It is definitely possible to find a great deal on the MLS (Multiple Listing Service), but it takes patience and work. Many markets are seeing rising prices and low inventory, which makes it hard to get a great deal. Some investors will tell you it is impossible to find rentals or flips from the MLS.
I buy many properties to fix and flip and hold as rental properties and 90 percent of my purchases are from the MLS. Even though prices are higher and competition is fierce, there are deals on the MLS. There are many ways to buy houses below market value, but this article will focus on the MLS because that is where I have had the best results. I am going to discuss what strategies I use and how you can get great deals on the MLS as well.
For more information on my investing strategy and properties check out my complete guide to purchasing long-term rental properties.
Can you still get great deals on the MLS?
I hear investors say you can’t buy from the MLS anymore; there is too much competition! It is true that there are many people trying to get a great deal from the MLS, but that doesn’t mean it is not possible. There are still many deals if you know how to find them and to me it is easier to buy off the MLS than other places. I used to buy many of my fix and flips from the trustee sale, but there is so much competition that prices are higher at the trustee sale than the MLS. With the trustee sale you have to pay cash in two hours and many times cannot see inside the home before you buy it. I would rather buy off the MLS where I can complete an inspection, see the home and get a loan.
REO and short sale inventory has decreased in most markets. I have bought many REOs and many short sales as rental properties or fix and flips in the past, but it is much tougher in today’s market. I am still getting REOs and short sales, but more of my purchases have been traditional or estate sales. I am still jumping on any short sale or REO deal I see, because they are typically priced very well. Prices are also rising in many areas of the country and that creates opportunity for investors. With prices rising more, fair market sellers are able to sell their homes. For information on how to determine market values, check out this article.
What is a fair market sale and how can they be great deals off the MLS?
A fair market sale is a term used to describe a home that is not in a short sale situation or REO. A short sale is when the homeowner owes more to the bank than they can sell the home for and the bank has to approve taking less money than they are owed. Many homeowners bought foreclosures and homes in disrepair the last few years when prices were lower. Not every homeowner had the money or time to repair the home once they moved in. Some of those homeowners need to sell a home that is not in very good condition. If a house needs repairs, that creates opportunities. The more work that is needed, the bigger discount it takes to get a home sold. Rental property number 5 was a property that was a fair market sale that needed a lot of work and was a great deal.
How can rising home prices create opportunity on the MLS?
With rising prices, some homes are underpriced by real estate agents or sellers. I have bought a couple of houses that were underpriced recently, and I either had my offer accepted right away or won a multiple offer situation. Houses are underpriced because the real estate agent did not know the true value of a home due to an increasing market, or it could be the seller wanted to sell the home quickly. Rental property number 9 and 10 were fair market sales that were underpriced and I was able to purchase them well below market value. If a real estate agent is part-time and not paying attention to the market price increases, it could mean opportunity for investors.
If you find a great deal on the MLS you have to act quickly
I am a real estate agent and that gives me a huge advantage when submitting offers quickly. I check MLS multiple times a day and as soon as I see a great deal, I look at the house as soon as possible. If I like the house I have my assistant write up an offer and send it to me with DocuSign. DocuSign let’s me sign the contract electronically on my phone, and I can send an offer to the seller almost immediately. By being an agent, having an assistant and using DocuSign, I can send an offer in less than an hour after a home is listed. Here is more information on why it is a good idea to become a real estate agent if you want to be a serious investor. Acting quickly is one of the most important things you can do when buying off the MLS.
It is true that many REO sellers will not accept an offer right away, but many short sales and fair market sales will. Most banks when selling their REOs will have a 5 day period or longer before they will review offers. Some banks and HUD will have owner occupied periods as well where only owner occupants can make offers when a home is first listed. This is why short sales and fair markets sales can sometimes be better deals than REOs.
How can you submit offers quickly if you are not a real estate agent?
No matter what you do, it is going to take longer to submit an offer if you are not an agent. One way to speed things up is to ask your agent if they can set up property alerts for you. In my MLS I can set up a property alert that sends specific properties that meet my given criteria to my e-mail as soon as they are listed. I set these alerts up for myself, because I sometimes miss a great deal on the MLS. I was able to buy my last fix and flip thanks to a property alert that told me a home was back on the market. Investors can use sites like Zillow or Realtor.com, but those listings are not always updated quickly. The best way to submit offers quickly is to have a great real estate agent.
How to find an investor friendly real estate agent
Besides setting up property alerts you need an awesome agent. I talk about how to find an investor friendly real estate agent in his article, and I talk about how to motivate your agent in this article. You need an agent that can submit offers quickly and show homes quickly. Don’t be afraid to try out a few agents until you find the right fit. In some cases a new agent may be better than an experienced agent. The new agent will have the time and motivation to find you deals and act quickly. The older more experienced agent may be too busy to find deals and write offers as quick as you need.
Offer the most you can in multiple offer situations
If you find a great deal, don’t be cheap! Don’t try to low ball an already great deal because it may cost you the deal. Don’t try to make a few extra bucks if there are multiple offers. Offer the most you can to make your desired profit. Here is a great article with much more information on how to win a multiple offer situation. You don’t want to stretch your limits when you make an offer, it doesn’t make sense to buy a home that will not make you money. You don’t want to try to steal a home either if it will cost you the deal.
When I make an offer on a home, I may try to offer a little less than I want to pay if I think I can get my offer in before any others. If the home is an amazing deal I will offer full price or sometimes even above full price so that the seller will sign my offer before any other offers come in. In a multiple offer situation, I do not pay attention to the list price. I offer the most I can that will still make me my desired profit. Sometimes I offer less than the listing price and sometimes I offer more than the list price.
Make your offer more appealing to a seller by using cash or few contingencies
I am an experienced investor and I am in a great place where I can offer cash on a property if I have to. I also have a great portfolio lender that will not require an appraisal on loans under $100,000. Most sellers want quick and easy closings and a cash offer is usually the most enticing to them. If you have to use financing, use as few contingencies as you can. I am able to remove the appraisal contingency on most of my financed offers, and I will even remove my inspection contingency in some cases. On my last three deals I have taken out my inspection contingency. This is risky for someone who does not know what to look for in a house, but if you are getting a good enough deal a few unknown issues will not kill a deal. A cash offer with no inspection contingency is a great offer for most sellers. But some sellers like HUD only care about the net price to them and do not care if you use cash or a 203K rehab loan.
Use real estate agent mistakes to your advantage on the MLS
I have bought many houses from the MLS that were listed incorrectly. I bought a house from HUBZU that was listed with no basement, when the house had a full, finished basement with two bedrooms and a bath. I recently bought a rental that was listed as a 3 bedroom 2 bath house, when it was really a 5 bedroom, 2 bath house. You have to know your market, pay attention to the pictures in listings and confirm the information that is listed. Don’t be afraid to look at many houses to find the few that are not listed correctly.
Buying off the MLS is not rocket science, but there are definite tactics to use to increase your chances of getting a great deal. Acting quickly and being able to identify a great deal are the most important things you can do. Making solid offers will also increase your chances of getting that great deal. When you see a great deal, you better be able to pounce on it and get it under contract before anyone else can. Nine of my last ten fix and flips were bought of the MLS, so it is possible to get a great deal on the MLS.
For more information on flipping houses, including how I average over $30,000 profit on each flip, check out my bestselling book Fix and Flip Your Way to Financial Freedom on Amazon. It is available as a paperback or eBook.