Real Estate Agent · Atlanta, GA · Member since 2020 · 39 posts · 16 votes
I wanted to make this post to generate dialogue around listed properties. I currently work for investment wholesale brokerage and we sometimes find great deals that are listed on the MLS. However, in some of the conversations I have with my investors and some of the RE Facebook groups I subscribe to, it appears that investors do not fancy listed properties. I would like to understand why? If the numbers make sense and the Cash on Cash return is there; why does it matter if the property is listed or not. Seems like a stigma based on emotions and not numbers to me. What do you guys think?
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
The main reason is that usually there is something wrong with it. If you as a wholesaler are getting it off MLS and not getting a big discount, there isn't much meat on the bone. It didn't sell on MLS for a reason, sometimes that's a crappy agent but most of the time it has something to do with the house, like a big repair that wasn't factored into the price. Everyone looks at MLS and people bid quickly on good deals, the ones that make it through that process may have repairs that your average investor doesn't want to deal with or an external obsolescence like backing power lines or a major road that they don't want in a long term hold. I would demand a much higher return on a property that backs a freeway than I otherwise would, because it is likely to appreciate less, have more vacancy, etc.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
The main reason is that usually there is something wrong with it. If you as a wholesaler are getting it off MLS and not getting a big discount, there isn't much meat on the bone. It didn't sell on MLS for a reason, sometimes that's a crappy agent but most of the time it has something to do with the house, like a big repair that wasn't factored into the price. Everyone looks at MLS and people bid quickly on good deals, the ones that make it through that process may have repairs that your average investor doesn't want to deal with or an external obsolescence like backing power lines or a major road that they don't want in a long term hold. I would demand a much higher return on a property that backs a freeway than I otherwise would, because it is likely to appreciate less, have more vacancy, etc.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
Finding an off-market property in our market is near well impossible. We buy flips and rentals from the MLS listings and have done quite well so far. The general perception seems to be that listed properties are at "full market value" but if your business is in adding value money can certainly be made from listed properties.
Finding an off-market property in our market is near well impossible. We buy flips and rentals from the MLS listings and have done quite well so far. The general perception seems to be that listed properties are at "full market value" but if your business is in adding value money can certainly be made from listed properties.
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y
Theyd rather over pay for an off market deal than pay markey price for an on market deal. Some properties I purposefully sell off market because I know I can get someone to overpay for it with the illusion pf exclusivity from being off market.
Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6y
I stopped looking at MLS data where I am (which is where you are in Atlanta @Damicco Robinson). I'm in Woodstock actually and mostly just invest around Cherokee, Cobb and Bartow.
I found checking the MLS daily was a waste of time...when i could spend my time doing other things like following up with off market leads.
Sure, a deal may come up every month or so...
But you'll be bidding against 5-10 other offers...
Plus, the opportunity costs of spending 1-2 hours per day checking the MLS to bid on one great deal...and then potentially not getting it...seems like not a good use of time.
Especially as many newbies solely rely on what realtors bring them.
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As for wholesaling on market properties...I'd think there is also a bias of "Oh, you got this off the MLS, you didn't have to 'work' for the deal" haha
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
DeMarcus: I have written several posts on my thoughts on out of area investing. Short story is I believe it is best to limit to A and B properties (maybe C+) and for experienced investors only. I believe it is too risky for new investors. There is a way you can search for my posts on this subject if you are interested in my reasoning. The best post was in the California local investing section.
Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
6y
You have to know your market. For example, Buyers in the greater Phx market like turn key properties right now. They won't look twice at a property that isn't ready to move in (unless they are investors). It is a crazy phenomenon right now in this market, but still remains true. Therefore, as an investor, you can get a good deal on a property that has been sitting with no updates or desperate need of a remodel. There can still be meat on the bone to flip it as our market is also appreciating nicely as there is NO inventory in most areas.
