believe you are referring to was something to the effect of “How does a newbie compete with veterans.” When I go to MIG, most of the investors there are newbie’s and when they talk about renovating their distressed properties, I understand why they need them so cheap. The cost they pay to renovate a house is far more then a industry veteran would pay. I hosted a “Renovations Class” at MIG last month and I went around the group asking what everyone paid for certain services; most paid $2,000 to $2,500 for AC installs (when i get brand new ones for $1,300 for a 3.5 ton), $1,200 for H2O tanks (where we pay $650), $2,500 to paint a house (we pay 2 guys $12 a hour and it normally takes them 2 to 3 days to paint the interior 3 colors). A newbie’s purchase price has to be lower to meet their expected cash flow #’s Vs. a veteran who can get renovations done cheaper and quite possibly the cash flow expectation may be a little less then a newbie. Also, a lot of newbies hire contractors, which certainly adds to the cost of renovation, where as a veteran will act as the contractor. I recall my first purchase in Collierville in 2007; I maxed out a HELOC of $14,000 on my primary residency to renovate a home, which today I know I could have renovated that home for around 1/2 that cost. That is why I said that industry professionals can snag deals off the MLS that to a newbie does not look great, but because they can get the renovation done for 50% of the cost that a newbie can, the deal still makes sense for the veteran. Now I am not saying great MLS deals can’t be found, as I buy around 5 a month, but because I can the work done cheap, it turns what may look like a marginal deal for a newbie into a great deal for myself or a client. All that being said, the best deal I ever got was off the MLS, but consistently the very best deals I have received have been wholesaler deals. Just this week, I received a contract from a motivated seller at $35,000 that needs very little work; just paint, landscaping, cleaning and new counter tops plus a few other minor details. Will rent for $850. Retail comps and investor comps suggest high 70’s, low 80’s. If that was on the MLS at a list price of $35,000, I am willing to bet either a certain fund or other RE professionals would have bid over list and paid $45,000 to $50k.

    Long story short, I have talked to the newbies in this town first hand each month, they have to buy cheaper b/c their rehab cost is so much higher (if they are not doing the work themselves), thus making it hard to compete with RE professionals.

    • Chris Clothier

      Hey Alex –

      It is excellent to hear from other strong professionals in our area. I appreciate your taking the time to leave your comments and you make some really, really good points. I think in a sentence or two it is safe to say that the MLS is a playground that may be easier for an experienced investor to find success than for a brand new one. However, all of us were brand new investors at one point and we cut our teeth on the MLS. We built our company by getting in there and making a lot of offers and looking at a lot of houses. That is not to say that we did not make mistakes and lose money on deals as well, so your points are very valid.

      Also, I was not referencing Kevin’s article. To be fair, I had not had a chance to read it. I was referring to actual forums where investors post questions and the person answering simply does not have the experience or knowledge base that an investor like Kevin, yourself or even I have. That’s not to say his opinion was not valid, because it is. But the opinion and advice were to forget about the MLS straight up and I still think that is pretty bad advice – even when you are starting out. Maybe you should not go full on crazy making offers, but not making any offers is a sure fire way to never get started.

      Again, great comments and I appreciate you taking the time to leave them.

      Chris

      • I often wonder how many REI’s that call themselves vets have ever ran a construction co or are a licensed GCs? There are so many laws that surround it, liability issues in managing subs properly. Perhaps before you take on the liability get with a construction attorney for a first had look at the liability and workers comp suits, labor law issues, IRS issues, and if you have no glue what they are off the top of your head you have no business acting as a GC. And to think I just skimmed the surface, I have not even started in production where a wealth of knowledge on build processes and material selections is need. It changes so rapidly you would struggle to find time for REI and both.

        An REI acting as GC in most cases is just as bad as ignoring the MLS as an REI. REI and GC’s are full time jobs in themselves. I have both companies and know first hand. They do mix well if you know what you are doing, can stay out of trouble, and on top of things…once in trouble you better have good insurance and/or legal structure.

        • Chris Clothier

          Terry –

          Thanks for the comments. You bring up some good points for investors as they grow into their business and start to add other verticals. Whether they add them as simply value plays to themselves or their clients or they add them as revenue generators, your point of getting good legal advice is spot on.

