Why the MLS is the worst place to look for a property.

Why the MLS is the worst place to look for a property.

By it’s nature the MLS is the last place you will ever find a deal on a property.

Why am I so sure of this?

Why do I almost never bother to look at the MLS?

Why should you do your own marketing and avoid wasting time on the MLS?

Let’s start with the people who put houses on the MLS. They are agents and brokers.

What is their goal?

Their goal is to get paid a commission.

Why is this important? It is important because their commission is paid based on a percentage of the sale price. Let me restate that in a different way. The people who place property on the MLS get paid more for getting a higher price, so the only way that those professionals will ever let a property go below it’s actual market price is if they have personally made a colossal mistake.

Agents who make mistakes like this don’t stay in the game very long.

Next up, agents have friends and preferred buyers.

Have you ever spotted a listing pop up on the MLS and go contingent faster than you can dial your phone? This happens when an agent finds a buyer before the listing is made public. It is called a pocket listing. Good agents will advertise their pocket listings to their best buyers before the public ever gets a crack at it. The way to get on an agents preferred buyers list is to buy a bunch of houses at retail price. As investors, we never want to pay retail price.

Now let’s talk about real deals. All across America there is property where someone will walk away from $50,000 in equity or more. These people are the mythic beasts that we call motivated sellers. They are selling because they have a problem. If one of these mythic beasts offers up a deal that is too good to be true, the real estate agent will explain to them that they are walking away from 50k, and this just will not work. The agent is obligated to list the property at market price, the deal is now dead.

You need to market to find these deals before the MLS gets a hold of them. One of the greatest things about real estate is that our market is asymmetric, meaning that no two investors are dealing with the same bits of information. You can bet your bottom dollar that if I find the big equity deal, the rest of you will never hear about it. The MLS screws this up and functions much like the stock market where everyone can see the same price and the same information about what makes that price happen. In our world, we create offers on property that is not for sale. We make offers to people in various levels of distress. Our core function is to market to uncover these deals, and then pounce upon them before everyone else gets to see them. So rather than waste your time on the MLS, go out and market for much better deals.

To your success

Josh