MLS the best place to sell for the biggest profit?

Question

Chris Mason · Answer

Exposing your property to the greatest pool of potential buyers possible will of course yield the highest sales price. That means the MLS, and all the consumer-facing websites that copy from it. And, as someone selling a thing, paying salespersons a commission to sell your thing as a high quality premium product of course makes sense.

Why else would BMW and Toyota have all those salesmen on the car lots, and be paying them a commission, if it didn't yield a higher net number even after factoring in the salesperson commission? Indeed, here is some research done by Collateral Analytics (that sells data/etc to the mortgage industry) that just came out in July where they find that the "FSBO Discount" is typically greater than what the real estate agent commissions would have been, had the property sold for fair retail price.

As a buyer, either can be viable. The greatest appeal of the MLS is product choice and realistic sellers. Most FSBOs are delusional about price, so going off-MLS you might have to talk to 100 sellers before you find 1 that isn't unrealistic. If you have that time, by all means go for it. One of the functions of a listing agent is to get sellers to understand that no one is going to pay more for your home just because you have childhood memories there, etc.

How can both of these things be true, for buyers and sellers? Well, the MLS adds streamlined efficiency. Efficiency in the Adam Smith 1776 "Wealth of Nations" sense. Those FSBO sellers are often delusional about value and will (assuming they sell at all) typically eventually sell for less than if they'd just put it on the damn MLS day 1 instead of trying to re-invent the wheel, but it might take them (and you as the buyer...) a year to get to that point (opportunity cost). So if you have the time to exploit this market inefficiency, and/or are just a freaking top 1% salesperson, absolutely go for the off-market stuff as a buyer, because these aggregate averages aren't relevant to you. But if you've been putting 30 hours per week in, bill yourself as a "wholesaler" or "flipper," and in the course of 12 months have closed 2 deals for a total of $17k in net profit to show for your efforts, it might be time to consider another strategy.

Chris Mason · Answer

The study above uses Phoenix, Arizona and San Diego, California, btw. It's not national. So there may be markets where the findings do not hold true, or hold true but only with nuance.

Account Closed · Answer

Account Closed  If you're flipping properties to buy and hold investors, or rehabbers, your property is priced correctly, and you already have a pool of buyers..there's no reason to list it on the MLS and fork over 6-10%. Classic example: ARV $100k, you buy it for $50k, clean it up, clean it out etc and you want to sell to an investor for $60k cash. Would you take it straight to an investor and net $60k cash, or would you list it with an agent and net $54k-$56k after commissions and closing costs? Easy answer right?Buyers generally want off market deals because the vast majority of agents focus solely on retail buyers and are not "investor friendly", meaning they often don't know what constitutes a "deal" and often over complicate something simple like a cash transaction. That being said, if you're rehabbing and selling retail, absolutely use an agent. Selling retail FSBO will lose you money 99% of the time.

Account Closed · Answer

All of us will be in the position of both buyer and seller at some point in the future.

Does it means the followings?

From the seller position, to maximize the profit, we always want to list it for sale on MLS,  unless...

...unless the seller can find a buyer to pay for the same MLS price without paying the commission.  (Usually, the chance is very slim...)

Conclusion:  Most of the time, seller don't need off-market deal unless the buyer is paying the same MLS price.  Then it can save the seller's commission.

From the buyer position, if the seller list the property for the same price on both MLS and off-market, what is the differences buying the property on MLS or off-market?

During buyer market, deals are everywhere, there is no need to look for off-market deals.

If this is the case, the buyer don't need to purposely work very hard to look for an off-market deal unless...

...unless the seller sell it below the MLS price... (...which is not easy to find such seller who is willing to make less money while they can make more money on MLS...)

or ... unless it is a very hot seller market, unless the MLS competition is too high, unless there is multiple bids everywhere to the point that it is not easy to buy a property on MLS, then at this time, the buyer may want to look for off-market deals for the reason of less competition even though paying the same MLS price.

Same thoughts or different opinons please?

Dan H. · Answer

The more networking and the longer you look for/ purchase RE the more likely off market deals will find you.  I live in a hot (very hot) market but I have had 3 off market properties come to me in the last week.  Each in my area and each meeting the RE I seek.  Only thing to resolve is do the numbers work and how many do I desire to take on at once.  I have never purchased more than one at a time and think we only have time to deal with one at a time.

Arianne L. · Answer

Account Closed Yes, for the most part, you always sell for a higher price on the MLS. And you pay realtor fees, etc.

Now, there are certain properties or perhaps certain price points where this might not be the case. For example, I bought a 10k house with bees living in the walls and was able to sell it to an investor I knew for 12.5k. I made a little and helped the seller. I am licensed agent as well. Most agents won't touch that 10k bee house for a small commission check.

Buyers buy according to their buying criteria, it doesn't matter whether it's off market or on the MLS

Am I missing a question here? What are you really asking?

Kevin Fox · Answer

Hey Chirs,

Great Post! Agree on all accounts.

Chris Martin · Answer

I generally sell via broker via MLS. Having said that, as an investor I generally have an idea of what other investors want and what they are buying. So I approach them first to see if I can sell 'off-market'. When I do this, I just give them a 'take it or leave it' price that is about what I'd put it on MLS for, maybe a little less. In this market there are investors buying at retail price for sub-$100K property. That's historically where I operate.

MLS the best place to sell for the biggest profit?

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