          Chris

  3. Jerry Kisasonak on

    Great article Chris! Their are tons of deals to be created on the MLS. Being an agent myself, I started to add up what I would make if I just bought properties off of the MLS versus buying directly from private sellers. Just 3 or 4 deals a month would bring a tidy income, and of course this money is in addition to the profit from the fix and flip! Yes, sellers are actually paying me to buy their house so I can flip it and make even more money!

    Also, when marketing to private sellers (absentee owners etc), you’re not really sure they even want to sell. We’ve all got the “Well, everything’s for sale if the price is right” calls. To an investor these callers are a waste of time and a waste of advertising dollars. Conversely, ALL the MLS listed properties have owners that have raised their hand and said “Get it sold!” Well okay… I’ll buy it!

  4. Chris…
    I would like to know more about the process of making 300 offers a month. How much time to review enough houses to find 300 that are worth offers; The time to decide how much to offer; the time to write the offer and follow up on counter offers; The time involved to visit the properties for accepted offers; Managing the follow up during escrow closings. This sounds like a huge time commitment, especially to do it every month across 3 markets. I would enjoy hearing about how you manage it all.

    Thanks, Bliss

    • Chris Clothier

      Hey Bliss –

      I appreciate the question and i think it would actually make a really good next article. I will be sure and tackle it in longer form. But, to be quick and brief, today i do not look at any houses. I used to. At that time I was making probably 25-50 offers each week depending on what I needed. Many of the offers were made sight unseen and using data points to create the offer. As I noted, after tracking every purchase for years (and tracking every offer early on) we know the exact price per square foot that we pay for houses and the exact price per square foot that we pay on renovations and that data is broken down by zip code and in some cases neighborhood. When you have that data, it is not difficult to make a lot of offers. In fact, you could make an offer on every home in an area that you like if you knew the price per square foot that you pay and renovate. It becomes a simple calculation.

      Knowing that you will only win a fraction of those offers allows you to get into the houses where you win the bid and confirm your pricing.

      I will get into more detail in my next article. Thanks for the idea!

  5. Sharon Vornholt

    Chris-

    I think you hit upon one very important thing:

    Due to inexperience a lot of folks just don’t have the facts to succeed in a particular strategy at a particular given time. And then to make matters worse, they shout it out to the world that “this ________ doesn’t work”. You can fill in the blanks.

    Folks would be better served when something isn’t working for them to find someone that has actually done that particular thing and learn from them. I’m always amazed at how quickly people throw in the towel.

    Sharon

    • Chris Clothier

      Thanks for leaving a comment Sharon. You are correct that inexperience sometimes leads to comments that are a bit too “definitive”. I think a good piece of advice would be to make comments and join the conversation, but get a little more time under your belt before dispensing advice on “how to”.

      Thanks again – hope your business s doing great!

      Chris

  6. As a new investor, this is great advice. I plan on getting my real estate agent license so that I can actually use this strategy. One question: when making your offers, what outs do you typically put in the contract and which ones do you leave out?

    • Chris Clothier

      Hi Phillip,

      As an investor just starting out, I would at a minimum ask for 24 hours to inspect the property fully. I don’t see a problem with language in a contract and it should be ok with most sellers. Some will say it is a take it or leave it offer and ask you to remove that clause or they will reject the offer.

      That was a minimum for a new investor. If you can get 48 hours to inspect even better. I am not a fan of using financial clauses like contingent on getting financing or the property appraising for a certain number. I would use the inspection contingency and ask for as long a period as possible when starting as long as it does not hurt your offer.

      Chris

  7. Thanks for this, Chris! I will say that I have sensed a certain attitude from some BPers along the lines of “MLS? pshaw! real investors only use use yellow letters/ tax auctions/ networking voodoo… MLS is for sissies!”
    I think in many markets the MLS may be the simplest and most cost effective way to find a property, especially for folks like me, i.e. smalltime buy-and-hold investors.

    • Chris Clothier

      Jean –

      That comment made me laugh a little! There definitely can be a bit of a slant by some voices on the site toward what makes a “real” investor, but not too many. I think the really good, long-time commentators keep most of their comments towards advice about what they have done and encourage investors to be active. But, you are right, there are some times when come comments can almost be disparaging if you are not buying real estate with some “creative” concept. Sometimes the MLS is looked at as something so simple that anyone can do it and not challenging enough I guess.

