In the highly competitive real estate market of 2021/2022, anyone wanting to buy a house has most likely been very frustrated by home prices getting away from them or constantly losing out on a house by not bidding $500,000 over list price. Anyone in the market to buy a house would be ecstatic to find an off-market house that’s willing to sell for a reasonable price by not going on the MLS and receiving many offers. You can see all about the benefits of buying an off-market property here.
If getting out to the greatest number of people (e.g. putting on the MLS) typically provides the best price to the seller, why would someone want to sell off-market? Typically, most people sell off-market because it saves them the significant hassles of fixing up, cleaning up, and the inconvenience of open houses and showings and saves them significant costs (e.g. staging, real estate commissions, etc.). In addition, if they want to be able to rent back, extend close, or do a 1031 exchange, selling through the MLS gives them less of an ability to negotiate that. So how does one go about finding an off-market listing?
Here are a few tips:
- Tell everyone you know you are looking for a house to buy. Friends might have other friends that are looking to sell/move. Talk to your neighbors, they might know someone or they may want to move themselves.
- Get a well-connected real estate agent. They might know people that are going to want to sell in the near future or they might have some strategies to find sellers. However, once you use a real estate agent, they are going to want to represent you and probably the seller (if they don’t have an agent) and the price of your property would go up 5%.
- Write a letter to everyone in the area that you are looking to buy. This is what I did and it worked. I sent out approximately 300 letters and received approximately 25 replies: 10 just wishing me well and saying they will keep an eye out and 15 interested in selling or possibly interested in selling that I went to go visit.
Here was the process I used to send out letters:
- Determine the area and houses you would be interested in purchasing. First, start out just in your optimal area. You can always expand later.
- Next, try to get the names of the owners of each house that you are interested in. Since I’m a broker, I was able to access a database with this information. However, there are other ways you might be able to find this. You could Google each address and poke around to find the owner’s names. Your city’s planning or building department may be willing to send you a download of that information. If you can’t find a name, just don’t put a name on the envelope and mail it or drop it off.
- Write a personalized letter to each house. I just used Word to do a mail merge and differentiated my letter between owners who lived in their houses and owners who rented out their houses (i.e. tax mailing address different from house address). However, the more specific you make the letter to that person (e.g. the appearance of their house), the more likelihood you have of them responding. In the letter, include details about yourself/family, why you like the neighborhood, etc. To top it off, include a picture of your family. I used half of a 4”x6” print.
- Handwrite the address on the envelope. If you print it on there, the open and response rate won’t be as high.
- Wait for replies. I received replies all the way up to a month from when I sent the letters.
- Make offers on the properties that you like. This is another area where it helps to have an agent because they have offer forms that are industry standard. You may be able to talk to an agent about working on a limited engagement and give you or the seller credit back on the commission. However, you can also work with a real estate attorney or Google “Residential Purchase Agreement” and your state and you might be able to find the necessary forms.
- If you get this far, make sure you then work with a reputable title company to make sure that they help you through the process correctly and that you have clean title to the house.
This whole process is a substantial amount of work you might find rewards like I did or you might get nothing. If you do decide to embark on this endeavor, contact me and I can answer any questions or provide additional wisdom.