Where Does Real Estate For Sale Come From?

Real Estate For SaleWhen you’re a buyer in the market for a home, business or investment property, one of the first things to consider as you begin your search is where does real estate for sale come from?  We can rule out the stork flying them in or growing properties in a pumpkin patch, since we know that’s where babies come from, not real estate.  Let’s look at some of the most common sources of real estate for sale and how we can tap into those sources in our property search.

1.  Multiple Listing Service and Syndication Sites

The local Multiple Listing Service (MLS) is the most common place to find real estate of all types, including homes, land and commercial properties.  Almost all MLS systems “syndicate” their listings by sharing them electronically with public real estate information sites such as REALTOR.com, Trulia, Zillow and others.  Real estate brokers and their agents can also receive listing feeds onto their web sites through a system called IDX (e.g. mine > Northern California Real Estate) where buyers can search for properties themselves and communicate with the agent to schedule a showing or request more information.

Strengths:  Most real estate agents list their properties on the MLS and opt to have them syndicated, therefore the MLS is the largest single place to find real estate for sale.

Weaknesses:  Listing brokers have the option to withhold their listings from syndication and not allow them to be transmitted via IDX to competing broker’s web sites.  This means buyers must have direct access to the MLS themselves (most MLS systems now operate their own consumer-accessible listing site) or work with an agent who has MLS access (not all agents do, see next section…).

Quick Note:  Since the local MLS initially featured mostly residential properties, other listing systems such as Loopnet were developed to feature commercial properties for sale or lease.  Most local MLS system now offer listings for just about any type of property, but Loopnet remains the most popular marketplace for commercial, industrial and special use properties.

2.  Non-MLS Brokers

With the development of MLS syndication and Internet search capabilities, some brokers choose not to participate in the local MLS system.  Rather than paying MLS fees and being bound by MLS rules, they post their properties for sale on the public sites I mentioned above, which is also where they also find properties for their buyer clients.  They will also post their listings on their own web sites and use many pre-Internet marketing channels such as print advertising and neighborhood post card mailing campaigns.

Strengths:  Some non-MLS brokers offer reduced fees commensurate with their reduced level of service.

Weaknesses:  Since not all MLS listings are syndicated, not having direct access to the MLS means that non-MLS brokers may not find all properties for sale that fit their client’s needs.

Quick Note:  Real estate brokers and their agents are required to be licensed by the State where the property being sold is located, but they are not required to participate in the MLS or to be members of the National Association of REALTORS® or a local REALTOR® association.

3.  Pocket Listings

The definition of “pocket listing” varies throughout the country, though in general it’s a property that is for sale but the listing is not published on the MLS.  The property owner may have a written contract with a broker to sell the property for them, or may have a verbal agreement with any number of brokers stating that they MAY sell the property if a broker produces a qualified buyer that will meet the seller’s terms.

There can be many reasons why a seller might prefer to sell via a pocket listing, the three most common are: 1) they don’t want neighbors to know their property is for sale and 2) they want the property shown only to a limited market of highly qualified or unique buyers, 3) they are only testing the market and won’t sell unless they receive an offer they can’t refuse.  The broker with the pocket listing will usually circulate information about the property first to potential buyers they know who are looking for that type of property, then to other agents in their office, then to selected agents at other brokerages who frequently deal in similar properties.

In some areas, brokers who frequently work with pocket listings have formed “off market” property information exchanges, usually a web site, where they share their pocket listings.

Strengths:  The sale is confidential, though when it is completed a grant deed confirming transfer of ownership is filed with the County Recorder and becomes a public record.

Weaknesses:  Not implementing a broad marketing campaign limits the pool or potential buyers, usually resulting in weaker offers – if any.  Also, many agents holding a pocket listing will seek to represent both the seller and the buyer in the sales transaction, a practice known as “dual agency.”  Opinions vary on the ethics and legality of dual agency, though it is illegal in some states and considered an unethical practice by some brokers.

