What to know when you find that off-market deal

Question

Hey BP team.  My fiance and I are starting our first direct mail campaign in Santa Barbara, CA to hopefully land our first off-market live-in rental.  In this market we would be putting between 5%-20% down.  Wondering what you folks think are key things we should know when someone calls us up and says, "tell me more"?  Specifically:

• In what unique ways can we bring them value?  The obvious ones are saving them the hassle of listing, and saving them money on agent commission if they choose not to get an agent; but I am sure there are other creative suggestions out there.
• Is it pretty common for the buyers agent to act as a dual agent in situations like this?  I could imagine the seller might be weary of the buyer suggesting, "hey, you should use my agent".
• What, if any, differences are worth highlighting between the MLS and off-market ownership transfer process?
• Is there anything related to financing that changes for off-market deals? Is it harder to get financing for any reason?
• I don't have any more questions but can't get rid of the numbered list. Anyways, thanks for any tips!

Caleb Brown · Answer

1) Bring value by seeing what they need and seeing if you can fit that. Whether it is price, time frame, contingences, etc. Build a relationship with them.

2) An agent could work as a designated agent (solely representing you),  dual agent(I would NOT do that), or transaction broker(they represent the transaction but give NO advice)

3) No difference between the process.

4) Financing is the same just walk it before offering.

Cornelius Charles · Answer

Hey Baird. Good questions.  I haven’t done direct mail in a few years. We stopped because our response rate was around 0.25%.  Just wanted to give you that data point.

• We are doing marketing in a couple of      markets.  Most of the sellers know      it’s a huge seller’s market, so keep that in mind.  Another way to bring value is with a      quick close, but it sounds like you will be getting a loan, so you may not      have the speed that a cash purchase would. Saving money on commission      though could be a big one for the homeowner, especially with these prices.
• I      thought you were trying to buy directly from the homeowner? Where did the      use of an agent come from?
• I      would close on the home the same way, with the exception of you would be      doing the paperwork yourself vice the realtor.
• Not      that I know of, but that would be a good question for a lender.

As for what you can say when someone says “Tell me more,” I would just be honest about what you are trying to do.  Tell them that you are looking for a home in the area for you and your wife, so you sent mail to all of the homes in the area.  Who knows, maybe you can get lucky and find someone who is looking to sell and you happened to catch them before they reached out to a realtor. If you are looking for a “great deal” though, I would be mindful that a lot of people understand the market and will probably not be willing to sell at a steep discount, but you never know.

Baird King · Answer

@Matthew Irish-Jones - for sure.  This is just one avenue we are pursuing.  Certainly a realistic evaluation of the property will be key to making it work for us.  Thanks for the input!

@Carl N. - hope it works out for you! Friends of mine just got their STR up and running on the Mesa.  My wife and I would love to do it with our property, but we are outside the coastal zone.  Too much red tape.  STR is our goal for Ventura.  How has your experience been in IV from a distance?  Property management must be a nightmare... but I assume you have someone local?  I imagine the returns must be nice once you work out the kinks.

Carl N. · Answer

@Baird King I don't currently live there. I moved away in 2012/2013. I am in the process of converting my old home on the mesa into a vrbo hopefully. Other than that I have mainly invested in Isla Vista for student housing and just recently up here in Berkeley. I will continue to invest in SB if possible but it is definitely an appreciation play more than a cash flow. I am interested to start looking at Ventura as well for it's long term potential.

Matthew Irish-Jones · Answer

@Baird King if your plan is to use an agent why are you also marketing to an off market seller?

Off market is not always better and often times sellers come to the table with a pie in the sky number and say “sure, if you will pay this price, I will sell off market”

You may be better off saving the money and putting it into the potential property you want to buy.

Off market properties are tough and usually the successful marketers are buying as is in cash

Baird King · Answer

@Carl N. - Thanks very much for the tips.  I especially love the last one; it's amazing how connected everyone is here in SB.  We made our first deal work here in SB and have loved the experience.  Since then, the skyrocketing market has directed our efforts to Ventura and out of state.  We will still keep our eyes and ears open here in SB for anything that might pop up.  I also like what you said about the 154 and SB9/10. We have toyed with some options up off East/West Camino Cielo but not since the bills passed.  Curious - do you live here as well or do you invest from a distance?  I am always curious to hear investor's stories who choose Santa Barbara.

Carl N. · Answer

@Baird King SB is a very tough market and has only gotten harder. I currently invest there and am always on the lookout but here are my opinions just based on personal area knowledge.

1) Pinpoint an area or a few areas in which you prioritize your time. For instance, do you have kids now or will you need a good school district in the next few years? If not look at areas that are still 5-10 away from getting better such as the Eastside or deep in the westside.

2) Maybe check out how SB is responding to SB9/10 and find a property that would benefit from that(perhaps on the 154 with more space).

3) Start talking to neighbors of friends who may know of an older couple that is looking to retire soon and offer a make them move price. This recently happened to someone I know on the Mesa. It's a small town so networking is crucial and everyone is just 2 degrees of separation away!

.

Baird King · Answer

@Cornelius Charles - great advise, thank you. It is a tough market all around.  I am sure most folks are aware how hot the market is, but figure its still worth pursuing. It's certainly not any easier to land an on-market house at the moment :-).  Regarding your comment about using an agent - our plan was to use an agent as a safeguard against potential mistakes.  This will only be our second house purchase so I want to make sure everything is done correctly.  That said, do you have recommendations about carrying out the purchase process ourselves?  For instance, where to get appropriate paperwork?  Is that something a transaction broker would help with (as referenced by @Caleb Brown)? Or would an escrow company be helpful in this regard?

@Caleb Brown - thank you also.  Curious what it would look like to use a "transaction broker".  Do they typically take a lower commission?  I assume transaction broker is an standard role for agents/brokers?

Really appreciate the info, guys!

What to know when you find that off-market deal

Most Popular Reply