      Chris

  8. Melodee Lucido on

    Chris,

    Thanks for the great, refreshing article on this topic. I have read a lot here pooh poohing the MLS and scoldings to people who find deals there.

    I remember being a brand newbie (I’m still a relative newbie) and it was all so confusing to read the diff points of view. And like Sharon pointed out listening to the right people is the ticket to starting to see success.

    This business is fun—and a lot of focused effort. Many quit because they thought it would be easier—-so they must be doing it wrong. Your article shows people the true grit it takes to win in this great industry.

    As always, thanks Chris

    • Chris Clothier

      Thanks for the comments Melodee. I love reading your comments on the website and I really like the fact that you are so willing to jump in and ask questions and talk about your experience so far. There is a big difference between telling others how to do something (or what not to do) and telling others what your experience has been so far. Even if your experience has been not to use the MLS because you have not had success. Readers want to read about what people have experienced (in my opinion) before they want to read someone telling them what to do or not to do.

      Again, thanks for your comments.
      Chris

  9. Excellent advice and a peek into a RE pro’s standard approach to investing by numbers. I look forward to the details of your next article about what’s more involved in running an investing by numbers (offers) strategy as mentioned above.

    • Chris Clothier

      Not a problem – I’ll definitely tackle that subject monday or tuesday and hopefully they will publish it at some point next week. Be sure and ask any questions you have here in the comments when it is published. I have no problem answering if I can.

      Take care – Chris

  10. Alejandro Casablanca on

    Chris, thank you very much for the good advice. Actually it came to me at the right time when I was questioning myself if it was worth it to continue pursuing properties on the MLS. Certainly the law of large numbers (offers) is the key to be successful on the MLS, I will increase the number of offers and as you mentioned 10% hit ratio would be more than enough.

    Thanks,
    Alex

    • Chris Clothier

      Hey Alejandro – Thanks for the comments. I will tell you that we came to the conclusion that 10% was really the maximum ration we wanted to win on offers. If we won more, then we would assume that we were offering in the wrong neighborhoods (not enough competing offers), or that we were offering too much on the properties (too many getting accepted instead of countered). If we were winning say only 3-4% of our offers then the opposite would be true. We would be offering way too low and would need to raise our prices.

      Much of this has been developed over years, but it is the exact same concept that we started out with on day 1.

      all the best to you – Chris

  11. My two questions are:
    1. Do you make offers sight unseen on properties based on your data points? If so, do you then have the opportunity to cancel if the property is much worse than you anticipated? Do you cancel based on the inspector’s report or do you put a “subject to interior inspection” in your offer? My initial impression is that “subject to interior inspection” would make it more difficult to get offers accepted.

    How do you give yourself an out if the property is not really suitable or it requires more rehab than you thought? Do you even drive by the properties?

    Sorry for all the questions out of sequence.

    Mirko

    • I am wondering the same thing, I guess if you get accepted for .30 -.5 of asking assuming that is with in 3-5% of market you still got wiggle room to rebuild the whole darn place and and out barely.

      Making it more of “numbers game” or gamble! 🙂

      • Chris Clothier

        Hey Terry –

        Your point is correct. Even on houses where we do not have an out and our offer is accepted. Not every property is going to be a big winner and there are times when we close and complete a deal making less than our average and in some cases breaking even. But in those scenarios we earned a great deal of respect from the listing agent for not backing out of the deal. We close and complete the deal and simply move on to the next one. Those are far and few so it is worth it to keep a reputation in place and to act with integrity.

    • Chris Clothier

      Mirko –

      So a couple of things to remember and I will address all of this in really good detail this week. We do not shotgun on the MLS making offers on anything and everything. Even when starting out, we stuck to very specific areas of the city (zip codes and neighborhoods). We also worked out of our vehicles everyday. We had offices, but to be successful, we had to be on the streets. SO while we were looking at current projects and rental properties, we were also looking at houses on the market – constantly.

      IN the beginning our outs were always simple inspection clauses. Today, many listing agents will not allow them and they ask us to look at everything before we offer. We have two people whose only jobs are looking at properties and we are in 10-15 houses a day – just looking.