3.  For Sale By Owner

A property owner may choose to sell For Sale By Owner (FSBO), listing their property for sale on the public sites previously mentioned and on FSBO-specific sites such as For Sale By Owner.  They will also usually use other traditional selling methods such as the For Sale yard sign and print advertising.  Many publish a single page web site to advertise their property.

Strengths:  FSBO sellers with knowledge of the real estate sales process can save a significant amount in commission fees.

Weaknesses:  Not implementing a broad marketing campaign limits the pool or potential buyers, usually resulting in weaker offers.  It also creates problems due to “commission adjustment.”  For example, if the seller wants $100,000 and the seller won’t pay broker commissions, a buyer might offer $93,000 ($100,000 minus 6% “standard” commission).  If the buyer must pay their broker commission out-of-pocket, rather than financing the commission in the mortgage as is usually done when the seller pays all broker commissions, that could reduce the amount of cash a buyer can put down, again reducing the offer price.  In some cases, it could scare off potential buyers who are on a tight purchase budget.

Quick Note:  An owner can sell his/her property without a real estate license.

4.  Auctions/Tax Sales

While individual property owners seldom sell by auction (though it does happen), lenders and government entities use auctions as their most common method of liquidating foreclosed and seized properties.  Auctions are usually announced well ahead of time and a specific bid submittal date is set.  This provides opportunity for buyers to conduct inspections and prepare a bidding strategy prior to the auction.  Some auctions are now conducted online (example: Bid4Assets), so that bidders aren’t required to physically show up to compete for properties.

Strengths:  Ability to inspect/analyze properties prior to them going live in the auction.

Weaknesses:  Many auctions do not allow interior inspections prior to bidding.  While most bidders are hoping to buy properties under estimated market value, the auction process frequently drives the final sale price higher than market value.

5.  Probate Sales

In the vast majority of probate sales, the executor or trustee managing the estate will list properties with a local broker of their choice, to be marketed like any other property.  In less frequent instances, the court may assign the property to an auction or to a court-appointed broker (practices vary throughout the U.S.).  Although some investors specialize in purchasing probate properties below market value, those sales are infrequent and usually take place only when the estate in probate has immediate cash needs.  But in most instances, the court or executor is required to accept no less than full market value for probate properties or face opposition to the sale from beneficiaries of the estate.

Strengths:  Properties come on the market that may not have been sold if the deceased were still living.

Weaknesses:  Most probate sales go through normal sales channels, monitoring probate court activities rarely yields opportunities for most buyers.

6.  Unsolicited Offer

When a buyer needs a specific type of property in a specific location but none are for sale, they can always approach property owners with an unsolicited offer (see my article: Making An Unsolicited Offer For An Unlisted Home).  This is often the buying method of last resort, but can be our first choice when none of the properties currently on the market are as suitable as a property that we see that is not on the market.

Strengths:  With luck and persistence we find and buy the property we want.

Weaknesses:  Most property owners will outright reject the offer or might consider it on their own terms and/or at a later date, which might not be acceptable to us.

7.  Word Of Mouth

Letting friends, family, co-workers, golfing buddies, lodge brothers, our dentist, our psychotherapist, and the milkman know that we’re looking for a specific type of property could result in a phone call with a hot lead.  Just putting the word out that we’re in the market is a contribution to “making our own luck.”

Strengths:  With luck and persistence we may find and buy the property we want.

Weaknesses:  We could be bombarded with opportunities, but this is not a method to rely on.

 

If we’re in the market to buy property, these are some of the main sources we’ll look at to find just the right property that fits our needs.  If we’re working with a real estate professional, we’ll want to know that they are using multiple sources – including those we’ve discussed here – to find property for us.

Also… if we’re selling property, we’ll want to consider the listing sources we discussed here to see which would get us the best bottom line deal on our sale.

I hope you found this information helpful.  If you have any questions about sources of real estate for sale or buy/sell strategies, drop me a line.

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John A. Souerbry & Associates (CalBRE 01370983)

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John A Souerbry real estate

California Real Estate Broker License 01370983

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Author:JohnASouerbry

John is broker/owner of John A. Souerbry & Associates, a full service northern California real estate firm providing brokerage, property management and estate services in the greater San Francisco Bay Area.