I have been an investor since 2002, and have acquired properties all different ways...trustee sale, FSBO, HUD, short sale, probate/estate, and more, but included in that list is MLS. I have acquired some of my better projects off of MLS because I have the ability to walk the property and inspect, unlike trustee sale, for example. So, anyone that thinks that properties listed on MLS are defective, or overpriced just needs to be educated on the opportunities that exist in MLS that not everyone else may see. Sure, there will be investors out there to compete with, but they can't know everything about every market niche. If you hunker down into a specific community or area and commit to getting to know everything about the area, the sales activity, the rental comps, the time on market, the floorplan options (walk each one as they come on the market to get familiar with the flow of floorplans, and popularity of them based on time on market), it will make you a smarter investor so that when a property comes up within "your" community, you may have a leg up on an investor who is just doing broad strokes ARV estimating. I once outbid 19 other offers on a property in MLS because I got their first (I was triggered the minute the property went live on MLS), and I knew the floorplan and could speak intelligently to the agent about the property and neighborhood, so he knew I was less likely to cut and run like many investors who throw offers out there. I also structured my offer so that it would stand out. I acquired for $150K, and sold for $222,500 in a matter of months, and turned a $37K profit. That's plenty of meat for 1 project.
My guess is that you may be experiencing push back because you are a wholesaler trolling the MLS for deals, and not the end Buyer/investor. To an investor, the deal you got COULD have been the deal THEY got because it was available to everyone via MLS. In addition, wholesalers never seem to leave enough meat on the bone for the end investor who is doing all the work of remodeling. Wholesalers never know how to account for rehab AND profit for the end investor. The cut they take is usually the extra meat that is required to make it a worth while deal. SO, I understand why investors would take pause at your deals from MLS. The perception is that you didn't do anything or EARN the profit you are taking from the deal. You just beat them to it. I would imagine that if you add value, either through your expertise, your rehab vendor list, or some other resource, you would make yourself a must-have in their process, and not a line item expense. Then they wouldn't care where your deals are coming from because they would know that you were thinking of their bottom line and not your own when bringing them deals.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6y
@Damicco Robinson just because it's off market doesn't automatically make it a better deal. I have bought several buildings on the MLS. There are strategies that work to negotiate a listing such as offering when it falls out of contract and comes back on market, finding stale listings that have easily solvable problems or that others simply overlooked and offering aggressively on those, etc. I would probably never buy a stale MLS listing from a wholesaler though. To me the value the wholesaler brings is in finding the deal, not just tying up listings and marking them up above what they failed to sell for on the MLS. There also usually isn't enough margin on an MLS listing for it to still be a good deal after the wholesaler gets their cut. Plus psychologically people don't like the fact that they could have bought the property straight off the MLS themselves without having to go through the wholesaler.
Real Estate Agent · Atlanta, GA · Member since 2020 · 39 posts · 16 votes
6y
@Joe Cassandra Those are really great points!! I completely understand your approach to off market properties and how it may not always be the best use of your time considering all of the competition especially in a hot market like today. However, working with a quality wholesaler that understands how to find gems on the MLS could be great way to receive solid deals that are on market that the wholesaler has already locked up. Investors may receive an on market property from a wholesaler and think you didn't have to do any work for the deal, when truthfully we've put hours into properly vetting this property and getting it under contract sometimes before other investors ever even see the deal. Obviously, this isn't the same amount of work as marketing to a motivated seller and getting the property under contract; however, I look at it from numbers perspective. If the numbers make sense for your business and allows you to be generate a desired return for your business then it shouldn't matter where the lead came from.
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
"it appears that investors do not fancy listed properties. I would like to understand why?"
1) Too much buying competition
2) Broker may actually price it at market
3) Broker may outsmart (yes, it does happen) a smart investor screwing around with terms like nothing down.
Again, an investor needs to decide what makes a good return instead of throwing it out if it is on MLS - They do look, so they do know there is potential
Plus if something has sat on MLS and people think it stale and it's still listed - Seller wants to sell, then make your low-ball offer.
Investor · Decatur Atlanta, GA · Member since 2011 · 611 posts · 232 votes
6y
I see deals on MLS that are about on par with what wholesalers are putting out there and as an agent I can get the 3% commission. I'm not seeing much difference in pricing from MLS vs. Wholesalers. Unless you are buying a large number of deals per month you, as an individual buyer, won't get the best ones. In addition, I'm seeing wholesalers having "open houses." They do this to try to get multiple offers, which is no different then buying off MLS.
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