Read the Transcript:
Hi, I’m Joe White and this is the Grow Real Estate Investing Podcast.
Today, I am going to be talking about how your best deals can be found on the Multiple Listing Service.
The Multiple Listing Service (the MLS) is where agents list properties for sale for their clients.
Some investors feel that once a property hits the official marketplace and is put on the MLS, the chances of getting a deal evaporates.
To a degree that is true - think of off market deals as being priced at wholesale and the MLS as being the retail place to sell property.
Once a third party becomes involved, commissions are added to the price, the property is properly packaged with marketing and becomes available to a much larger pool of buyers, so the price would tend to go up and the deals would tend to be picked through.
And the price should go up. The seller is properly presenting their property. They have engaged a professional to package and present their property to the world.
But many top level property investors use the MLS to find their deals. In fact many successful investors rely solely on the MLS to find their properties. I would venture to guess that the most successful investors tend to use the MLS to build their portfolios.
So I recommend you also use the MLS to find deals. Maybe all your property deals. And I’m going to tell you how you can put this easy-effort, extremely low cost, maybe even free, source of leads to work for you. I’m going to teach you how to scrape the MLS to find your best deals.
But 1st Why the MLS?
- The MLS is Low Cost. Yes, MLS access costs money; but you can put agents to work for you using their MLS access to find you property.These agents will be working for free, until you buy a deal through them.Obviously, if an agent connects you to a deal, you would be extremely wise to make sure they get paid. Not only is it the right thing to do: but it's clearly smart investing.
- The MLS is Time Efficient. Marketing to find property leads takes time, often marketing takes lots of time. And time can be extremely expensive. There is a financial cost of time.How much is your time worth? If you weren’t spending time hunting down deals, how much could you make doing something else?
- You Have Far Less Competition, On the MLS Than You Think.
Consider this: FHA loans account for 83% of all residential property sales, and FHA requires a property to be safe and in good enough condition to be a candidate for an FHA Loan.If there are safety, or liability concerns, FHA isn’t an option. If a property is in poor condition FHA isn’t an option.Missing railings, broken tiles, lead paint, lead water service, damaged stairs, exposed wires, damaged roofs, so on all block the possibility of a buyer getting an FHA loan.
FHA allows a buyer to only put 3.5% down payment and if a property is on the MLS and it isn’t likely to be able to get an FHA loan, that seller lost 83% of his or her market.So you lose 83% of your competition on these properties. And if you are buying a property to flip, or to improve it through forcing appreciation, you are likely looking at property that falls into this category.
So these poor property sellers lose 83% of their possible buyers, which now means they are looking at either a cash buyer or someone buying it with a conventional loan, where they can put down at least a 20% down payment.
But the seller might lose even more than 83% of their possible buyers if the property still isn’t a candidate to get a conventional loan.Lenders often won’t loan on a property that is distressed or too low of value.
They won’t loan on a property in too poor of condition; because the property is their asset that secures this loan.If the buyer can’t pay back the loan, the lender wants to feel that they can take the property to cover their risk.But if a property is at risk of falling into worse condition, that asset is at considerable risk. They might not be able to recoup their money.
Let’s say a buyer wants to buy a property with a less than perfect roof...From the lenders position, the roof will only get worse. If it lets in water, the asset will quickly de-value.The borrower might have no ability to fix it, and they might have no ability to sell it in its worsened condition. And no ability to pay back that loan.The lender can take the property; but if it's now worth less than what they loaned on, they have little recourse to recoup their losses.
And if a property is too low in value, most lenders won’t bother lending on it either. It's simply not worth it to them to do a deal for $40 or $50,000.00. There simply isn’t enough profit.
The paperwork on a million dollar loan is the same as it is for a $50,000 loan. Less actually. And in many ways the risks and difficulties go up on the $50,000 property.
