Trying to Find That Perfect Home? They Aren’t Always on the MLS

We’ve heard the stories about people who managed to make an offer on a house before it officially went up for sale, beating out all the other would-be buyers and scoring the home of their dreams. And in a fast-paced market, where houses often sell in less than a day, and buyers have to be prepared to make top-dollar offers in what often turns into a bidding war, staying on top of both current homes for sale and potential up-and-coming listings can be one of the best ways to find the house you want. But if you don’t know how to buy a house before it’s listed on the MLS (multiple listing service), then you’ll miss out on this chance.

How do you buy a house before it’s listed on the MLS? And what is the process when it comes to buying? Most importantly, how can your real estate agent help you facilitate buying a house before it’s listed for sale?

We researched the ins and outs of what you, as a buyer, should know when it comes to purchasing a home before it’s listed on MLS. We spoke with top real estate agents in regards to buying a house before the “for sale” signs go up, where to look for those potential sales, as well as seeking insight from other real estate professionals.

Here’s our breakdown of everything you need to know about finding one of these sometimes elusive (but possibly perfect for you!) off-market homes.

What is the MLS, and how does it work?

The MLS, or multiple listing service, is a marketplace specifically for selling homes. The MLS is used by real estate professionals to showcase homes for sellers and find homes for buyers, with the intent of displaying houses for sale to the widest possible pool of qualified buyers.

Originally developed in the 1800s by real estate brokers, the concept was born when brokers would gather together to share information about listed properties, eventually agreeing to pay for each other’s help in selling homes and finding buyers.

Sam DeBord, CEO of Real Estate Standards Organization (RESO), a company that creates the standards for interoperability and efficiency for MLS sites, real estate agents, and consumer websites, defines today’s modern MLS as a brokerage cooperative.

“Brokers and agents agree to help sell each other’s client listings,” he says. “All buyers and sellers are exposed to one another, creating the most potential value for consumers.”

There are nearly 600 MLS databases in existence around the U.S., providing agents with the ability to share information about listed properties with other brokers, and giving both buyers and sellers wider opportunities.

The MLS is also there to maintain the integrity of home sales and purchases. “When putting a home on the MLS, an agent must research the market, create a comparative market analysis (CMA), and ensure that the seller understands the process, costs, and possibilities,” says DeBord.

“The agent will follow the rules of the MLS for transparency, consistency, and honesty to the public, and generate the most possible exposure for that listing.”

All publicly listed properties can be found on the MLS, from single-family homes and condos to foreclosures or pre-foreclosures. The MLS does not show FSBO homes (properties that are for sale by the owner), nor does it show homes that haven’t officially been listed for sale.

The database provides a wealth of information, such as the home price, property details like the square footage, property tax amounts, and contact information for the listing agent.

The MLS is only available to licensed agents, however. As a buyer, you won’t have access to the MLS and its listings without help from your real estate agent.

What is an off-market listing, and why would a seller want to go this route?

Simply put, an off-market listing, commonly referred to as a “pocket” listing, is one that hasn’t been put on the MLS. That means that not only is it inaccessible to many buyers, but their agents might not know about it, either.

While it makes sense for a motivated seller to list their house on the MLS as soon as possible, there are some situations where a seller wouldn’t want to put their home on the database. Pocket listings exist to accommodate those needs.

Privacy

Chicago agent David Dominguez, who sells homes more than 42% faster than the average agent in his area, says that there are several reasons a seller might not want their home on the MLS.

“What I’ve been seeing is that people are concerned about privacy and comfort,” he says. “If a person is a celebrity or an executive, they don’t want their property out there on the market. And especially with COVID-19, sellers often don’t want so many people going through their house.”

Health concerns

Like Dominguez, Virginia agent Jenny Maraghy, an eight-year veteran of the industry, says she has seen more sellers who keep their house off-market because they are concerned about COVID-19 and don’t want a lot of people passing through their home.

“Some sellers are concerned from a health standpoint, especially if they’re at an increased risk for infections or viruses,” she says. “They don’t want a large volume of people in their home.”

Living conditions

In some circumstances, sellers might actually find themselves in a position where they are embarrassed about their home’s condition.

“Maybe it’s a hoarder situation,” explains Maraghy. “The seller wants or needs to sell, but they’re embarrassed to have the house open to the general public.”

