Leveraging the MLS
I talk to a lot of people who wish they had access to the MLS. They want to get first crack at the new deals that pop up, they want to be able to get the lockbox codes for the foreclosures they want to look at, they want to be able to do searches for terms like “fixer upper” or “handyman special”, etc. Basically, they want access to the MLS for the sole purpose of being able to find available property that meet their investment criteria. And, more times than not, they figure out a way to get access to the MLS, and that’s what they use it for.
And, to be honest, that was my primary goal for getting access to the MLS when my wife got her real estate license early on in our investing career. But, in the time I’ve had access to the MLS, I’ve learned that finding property is probably the least important use I have for MLS data!
Instead, I’ve found that the MLS is an unbelievably great resource for helping me in other aspects of my investing — investing aspects that ultimately make the difference between failure and success in today’s world of property flipping.
Here are just a few of the things I use the MLS for that I believe will contribute to our long-term success, and if you use it similarly, it will contribute to your success as well:
- Determining what types of properties sell. In my area, there are far better deals on single family homes that have 1.5 bathrooms than on homes with 2+ bathrooms. Of course, the resale value of homes with at least 2 bathrooms is a good bit higher than homes with fewer bathrooms. While that’s to be expected (families want more than one tub/shower), it never occurred to me that homes with fewer than 2 bathrooms were essentially impossible to sell in this market. But, looking at historical MLS data, my wife and I have found that greater than 95% of homes that have sold in my area in the past 6 months have at least 2 bathrooms. Which essentially means, I should NEVER be buying smaller homes, regardless of how cheap I can get them, if my plan is to resell. This has been a huge eye-opener, and has steered us clear of some properties that seemed like amazing deals.
- Determining where to buy. When I first moved to this area, I quickly realized that there was a “good” part of town to buy real estate and a “bad” part of town to buy real estate. In the good part of town, houses were moving, foreclosures weren’t piling up too badly, and market values were holding up as best could be expected. In the bad part of town, there were more foreclosures than investors, there were very few first-time home-buyers, and market values were dropping pretty quickly. And for the most part, things haven’t changed much since then. Except, when I map out sold properties in first-time home-buyer price range for the “bad” part of town, I find that there are a couple subdivisions that are still seeing a lot of market activity, a good number of sales, and pretty good market values. Without analyzing the MLS data, I had decided to stay away from those areas completely; based on my analysis, I’ve found that I can safely expand my market to include these subdivisions, and because so many investors don’t realize that these “good” pockets exist, there isn’t much competition for houses in those areas.
- Tracking Sale Price:List Price ratios. Because I put in about 10x as many offers as I actually get accepted, it’s clear that my asking prices are often much lower than the seller’s are willing to accept. But, until an offer is accepted, I have no idea how far off my original offer was to what the seller would consider. Are my asking prices *much* lower than what sellers are willing to accept? Or are my asking prices just *a bit* lower than acceptable. Using MLS data, I can compare the List Prices (both original and final) to the eventual Sale Prices for the types of homes I’m interested in purchasing, and that gives me a very good idea of whether I can reasonably expect the banks to accept an offer 10% lower than list or 50% lower than list. This sames me the waste of time/energy in making ridiculously low offers, but also gives me enough information that I don’t offer more than I need to get my offers seriously considered.
- Finding active REO agents. A big part of being a successful investor in REO properties is getting to know the big players in the industry. For the most part, this consists of the REO listing agents and other REO buyers. The agents are the folks who control these deals, interface with the banks, and — if they like you — can help you get great deals. The other buyers are both our competition and our potential partners. While we make a point to treat everyone we work with like they are the most important person in the world (just our way of doing things), it’s nice to know which of these people really *are* the most important people in the world. Scouring through MLS data gives us a great idea of who the big players are, and allows us to tailor (and increase) our interactions with those people.
I could probably list another dozen ways we have successfully mined MLS data to benefit our business so far, but I think you get the idea. If/when you get access to the MLS, don’t forget that it’s value far surpasses just being able to find active properties.