Buying Deals on the MLS

SUMMARY

• Finding good real estate deals is one of the highest value uses of your time as a real estate investor.

• Despite popular belief, the MLS can be a good way to find deals, but you have to have an edge and a good strategy.

Most seasoned real estate investors have a terrible opinion about buying deals from the Multiple Listing Service “MLS”, and with good reason.

If you are trying to buy a deal on the MLS, it is likely that an investor who has a good relationship with the listing agent has already seen the deal and passed on it for some reason. And everyone else looking for deals is now at the table negotiating with you, which could create an auction-type situation which is never good for a buyer.

BUT – I believe there is a strategy that can be effective to buy good deals off of the MLS if you are willing to make strong offers and if you can deal with losing out on deals over and over again before you finally close on one. Also, generally it is easier to find good deals on the MLS during a “buyer’s market” than a “seller’s market” because there is less competition during these times.

The key to winning deals from the MLS is to have an edge. If you don’t have an edge you will lose every single time unless you are overpaying for the property (the cardinal sin of successful investing!!!). So how do you get an edge to win good deals off the MLS? Here is my 4 pronged strategy.

Edge #1

Write the strongest offer.

To get a good deal on the MLS you need to write an offer that has very limited contingencies. When I offer on the MLS my offers are structured as follows: (1) all cash offer when possible, (2) no inspection contingency (because I have already walked the property with my contractor and I know the condition before making my offer), (3) no appraisal contingency, (4) close quickly, (5) “as-is” offer, and (6) strong earnest money deposit (varies depending on deal size but your goal is to make the seller think you are dead serious about closing).

Edge #2

Your reputation.

To win a competitive deal on the MLS you absolutely MUST be able to demonstrate to the Seller that you are a closer. So many “buyers” are wanna-be’s who put properties in contract and either can’t or won’t actually close the deal.

This happens all the time and it drives sellers crazy. When you make an offer the seller must believe that you can and will close the deal. The best way to do this is to tell the seller right up front that you are a buyer who closes deals, and you make it easy for sellers. You are not going to nickel and dime the seller because there were small items found during the inspection (for example ungrounded outlets, tuckpointing needed, flashing repair).

No, you are going to close easily and quickly. You want to drive this point home with the seller and tell them repeatedly that you are a closer. Ideally you will be able to describe your track record as well, describing your current portfolio and tell them about a few recent acquisitions you have completed to show you actually to purchase real estate. If you don’t have the track record, this is where you need to lean on the reputation of your real estate agent, borrowing their reputation to help demonstrate to the seller that you will close.

Edge #3

Use Your Real Estate Agent.

Not all real estate agents are created equal. If you want to win a competitive deal on the MLS you need one of the best agents in your market or you at a huge disadvantage.

The difference between a really good agent and a regular agent is absolutely huge and cannot be overstated. Good agents add tons of value to their clients, helping them find and win deals and they can sometimes provide guidance on obtaining financing and finding contractors as well.

Edge #4

Let the Sellers Agent Double-End the Commission.

Another edge you can create for yourself involves playing on human nature. Seller’s agents are trying to make a living just like everyone else. If you are not working with a real estate agent on a transaction, you can call the listing agent and tell them that you are interested in a property and you are not working with an agent. You can then let them know that you would like them to prepare the offer and purchase contract for you and you are perfectly fine if they would like to represent both sides of the transaction.

Some real estate agents will not do this because they believe it is not in the best interest of their clients, who end up paying a larger commission because the agent represents both the buyer and the seller.

Other agents will salivate at the idea of earning an extra commission on a sale and will automatically move your offer up to the top of the list or perhaps indirectly assist you in getting the deal done. If your offer is close to other offers, you have an Edge because the listing agent is financially incentivized to want you to win.

Buying property on the MLS is not easy, but if you use the strategies above and create an advantage for yourself, it can be a winning strategy.