Investors with tenants

For those sellers who are looking to put a rental property on the market, they may be concerned about tenants finding out that the property is for sale. Having tenants in place, especially long-term ones, can be a strong selling point for rental properties, and sellers aren’t going to want to disrupt that edge.

“Investors who have tenants in place often don’t want the property on the open market,” says Maraghy. “They aren’t willing to upset the tenants or have them get nervous about it being sold.”

Unusual or unique properties

Living in a home that is notable (or notorious) in some way can also bring sellers some potentially unwanted attention.

Houses that have historic significance, are purported to be haunted, or were once owned by someone famous might bring in a lot of curious window-shoppers as opposed to serious buyers. Homes that are considered unique on the market in other ways, such as a specific architecture design that might only appeal to a certain type of buyer, might be another reason sellers don’t want to put the house on the MLS in order to avoid a surplus of “lookie-loos.”

Pocket listings and the National Association of Realtors®

In late 2019, the National Association of Realtors® (NAR) voted to prevent agents and brokers from keeping listings off the MLS, a reinforcement of NAR’s requirements that properties be listed on MLS within one business day of being marketed to the public.

Per NAR, agents can post a home as “coming soon” — but if they do so, the home must be put on the MLS within a certain number of hours. This is intended to keep information on available homes accurate, and to avoid any potential legal or ethical ramifications that might arise, such as a breach in the agent’s duties or violations of the Fair Housing Act.

Sellers desiring privacy or concerned about health issues can still sell a house off the MLS under the new NAR policy, but the property cannot be advertised publicly in any way, which can make it even more difficult for qualified buyers to find the home.

Finding a home before it’s listed

Hands down, the best way for a buyer to find a house before it’s listed is to partner with an experienced real estate professional. Both Dominguez and Maraghy note that there is no portal where agents or buyers can look at off-market properties.

“There are certain laws in place for agents,” says Maraghy. “We are limited insofar as putting information out there, and the rules are very set.”

There are, however, a few options for buyers who want to get a jump on a house before it’s listed on MLS.

Word of mouth

Word of mouth is probably the most effective method for buyers to find houses before they’re listed, and especially in markets where inventory is limited, agents do reach out to each other.

“We often get calls from agents asking if we have anything up and coming,” says Maraghy. “We have agents beating the bushes for properties, especially if they have clients who have lost out on multiple offers in the past.”

Dominguez adds that having an agent with a lot of connections can be helpful in these situations. “Try to get an agent who has a big network,” he says. “We do a lot of business via word of mouth.”

Knock and talk

Maraghy says that if there is a specific house you’re interested in, it can sometimes be advantageous to have your agent approach the owner. “It definitely has worked, and it is something we do,” she says. “If we have a buyer who can give us a really good visual of the house they want, we might reach out, talk to people in the neighborhood.”

Dominguez explains that while he personally hasn’t had luck with this method, he does still try to reach out to the owner if he has a buyer who really wants the house in question. “I’ve done it, but sometimes people aren’t ready to move.”

FSBO listings

Dominguez suggests that perusing FSBO (for sale by owner) sites can also be a good way to start a conversation with potential sellers.

“If I have a buyer that wants a certain area, and I see there’s a for sale by owner there, it’s sometimes worth it to have a conversation with the seller,” he says. Homeowners who might not have had any luck selling on their own might still be interested in selling to a buyer with an agent!

Letters of interest

If there’s a particular neighborhood you’re interested in, you or your agent could try reaching out to a wider group of homeowners directly via postcard mailings.

“The first house I ever sold was before I was an agent,” says Maraghy. “It was on a very desirable block, and an agent dropped a note in our mail slot about selling the house. We ended up selling it to the people who wanted to buy it.”

HOAs

If the community has a homeowners association (HOA), you can contact the association and ask whether it has information about residents who might be thinking of moving.

HOA might have community notices or other ways to get the word out, and their board members are also usually residents of the neighborhood.

Social media

Social media can be a helpful resource as well; you can share your desire to buy with friends, family, and followers, which in turn could put the word out to a larger social circle.

Neighborhood parenting or social clubs might also provide additional insight into members who have experienced recent life changes and are thinking of downsizing or upsizing.

What about foreclosures and pre-foreclosures?

If a homeowner is no longer able to pay their mortgage, the property will most likely end up in foreclosure, which means the bank takes ownership of the property and (eventually) puts it on the market. A pre-foreclosure means the owner is in arrears on their payments, but the bank has not officially foreclosed on the property.