      At this point, we are in and around neighborhoods so much and our team is in so many houses that we are making offers and a majority are sight unseen, but experience tells us that if the offers are accepted at the traditional price we pay, then there will be plenty of room for work to be done, our company to make money and the eventual investor to be able to earn a consistent and stable return. It is easy to develop this kind of system if you stick to areas that you know like the back of your hand.

      I will get into a lot more detail in this weeks article. Be sure to ask any questions and I will answer them in the comments.

      Chris

  12. Chris-
    Thank you for the great article. It is encouraging to new investors to hear that deals are available on the MLS. I am working toward making my first deal and I plan to focus my search on the MLS with the help of an agent. On your first deal or two, how did you do your analysis without all of the data points you now have? Did you gather data from other sites, did you ask your agent, or did you have some other method for determining what area to begin? Thank you!

    • Chris Clothier

      We followed the public record. It was easy to see what other investors were paying for properties in the same area. It was also to see the work that was being done. Alex Craig makes a good point earlier in these comments that it takes time to build a network to drive pricing of work down, but we had a pretty good idea of what work was being done on other properties. Then all we had to do was make a few calculations and work backwards.

      If you have public records in front of you then you can see what prices other investors are paying for properties and get an idea of what price you need to be paying if you want to win deals.

  13. Great article. I personally dont make offers on MLS properties. Part of that reason is i have to deal with Realtors who wont submit a “lowball” offer because they are afraid of offending the listing agent. I have fired more Realtors than i have fingers and toes. Its still worth a look, but i still drive for dollars.

    • Chris Clothier

      Driving for dollars is a great strategy and I completely understand the hesitancy. I think it all depends on the market as to how aggressive you can be on the MLS. In our experience, depending on the property, it makes sense to make every offer and we have been told more than a few times to go pound sand with our low offers. And we have been called back more than a few times with an apology and wondering if our offer still stands. This is still a tough real estate market for investors and if you can perform and close quickly, even low offers have some weight behind them.

      Chris

  14. Chris, would you mind expanding on the type of public records to look for and what county office usually has such records? Finding recent sold data will definitely be a help to me to evaluate both 1)what neighborhoods and zip codes to look in and 2)What price to offer for properties

    Thanks for sharing these tips!

    • Chris Clothier

      Morris –

      For us, we have a couple of places where transactions are printed. In Memphis for instance, they are published daily and they are fairly accurate. Usually when it is printed, the transaction occured within the last few days. They are listed by zip code and then in alphabetical and numerical order. The information that is listed is who sold it, who bought it and what price was paid. There are a couple of other data points printed as well.

      So that is there we have historically looked and then we can also look on our county property assessor’s website. On that site we can pull data in many different ways.

      Lastly, you can ask a closing attorney or a title company to pull a report for you on certain areas of the city on a routine basis. You may need to pay for this if you are not doing regular business with that company, but I cant imagine them charging too much money. There are also 3rd party tools that are for sale that provide this same data. Those also have a price attached to them, but they aggregate the data quickly and you have it on your computer in a matter of minutes. So there are several ways you can get this information.

      Chris

  15. Hey Chris!
    I know a few investors in my area (Des Moines, Iowa) that buy strictly off the MLS and one buys only from Sheriff Sales…..and they are getting great deals!! I know a lot of investors are also making offers on private seller listings and not bank owned stuff. But like direct mail, signs, door knocking, etc you have to be consistent. Also follow up is key!
    Great article!

    Tara

    • Chris Clothier

      Hey Tara –

      Thanks so much for the comments! Please keep reading and commenting. As writers, this is part of what makes writing the articles enjoyable.

      You are correct with all the things you listed. There are lots of ways to find good deals – just get to work and start making it happen! Be consistent and always follow up on leads and you should have no problems.

  16. For what it is worth, I just bought my third duplex off the MLS just 3 months ago in the Seattle area, which many of you know is a *very* hot market. It was being sold at a $100k discount, largely because the RE agent did a truly horrendous job of advertising the property. His one comment was “this property’s primary value is the land.” In essence, this is telegraphing to the potential buyer that this is a teardown, and a complete waste of time.

    As luck would have it, it was directly next door to a duplex I currently own, and it was a great property. There were, however, some big problems.

    1) It stunk (and iI do mean stunk) of cat urine.
    2) The building had slumped somewhat.
    3) One of the units was untended, and both units were in disgraceful shape.