So our poor seller, listed on the MLS, lost 83% of their possible buyers by having a house not capable of getting an FHA Loan, then they lost most all other buyers since the property is too distressed to get a conventional loan.And to make it official, the asking price is too low for a lender to bother with anyways.
Now the seller has a big problem and needs a cash-like buyer for the solution.Someone like you who has the cash, a home equity line of credit (a heloc), has private lending lined up or understands how the seller can use seller financing as a short term loan to sell this.
For a property investor, especially one looking for distressed properties they can improve, there is very little competition on the properties they are interested in.
But it gets way better for savvy property investors; because the seller possibly has another very big and costly problem, which might discount his property even farther.
Low value, difficult to sell properties don’t attract the best agents. Like the lenders, agents see low value homes as not having enough profit and they know they are also the most effort.Real estate agents are commission based. Agents fight for million dollar listings. They don’t fight for $100,000 listings. The profit goes way down, but the effort and work goes way up.
How To Find Deals On The MLS?
- Think Outside of the Data.
The data in the MLS is often incorrect and that's where huge deals are found.When the information is incorrect, the property gets overlooked. Learn how to scrape the MLS and you will be the only one interested in a property; because only you know about it.
The MLS populates many of its information fields directly from public records. And most property information that public records has is from when the property was first entered into public records; probably in the 1920s or the 40's.
Plus, pre-computers everything was handwritten, then that was copied by hand then likely copied at least a third time when it was finally computerized. Hundreds of thousands of houses all entered in by hand, at least three times by city employees, how many human errors do you think occurred?
But also, properties change. In most cases they increased in size from when they were first entered into the system. Even if the change was done with proper permits doesn’t mean a city employee ever bothered to enter it in correctly.And permits were far less likely than they are today.
Measure ten properties in my market, here in Philadelphia and I guarantee seven of them will be considerably larger than what's in their MLS listing.If you buy a house listed in the MLS as 900 sq’, that is actually 1,200sq’, you just got 400 square feet for free.
Is that common? Yes, it's more common to buy a house in Philadelphia that is much larger than its MLS listing states it is; than it is to not.Remember property value is by square footage. - there’s free money sitting on the MLS.
So learn to scrape the MLS, set up keyword alerts to notify you when possible inaccuracies hit the market.
- Bad Agents Equal Great Deals!
Bad properties attract bad agents. And bad agents can mean huge discounts for property investors. How?
Bad agents sometimes don’t list the property in the right category. A multifamily property might be hiding amongst all the single family properties. If you are the only multifamily buyer who finds it, you have no, or low competition.
Properties being represented by bad agents often are extremely difficult to schedule showings. That means that even though the seller believes the property is for sale, it really isn’t, if no one can see it.
I once listed a property that was listed with another agent for over three years with only one showing. I listed it for $12,000 more and it sold within four hours.The seller thought I was a selling genius; but the reality is that the property was listed; but no one could get past the bad agent to see it. The seller’s impression was that no one wanted to buy his property. He felt it was over-priced, and undesirable.
Bad agents usually work for bad agencies. Good agencies have high quality, automatic showing services. Scheduling a showing is as easy as clicking a button with a top agency..
My company, Grow Property Management, we have two showing services and we allow potential tenants and buyers to instantly schedule their own showings. Why? Because it greatly runs up rents and selling prices for my clients.
But many offices have no showing service, or the agent doesn’t even know how to set it up. Without a showing service a showing is reliant on a bad agent to respond, so those showings may never be scheduled.Most agents will skip over the properties they need to wait to hear back from. If you are trying to schedule your client to see ten properties and nine of them instantly schedule with the click of the button, the tenth gets skipped so you can move on to your next task.
Especially considering bad agents often can’t be bothered to respond anyways, particularly when the commission might be next to nothing.
And lazy agents, especially under paid ones, don't take pictures, some don't even bother writing descriptions.Even with top selling agents It's rare to find a listing on the MLS that doesn’t have typos, misspelling or other grammar errors. The worse the agent, the worse the marketing. The worse the marketing, the better the deal.
