How to Find Properties for Sale that are Not Listed
Some real estate investors gain a competitive edge by finding properties for sale before they become a real estate listing. There are a number of techniques used to find properties for sale that are not yet publicly offered. There are advantages to having information about a property that is not yet publicly listed so it pays to look for them.
Advantages of Buying a Property that is Not Listed
The reasons for buying property that is not on the market (off-market property) include getting a better price, having less competition for a good deal, and negotiating purchase terms that are more favorable. Another good reason to acquire off-market property is that it is adjacent to another property, which gives it more value. Buying off-market properties is frequently necessary in order to use multiple properties for a single development project.
How to Find Off-Market Property
Realtor Strategies
Realtors have an advantage because sometimes they get information first about a possible listing. A client may ask them to provide a valuation estimate because they are thinking about possibly selling their property. Some realtors make direct offers on these properties without ever having to create the public listing.
Realtors can increase their opportunities by checking in with past clients to see if they might be thinking about selling or if they know someone else who is considering it. If you are not a realtor or do not have a close relationship with one, who will give you a chance at these opportunities, the next best thing is to network with people.
Networking
Networking is being friendly and talking to as many people as possible. One successful real estate investor finds a neighbor he likes and simply goes door-to-door introducing himself. He explains that he is looking to buy a property in the neighborhood. It takes a bit of patience and multiple attempts. Nevertheless, he occasionally receives a call from someone wanting to sell a property. A direct purchase avoids paying a sales commission. He scored some great deals on these for-sale-by-owner (FSBO) properties. Since he knows any neighborhood that he likes very well, he can make an immediate offer, at a good price, and still get a discount.
Work with Title Companies and Banks
Title companies have a steady flow of property closures and know when the deals do not go through. Sometimes this creates a motivated seller because the seller has been waiting quite some time for the escrow to close. Most of the properties are no longer on the market when an escrow close is imminent. If a deal fails at the last moment, getting information about the failed deal may be useful in order to buy the property at a discount.
Banks end up owning many properties that they need to get rid of, even if sold at a discount. A friendship with a bank officer who is in charge of managing the portfolio of bank-owned properties needing liquidation may create some interesting possibilities. Another way to work with banks is to find a property that is pre-foreclosure and then make a short-sale offer to the bank with the cooperation of the person who is about to lose the property.
Amassing Multiple Properties for a Development
This situation is a different need. The price paid for a property may exceed what it is worth as a stand-alone piece if the property combines with a group of adjacent parcels and the entire group would be worth more. Developers sometimes use a “straw person,” to buy a property, in order not to give out the information of who the real buyer is behind a transaction. This is to avoid having to pay extraordinary prices for the properties needed for the development.
Summary
The main reason for seeking to purchase off-market property is to have some advantage from the “secret” information. These advantages are, to get a better price, to reduce competition from other buyers, and/or to create more value by assembling adjacent parcels.