    I live overseas, but my RE agent (who I trust enormously, and have bought 2 buildings from previously) passed me the lead off the MLS, and we had an offer in within the hour. They offered $375k, and I ultimately bought the unit for $340k.

    The biggest problem was the house slumping, which as many of you know is cause for serious concern. However, I had an inspector come in, and he said that the house had not moved in a very long time. In addition, I had 3 contractors come in to estimate what it would cost to re-level the house, and the average price was around $28k. That gave me the confidence to go through with the purchase.

    Even before we rehabbed the building, the appraiser valued the building at $405k. We have since repainted, re-carpeted, and done basic landscaping to the front yard. I am renting each unit out for $1,500/mo. ($3,000 total) which puts the cash flow on par with my other 2 duplexes, both of which are worth well over $500k each.

    To put it mildly I am very pleased with this one.

  17. Hi Chris – great great article, I really appreciate your openness o share your insights. A few months ago, I was chasing deals on MLS and after about 50 offers without deals I got discouraged. You really got me back on this track again. THANKS! I look forward to your next great article with more details about execution. A couple of questions in my mind if you can address, that would be great:
    What is your farm area criteria?
    Do you offer on short sale, REO, HUD, or private seller only?
    At what extent you wouldn’t offer on a property in your area, e.g. relatively new remodeled, listing price too high, odd house, etc.?
    What is your earnest money amount? How fast do you put in contract to close?
    Do you have other due diligence clauses in your contract?

    • Chris Clothier

      Cheng –

      These are excellent questions and I am going to answer them here, since they may or may not get answered in the article. I can’t make the article too long.

      Farm areas and how you define them is a really difficult question to answer. I will simply say that we looked for what parts of town had the most investor activity and started there. Then we moved into other areas that had investor activity but not as heavy and so on…

      We make offers on every thing you listed and will make offers on properties where a qualified agent is working a short-sale. We offer on any style of listing and – as I said – get told no a lot, but that is ok.

      About the only thing that turns us off is condition of surrounding properties. Other than that, we have purchased complete tear downs, burn outs, brand new properties and recently rehabbed properties as long as the numbers make sense.

      We generally put $1500 down in earnest money but have put as much as $20,000 down in earnest money. We have also made the earnest money payments non-refundable as a way to strengthen the offer. We typically put 7-30 days on closing because so few properties are actually able to close quickly due to title work and prep issues. As for your last question, we try to use as few clauses as possible. We have been known to make offers without any contingency at all AND making the earnest non-refundable. We do that to strengthen the offer on properties that we really like and we expect that other bids will be higher priced. In that scenario we want the listing agent to have to consider if our offer at a lower price is actually better because there are no contingencies and our earnest money is lost if we do not perform for any reason. That is a great way to win contracts that you think you may not be the highest price.

  18. I hope you have your RE license. I’d hate to be the Realtor (which I am) writing so many losing deals.

    I did a quick search on MLS to see if low ball offers are working here. In the last 30 days there were 267 sf homes sold in the city of Minneapolis. Of those –

    2 sold with a 28-30% discount to list
    3 sold with a 18-22% discount to list
    10 sold with a 10-15% discount to list
    The other 252 sold within 10% of list price

    In other words, the examples of getting houses for 50% of list aren’t happening here (and I’ve done the analysis before).

    That said, all 10 of the rental properties I own were off of MLS – it does help when I get the buy side commission on the deal. With the rise in prices over the last 18 months the deals there are certainly fewer and farther between now. If only I’d bought more 2-3 years ago – MLS was filled with great properties.

    • Chris,

      I would like to learn how to streamline the contract writing process. The realtor spends a couple of hours writing the contract and I have an hour signing all the paperwork. My realtor told me she spoke with someone who claimed to make many offers weekly. When asked how they get all of the contracts written they changed the subject.

      • Chris Clothier

        Hey Tom –

        Thanks for the question and I am sure you will find the answer in my next article. I will tell you however that part of the answer is forgetting what you think you know about how to make offers. Everyone assumes there is only one way to make an offer, but that is not necessarily the case. I can assure you though, we do not spend hours writing contracts.

    • Chris Clothier

      Hey Bill Wallace –

      Thank you for the detailed analysis of you area and for the comments. It goes to show that each market is going to be different. Your market, it would appear, is one where the MLS is not yielding a lot of deals. Thanks for the data!