And even experienced agents don’t usually correct the square footage that is listed too low. They have no idea that is even a thing.
Owning a property management company we manage our client’s’ property buying and selling; and I see buyers often get frustrated when running into the hurdles of a bad agent.And I see agents that also get frustrated. "Forget it. If they won’t sell it properly then screw them”.
If they won’t sell it properly; then they have to sell it cheap.We are not interviewing for new friends here. Badly behaved agents and sellers have to sell at a discount. The worse they are, the greater the discount.
Your job is to find a problem property where you can add value by fixing it at a lower cost than the improvement adds. A bad agent can be that problem that you can fix. And it's a low/no cost way to do it.
If we get through, where no one else can, or is willing to take the effort to, then we have no competition.The best opportunities often have a barrier of entry. Something that stops your competition.That poor property seller has a hurdle, they might never know about, that few buyers will ever get past. You get past it with an offer and your offer is the only offer that seller will ever see.
I’m not forgetting that time is money and a lot of this can be systemized to reduce the actual effort. The MLS is a utility designed to be systemized.And remember most of this effort is just your impression of things.It's that the seller’s agent makes this feel heavier than it is. For example, if you submit a low offer and a seller tells you to bugger off, that might feel very heavy to you.It might drain your energy so much that sending a quick 30 second response thanking them and telling them to keep you in mind, might feel too hard for you.But is it actually physically hard & time consuming or just your impression? And won’t that quick response greatly increase your odds of leaving the door open for them to eventually come back and accept your low offer?Always systemize things and you will get out of your own way to maximize.
Properties are listed on the MLS, with asking prices that are at very deep discounts. Maybe it’s because an inexperienced agent priced it’s value way too low, or maybe the seller just needs it gone. The problem is, the best property investors know how to pounce on them and they have the systems in place to do just that. They know how to be notified early, they know how to identify deals immediately, and they know how to get their offers in blindingly fast.
Set yourself up with alerts, pay immediate attention to them, respond immediately, and get your offer in before anyone else. And you have an easy, just about free source of discounted properties.
- Still Submit Offers That Meet Your Terms.
The asking price means nothing, only your valuation does. If the asking price is $100,000; but the numbers make sense at $50,000; then you offer that. You just don’t walk away and do nothing. Will a seller likely say no when you are so far off on their price? Yes. Will some say yes?
They will. If one out of every 30 will say yes; then you need to put in 30 offers. If it's 1 out of every 100 that will say yes, then you submit 100 offers.
Remember, what you have going for you, is you are the easiest deal. You are here now. You are the bird in the hand and the seller can be done with it. No more showings with strangers walking through their home, no more waiting to move on.Remember a wise offer indicates that it comes with zero hassle for the seller and is presented as a very easy, very friendly, low stress deal for the seller.Sellers often discount easier deals and are always looking to avoid hassle and to move on with their lives. Selling a property keeps sellers in a holding pattern, they want to be in. You offer them a way out. Always offer an easy deal.
Also, remember you can request terms that work for you. You want seller financing? Ask for it. Obviously, be careful not to put the deal at risk; but just because a property is on the MLS, doesn’t make it officially off limits to your creativity.
One consideration though is make sure someone is in position to offer you your terms. The MLS will tell you how much debt someone has. They usually will need the equity, to be able to discount the property or do seller financing.
We can sum this up with a question:
How much are discounted properties costing you to find?
The cost of acquisition, the expense of having to market for deals through direct mail, driving for dollars, cold calling, pay per click and seo leads, and your time cost of money?
The MLS is near free and has some of the best deals to be found.
Those are all effective ways to find deals; but they all cost money, they all have risks that you will not get a return back on that marketing investment, and they all take your time.
The MLS is a utility designed to help you find what you want. Put it to work for you. Find deals inexpensively and find them with efficiently.
This is Joe White with the Grow Real Estate Investing Podcast
As always, I wish everyone happy investing.