This might seem like an easy way to buy, but both foreclosures and pre-foreclosures are difficult to navigate, and closing can take a long time.

“Historically, a bank can’t schedule a foreclosure sale until [the property] is on MLS,” says Maraghy. “And pre-foreclosures are much more difficult. We have clients call us about houses in pre-foreclosure, but they aren’t technically on the market yet, and they may never be.”

Dominguez says that one positive aspect of looking at pre-foreclosures is that they are a matter of public record. “I do have access to pre-foreclosures, and I have reached out to owners to see if they were interested in selling, which I’ve done with success,” he says.

He also suggests looking at websites that promote available HUD homes, a home with FHA financing that went into foreclosure. These types of properties can be a great deal, but they also have fairly strict qualification requirements and often need of work.

How your agent can help

Trying to find that perfect, not-quite-listed house seems like a lot of effort — and we won’t lie to you: It is. This is where a qualified real estate agent can make the process much easier.

A good agent doesn’t just peruse the MLS for you but can also access other databases, and they will do much of the legwork mentioned above to help you find your new home.

Real estate agent Holly Connors, based in Arlington Heights, Illinois, is a 20+ year veteran of the industry and often works with buyers to find homes that haven’t hit the market yet. “It can be advantageous to both buyers and sellers,” she says.

In the Midwest, there is a back-end private listing network, or PLN, within the MLS. This allows agents to post a client’s home before it is officially on the market, and it also allows buyer’s agents to view homes before they are listed on the MLS.

“Sellers are using this private network to see how their property might fare on the public market, which gives buyers the opportunity to not only see what homes are coming up, but potentially make an offer on a house before it is ever officially listed on MLS,” says Connors.

Getting an edge on putting in an offer on the home of their dreams is a definite plus for buyers, and Connors says sellers like the PLN, too.

“Sellers are better able to control access to their home, and they aren’t having to open their home up to so many people, which is a big consideration in regards to health and safety right now,” she explains.

Other states have similar private listing programs, such as Top Agent Network, or TAN, which has 33 chapters across the country and allows agents to showcase listings only between other TAN members when they have sellers who don’t want their home listed on the MLS.

For areas that don’t have private listing networks, many agents will use their own professional network as a resource.

“Our database is sectioned by neighborhood and ZIP code,” says Maraghy. “If I have someone who wants a particular area or school district, I have a lot of past clients I can reach out to. Networking is the best use of my time and the best way to help.”

Pros and cons to off-MLS homes for buyers

As a buyer, your biggest benefit is being able to make an offer on a home before anyone else even knows it’s for sale, which can be a bonus in a tight market.

“Just having the potential to get into something before the general public sees it is an advantage,” says Maraghy. “You might be able to avoid a bidding war or escalation in price.”

Dominguez agrees, adding “It can be a great thing for a buyer if they can buy off-market. There’s no competition.”

However, with that advantage comes one big disadvantage: Buyers won’t really know if they’re overpaying for a house, possibly significantly, until it’s appraised. And if the house appraises lower than the sales price, then either the buyer is going to have to make up the difference, or the seller will have to lower the price.

You’ll also want to keep in mind that when you make an offer on a house that hasn’t been listed on the MLS yet, there are a few things that might be different.

For example, if purchase agreements in your area usually include an escalation clause, which automatically increases your offer up to a pre-set amount in case the seller receives multiple offers, you probably won’t need one in this case because there aren’t any other buyers.

If you’re getting mortgage financing, you’ll still need an appraisal contingency, however, which could potentially derail the deal if the appraisal comes in lower than the agreed-upon purchase price.

Connors says one of the biggest issues with off-MLS home transactions is that buyers and sellers do not always understand the importance of pairing with a quality agent.

“If they go with their friend or their cousin, who might be a real estate agent but doesn’t have access to or know about private listing options, or simply doesn’t know the market in the area they want to buy, both parties can lose,” she says.

Connors adds that agents need to understand what it is their buyers want before they even start looking. Her company uses an intake form for clients that notes all their specific requirements, which helps the agents to better understand a buyer’s needs.

Finding a house before it’s listed on the MLS can be an exciting prospect and a potentially great way to buy a home, but making sure you have an experienced agent to walk you through what can sometimes be a tricky process is absolutely key to making sure your off-market find is a perfect fit for you.

Header Image Source: (Erik Mclean / Unsplash)