      Chris

  19. Excellent article, Chris!
    Taking it a step further, what is your take on a wholesaler using the MLS to find deals? I have been told that wholesalers shouldn’t work with real estate agents mainly because it cuts into profits.
    However if a new investor is working a full time job, has little ones to care for, and literally does not have time to post bandit signs, or money to do direct mailing, it seems it would become a sort of joint venture to work with an agent who has access to the MLS to find distressed props. What is your take?

    thanks,
    Melinda

    • Chris Clothier

      Melinda –

      You will see in my next article that I believe anyone can find deals in the MLS. I write a little about a wholesaler who makes his living off of MLS listings. The reality in some markets is that there are investors who, for lack of a better word, may be lazy when it comes to the MLS and are perfectly willing to pay a little premium to someone who is willing to get in there and work the listings. They are fine paying that premium when someone else is putting in the leg work to build the relationship, walk the houses and make the offers. So i think it is entirely plausible (because it is already happening!) for a wholesaler to buy off the MLS and make a good income by doing it.

      Chris

  20. Chris this is a great and encouraging article. Is it safe to assume that you are a real estate agent? This is one of the reasons I’m working on my license now, so I can make as many offers as I want without constantly bugging a buyer agent.

    • Chris Clothier

      Darien –

      I applaud you for having a plan and following through with it, but to answer you question, I do not have my license. If you plan to get your license so you can do the offers, after you read my next article, you will see that you do not have to have your license to make offers. You will be able to save money on selling the property, but I think you would also be smart to let the listing agent keep a portion of a sales commission when you buy a property with them. It will be a great incentive for them to see you as a partner and not competition.

      Chris

  21. Shawn Holsaple on

    Great article, Chris.
    I agree with your strategy and am doing a similar plan myself. I think the only way to make this high volume of offers is to be an agent or have one in your office. I made that transition a couple years ago and have never regretted it. I too make several hundred offers per month with about half of those through HUD. I use as much automation as possible [iMacros for the HUD offers] and enlist the help of VA’s.
    Even though I am in a very strong sellers market, I still manage to find good opportunities on the MLS. I use the rule of “if you’re not embarrassed by your offer it’s too high”. I regularly buy at 1/2 to 1/3 of list price, as you mentioned, because I was the first or the only one that made an offer.
    I agree with your reply to Bliss, I’d like to see an article on how to streamline the offer process.

      • Lucas,
        I prefer the iMarcros add-on for Firefox, it seems to work better than IE or Chrome. This allows me to record and playback multiple mouse clicks. I have a macro setup for logging into the HUD HomeStore, the Make Offer screen, the Offer Form and submit. Plus, I can semi-automatically respond to counter offers as well.
        NOTE: The new version had a bug that wouldn’t allow the sign-in portion to work correctly so, the tech support had me go back to version 8.3 & it’s worked fine ever since.

        I can do a complete HUD offer, start to finish, in less than a minute and respond to counter offers in about 30 seconds. This really helps when make a few hundred a week!
        I found out about this trick right here on the BP forums about a year ago.

        I hope that helps.

    • Chris Clothier

      SHAWN –

      I think you are spot on with your comments. It takes a person with a little business vision to pull off a high number of offers. The reality is that you have to have a team or employees and taking on those risks means you know what you are doing in business. From your reply you seem to have your head on straight and I am sure you are doing a great job in your market. I will absolutely address a little of the process in my next article.

      Chris

  22. Hi Chris,

    I look forward to your next article about your systems to making all these offers every month. I was hoping you could elaborate on a couple points in your next article, as I myself is thinking about using the MLS to buy property. (I’m all direct mail at the moment.)

    Questions:

    How could a newbie get past having to submit offers with proof of funds? I used private and hard money, so I don’t have access to their bank statements. Would agents accept my offers without bank statements?

    Do you need another Realtor to submit the offer? I have my license but its not active. technically, I’m an “assistant” to a broker so I can get the MLS access. I wouldn’t plan on collecting any type of commission. How would I submit the offer?

    Please do elaborate on how you manage the workload.

    How do you pull the recent investor flips and analyze your market. Do you break this down by city? If you could use a specific example that would be great.

    How do you know what properties you have made offers on and what you haven’t? It sounds like you would lose track after a while. What is your over all process? Maybe if you ran us through a typical “week in the life of Chris” would be awesome.

