Finding houses before they hit the market has many benefits for both sellers and buyers.
This is especially true when there is a stronger seller market or a shortage in property inventory.
But how do you go about it, and which marketing methods are most efficient?
This article will provide you with the general benefits of finding houses before they hit the market, why it got a bit more difficult to do that, and which marketing methods are the most efficient.
Why You Want to Find Houses Before They Hit the Market
Finding houses before they hit the market are also called off-market homes or pocket listings.
There are benefits for both the sellers to offer a house off-market, but also for buyers, investors, and other real estate professionals.
Some of the benefits have their merits but others are rather of a psychological or “placebo” nature.
To be on the same page definition wise, houses before they hit the market or off-market homes are not yet listed on the MLS but nevertheless, they are for sale.
The Benefits for Sellers
There are home sellers that prefer to offer their property off-market because they just want to test the waters.
Another benefit for sellers is that they can do their home sale in a more discreet and private way.
The next benefit is that they can reduce their commission costs or even avoid it if they go for the sale-by-owner route.
The commission reduction becomes possible because they will only have to deal with buyers’ agents.
For other sellers, another benefit is that they will be able to reduce the chances of their home becoming a shelf warmer.
The latter happens when it gets listed on the MLS by a realtor and it stays on the market for more than 30 days.
Once listed on an MLS, the clock starts ticking and the “time or days on the market” start to count.
The longer the time on the market, the higher the chances of receiving rather low ball offers from potential buyers.
So, sellers think that by avoiding getting listed on an MLS at all they can also avoid their house becoming a shelf warmer and getting bombarded with lowball offers.
In turn, by not listing it, they think they may get a higher price
The Benefits for Potential Buyers
The first benefit is the most obvious.
By going after off-market homes, you reduce the number of competing home buyers.
Because you will have access to an inventory that other potential buyers don’t have easy access to or no access to at all.
This approach is especially true when there is a market with a low inventory and/or a seller’s market.
When using this approach as a buyer in a “balanced” market, an additional benefit is to also get deals more often, since the seller has lower commission costs.
The last benefit is that going after houses before they hit the market increases the chances for real estate investors finding a deal.
When sellers usually work with a seller’s agent and it’s a decent realtor, their house will usually get somewhat prepared to get offered on the market.
And the potential buyer group is usually made of retail buyers.
The chances are higher for pocket listings that the respective properties are not necessarily prepared to sell and not many upgrades are made, if at all.
So, the likelihood is higher to find wholesale properties or fixers and flippers among these off-market homes.
The exceptions, of course, are those pocket listings where the sellers expect to get a higher price.
But that’s just one sub-group of sellers that prefer to go with a pocket listing.
And of course, your chances depend also on the type of market you are in.
In a hot seller’s market or a market with a low inventory (such as right now in the U.S.), it might get quite tough to even find deals among those pocket listings.
It Just Got More Difficult to Find Houses Before They Hit the Market
Finding houses before they hit the market got more challenging on January 1, 2020.
Well, there is a thing called Clear Cooperation Policy by the National Association of Realtors and its implementation became mandatory by May 1, 2020.
What needs to be implemented?
I better quote it to be more exact:
“MLS Participants must distribute exempt listings within (1) one business day once the listing is publicly marketed. See Section 1.01, Clear Cooperation.”
My first thought was “not so funny” for realtors that want to go with pocket listings.
But it’s not as bad as it sounds.
First, it’s not a law, but it’s binding for all brokerages, agents, and member MLSs of the association.
For example, this policy is not binding for licensed agents that are not members of the National Association of Realtors.
But if you take into consideration the fact that 88% of homebuyers use a real estate agent or broker in the U.S. and that most of these are members of the National Association of Realtors, you can conclude that at least getting access to residential home pocket listings via a realtor or broker got a bit more difficult.
Nevertheless, this new policy still allows brokers and agents in a limited way to have off-market listings.
So, there are still some loopholes.
According to statement 8.0, as a seller, you can have the respective agent not display your house on the MLS IDX or you can make the listing an “office exclusive”.
In the latter case, a realtor can share the property listing only with other agents or one-on-one with buyers.
What Options Are Left to Find Houses Before They Hit the Market?
Because of the above situation, there are basically three options left for you to find off-market homes:
- You could work with a licensed agent that is not a member of the National Association of Realtors.
- You could still work with a licensed realtor that is also a member of the National Association of Realtors and hope that he has “office exclusive” listings.
- You could use marketing and prospecting methods that avoid realtors altogether.
Because of the mentioned constraints, your options are a bit more limited to find houses before they hit the market at least if you did this with realtors before.
So, to increase your chances I will focus on prospecting and marketing methods you can use where no realtors are involved.
But I think even if you are a realtor you may benefit from knowing these methods, since you may also be in need of convincing a seller of an off-market property to work with you.
17 Marketing Methods and Channels to find Houses Before They Hit the Market
Since the indirect route via realtors is a bit more limited, there is only the direct route left.
This means approaching or targeting potential and overall motivated sellers directly.
Why should they be motivated?
Motivated means that they actually want or even need to sell, because of some pressing problems or needs they might have.
It will make it easier to negotiate both for realtors, brokerages, and independent buyers and real estate investors.
So, no matter what type of real estate market participant you are, you have better chances to solve a problem or fulfill a need they have.
In my article about how to find motivated sellers applying the 80/20 principle, I covered what will come in this section already in-depth.
So, I will provide you with a shorter version of this article below.
When looking for different marketing methods, you will accumulate a large list of different ones pretty fast.
On one hand, this is inspiring, because you realize that you still have many options.
On the other hand, you may feel overwhelmed soon, not knowing what to focus on.
Here is a longer excerpt of the list of my article, and please feel free to feel inspired:
- Networking with hundreds of business cards and let everybody know that you solve problems for motivated sellers
- Leaving flyers at unemployment offices
- Looking for ‘For Sale by Owner’ (FBSO) signs or vacant houses, or occupied but messy homes (Driving for Dollars)
- Running a classified ad on Craigslist that says “We Buy Houses”
- Use walking billboards
- Run direct mailing campaigns to absentee owners, out-of-state landlords, estate/probate attorneys, divorce attorneys, vacant landowners, HUD/VA foreclosures, credit repair agencies, pre-foreclosures, specific zip codes, properties purchased between 3k and 20k within the last five years, laid off employees, hair salons/barbers (because they are social hubs), water, gas, and electric company shut off lists, carpet cleaners, people having garage sales, and owners of multiple properties
- Cold emailing to Craigslist rental property classifieds
- Cold calling FSBO sites
- Using bandit signs
- Reaching out to mortgage companies
- Put door hangers on target properties
- Using a bird dog
- Having mail carriers notify you of vacant properties
- Door knocking
- Advertising in penny saver papers
- Buying leads from DataTree, ListSource, RealQuest, MelissaData
- Running social or search ppc campaigns
A pretty long list, right?
And it wasn’t even everything I put in the list of my other article.
So, in that article, I concluded that the least time intensive, most scalable, and easier to test marketing methods and thus the 80/20 of the longer list of marketing methods are social or search ppc campaigns, and direct mailing campaigns.
Because of the Clear Cooperation Policy by the National Association of Realtors, it got a bit more difficult to find houses before they hit the market, at least with the help of a licensed realtor that is also a member of the National Association of Realtors.
The other option is targeting and reaching out directly to potential sellers.
There are many existing marketing methods and channels to reach these potential sellers and using ppc campaigns on social media or search engines and direct mailing campaigns is the 80/20 in terms of least time intensive, most scalable and easier to test.