[UPDATE NUMBERS BEFORE PUBLISHING]
From analyzing 13,000 flips in greater Seattle-area since 2002, we find that on average, MLS-purchased flips sell for 1.8x their purchase price compared with 1.6x off-market and 1.4x at foreclosure auctions.
While we do not know the condition of these flips, we think if anything MLS-purchased flips are in better condition, not worse. Furthermore, off-market deals often have an assignment fee and foreclosure deals have a commission paid on top of the purchase price, which makes MLS deals even more favorable than the numbers suggest.
Our guts tell us that this feels off, and to some extent this is true. The opportunity for luck is greater in these markets, and the top 10% of off-market flips perform better than the top 10% of MLS-purchased flips. Nevertheless, the MLS still presents a meaningful buying advantage for rehab investors.
This suggest there is more supply (deals) relative to demand (competing buyers) when shopping for deals on the MLS versus off market or at foreclosure auction.
From a supply perspective, 4_% of historical flips were purchased from the MLS versus 3_% off-market and 2_% at a foreclosure auction. With more supply, the MLS can absorb more demand.
From a demand perspective, we can say there's roughly 87% of the relative demand off-market as measured by the resale multiples (1.4 / 1.6). Because there are 1.25x more deals on the MLS than off-market (4_% / 3_%), we can deduce there is about 1.09x more demand (87% * 1.25).
In other words, there is 1.09x more demand on the MLS, but 1.25x more supply to absorb it.
We can't say for sure, but we have some theories as to why there is less competition on the MLS than it might appear.
For starters, prospective homeowners cannot easily finance properties that need repairs, and when they do compete it is normally for cosmetic flip opportunities. Many sellers also over price their listings and end up accepting a lowball offer—think of it as a hidden supply on the MLS.
The demand for off-market deals is also is also higher than it appear. From intuition and the advice of others, investors gravitate to the idea that buying off-market or at the auction is less-competitive. The problem is that everyone thinks this way.
In many cases, investors are purchasing overlapping mailing listings and calling on the same FSBO directories.
This is not to say you should only pursue MLS-listed opportunities. Rather, we believe the MLS should be an active source of opportunities for serious investors. From analyzing 13,000 flips in greater Seattle-area since 2002, we find that on average, MLS-purchased flips sell for 1.8x their purchase price compared with 1.6x off-market and 1.4x at foreclosure auctions.
Have them sign a Listing Agreement (NWMLS form 1a).
After that, send them the Seller Disclosure (form 17). Also send them the Listing Input (form 1) with as much as you can fill out for them. Open title with a title/escrow company; they will give you a preliminary title report and a legal description. Have seller initial/date the legal description.
Order the signpost at least five days before the listing and specify it to be installed on the date the listing should go live.
Please see pellego.com/resources
Hire a photographer. Have seller clean the house and discuss how showings will work, if you're doing an open house, etc.
Have the seller sign the other forms that make the listing look complete (see below), e.g. 22k, 22J, etc.
Upload all the forms and documents to the listing. Either input the listing yourself or send it to firstname.lastname@example.org.
Normally you. We recommend asking the private facebook group for recommendations.
The longer you can hold off setting a list price the better.
We recommend looking at active comps right before listing it. Even though sold comps are better for assessing what a property "should" be worth, active comps are what your listing will compete against. If your listing is more desirable for its price than another listing, it will have more demand.
We also recommend thinking about the volume in the area. If the property has low volume (e.g. low population area or luxury) there are only so many buyers. If the ones this week didn't like it, that doesn't mean it is overpriced. However, if your property is in a high volume area or segment, then the market will bid the price up to market value. So in high volume areas it is hard to underprice but easy to overprice.
If you expect a lot of offers (because the home is in a high volume area/segment and priced well), then yes. If you are not confident you will get a bidding war, no.
Open houses serve three purposes: (1) showcase demand, (2) make the seller happy, and (3) help you get buyer leads.
In theory a busy open house signals there will be a lot of competition. This is probably good, but in theory can discourage some buyers.
The real value of open houses is to make the seller happy and generate buyer leads. Busy listing agents will sometimes have newer agents do the open houses for them, because they want to make the seller happy but do not care about getting buyer leads for themselves.
Promotion mostly happens by itself if you put the open house dates in the listing when it goes live. You can also post about it on Craigslist and you should have extra open house signs to put on busy intersections nearby (since part of the goal is to showcase demand).
If a percentage of the sale price and or a flat amount is not enough to define agent compensation, use the Amendment to Listing Agreement (form 18).
If the closing date has passed, then yes.
If you are amazing, we want to know. Here is a list of current openings, and we are always open to unsolicited pitches.
The empty lines are pretty self explanatory, except section 4.
Section 4 is where you set the commission the seller pays.
The first set of blanks is the total commission the seller pays, the combined amount between you and the other broker.
The second line is how much of that goes to the selling broker (the buyer's agent), e.g. each agent gets 2.5%
In the first annotated area put 5 and in the second one put 2.5.
After you get the listing agreement signed (or at the same time), you need to get the (grueling 5-page) listing input form completed by the seller.
If you already have listing input access, you can just send this to us at email@example.com and upload the listing yourself.
If you haven't already completed the listing input class by NWMLS, send the completed forms to (us and) NWMLS at firstname.lastname@example.org.
Select a title/escrow company and "open title"
The title company will send you a preliminary title report and a legal description. Upload both to the listing.
For the legal description, have the seller initial and date somewhere on the page before uploading it.
Seller Disclosure (17)
Identification of Utilities Addendum (22K)
Lead-Based Paint and Hazards Discl. (22J)
Seller's Information Undisclosed (7B)
FIRPTA Certification (22E)