    Looking forward to your next article!

    Lauren

    • Chris Clothier

      Wow! That is a doozie of a reply! I promise not to pull out any “aw shucks” comments to follow the word doozie – I’ll just try to tackle each question one at a time.

      1. Earnest money is a key factor to being able to make offers. I do not know if a seller would accept a proof of funds letter that has a different name on it. i am sure there is some form of paperwork you could provide that would be acceptable, but you may have to get creative in your thinking and simply ask what the listing agent would want to see to prove you have the money. If the earnest money came from that account, i would think it would help.

      2. We do use realtors to submit some offers, but we also have our own brokerage and we allow a lot of realtors to represent us on their listings so they are presenting the offers for us on their own listings.

      3. Early on the workload is intense and I have worked 18 hour days before. So has every member of my team. There is no getting around the fact that if you want to own a company (instead of simply investing in real estate) it takes commitment and hours. Today we have a different kind of commitment. We have over 40 full time employees so we have payroll to meet! But we have divided the work over a large group.

      4. We use a 3rd party system for pulling sales data today.

      5. So in my next article I talk a little about data tracking. We used simple excel spread sheets early on and tracked data on every offer we made. That literally consists of thousands of properties and even with data tracking we still have made mistakes where we may “outbid” ourselves on a property by accidentally going up from one week to the next.

      Either way, tracking data is important. I will hit that heavily in my next article.

      As for a day in the life of Chris, that suggestion made me laugh out loud! I may have to save that for another article. I could write pages on that topic….but it may bore us all to death!

      Take care and thank you for your comments and questions.

      Chris

  23. I couldn’t agree more. As a broker I have great houses that have sat without offers for no apparent reason. And I can’t tell you how often I get feedback that states the buyer can’t pay the list price and I can’t believe they don’t put in a low offer. A written offer will always get reviewed and you never know what a seller’s situation or motivation is. As an investor I want to seek deals out in as many places as possible and the MLS is a great resource.

    • Chris Clothier

      Micki –

      Thanks for jumping into the conversation. You are so right! I see it happen every single day on offers where we get the deal and it simply boils down to people thinking that they know more than they really do. I’m not saying people are not smart, just they out-smart themselves by thinking there is no way a seller will take their offer.

      There is only one way to find out…make the offer!

      Thanks again for your comments – Chris

      • Hi Chris, just read the forum. I’m interested in becoming an REI. I’m about to get my RE license, to take advantage of the MLS. I currently don’t have much equity to my name. How can I overcome this obstacle? Do you need all cash when using MLS? Or is financing available?

  24. Dang Chris that is a nice empire you built with all those employees, congrats and kudo’s to you.We built a construction company in the past year, felt your pain on the 18 hr days. Not easy but very rewarding. Now looking at a REI and looking fwd to your next blog on the details. I still don’t get how you don’t have a license but do have a brokerage. I can’t wait for your next lesson, if you can let this blog know when it’s up so we get email notifications. Thanks, again! T

  25. Good points.
    MLS will be better in some places but it is silly to eliminate the biggest source of properties in your market.
    I to will be interested I’m seeing your piece on how you automate offers.
    If you have a system it should be easy to put in a lot of offers. If you put in enough you’ll get some deals.

  26. I was not able to get through all the comments but had one question. I am a newbie and don’t have any desire to disregard the MLS, but I guess I am not sure how to go about doing it when my initial strategy is to assign any property I get under contract?

    How do most of the investors who are making offers on MLS properties actually purchase them?

  27. Shawn Holsaple on

    Cory,
    I would suggest taking the time to read all the replies when you get a chance.
    As an agent, I prefer to close on all of my transactions and never use assignments. Of course this requires a double closing and extra closing costs plus transnational funding fees if I don’t have my own funds available. One must figure this into the cost of the deal. If you can’t cover these costs and make a good profit – then you don’t have a deal…

    If you haven’t already, you need to read The BP Ultimate Beginners Guide – TODAY!

  28. Great article! I get 90% of my deals off the MLS as well although I am not doing nearly as many deals. I think it is important to target properties and not through out low-ball offers on everything. I am curious what percentage of houses you buy are REO, Short sales, Estate sales, investor owned or owner occupant owned. Just a rough idea is fine if you know.

    Keep up the good work!

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