What You Need to Know About Off-market Real Estate Deals in Toronto
Chances are that you have stumbled upon this article because you have heard about off-market real estate deals in Toronto and want to learn more about them. In this article, we will explain what off-market means when you are buying or selling a home as part of a real estate transaction, some ways you can go about finding an off-market real estate deal, the pros and cons of off-market real estate deals for sellers and buyers.
What does off-market mean in real estate terms?
Frequently, when people are listing their homes for sale, they are working with a local real estate agent or broker who will be posting their home on the Multiple Listing Service (MLS). Using the MLS allows real estate agents and brokers to advertise a property they are selling to a wide variety of potential buyers and investors.
However, MLS is not the only way in which real estate agents, brokers, and sellers can market a property they are trying to sell.
Sometimes, sellers will choose to not market or list their property on the MLS. When a seller chooses to sell their home but is not using their local Multiple Listing Service (MLS) to list and advertise their property this known as an off-market listing. Having an off-market listing allows sellers to keep the sale of their private and more discreet than listing it on the MLS.
When a real estate agent represents a seller and property who has decided not to list their home on the MLS, this might be known as a “pocket listing”. In this scenario, a real estate agent or broker is representing the seller and their property, but they are not actively marketing or advertising the property online or on the MLS.
Homes that are being sold off the market, might be in pre-closure and for this reason, are not be advertised to the general public. Or an off-market property might be a home that an investor might sell but they have not made any concerted effort to sell it.
The definition of an off-market property may vary. However, an off-market property can be great deals for people actively looking to invest in real estate.
What is the MLS (Multiple Listing Service) in real estate?
The MLS is a set of services that real estate agents and brokers use when establishing contractual offers of compensation (among brokers), that also allows them to gather and disseminate information on properties for sales to enable appraisals.
The MLS database and software are used by real estate agents and brokers to represent sellers under a listing contract. The MLS is useful because it allows real estate agents and brokers to widely share information about properties that are for sale with other real estate agents and brokers who might be representing potential buyers.
The MLS also can be useful for real estate agents and brokers who might want to work with the agent or broker representing the seller to help the seller find a potential buyer for the property.
It is important to note that the data on a property listing that is stored within an MLS database represents proprietary information from the real estate agent or broker that has a signed listing agreement with the seller(s).
In Canada, the national MLS represents a cooperative system for the members of the Canadian Real Estate Association (CREA), that work through Canada’s 101 real estate boards 11 provincial/territorial associations. Here is a publicly accessible website that allows the general public (individuals who are not real estate agents or real estate brokers to view and search an aggregated subset of each participating board’s MLS database of active listings. This website provides individuals with limited details on available properties in a given area.
It is important to note that while most real estate boards in Canada participate in Canada’s national MLS, the Data Distribution System, some real estate boards like Toronto Real Estate Board (TREB) operate their own MLS.
How can you go about finding off-market real estate deals in Toronto?
There are many ways you can go about trying to find off-market real estate deals in Toronto and listings.
Consult a real estate agent or broker working in the area(s) where you are looking to buy
If you are considering investing in real estate and trying to get in on off-market real estate deals in Toronto, you should definitely consider speaking with a real estate agent or broker working in the area where you are looking to buy.
It is important to remember, that while real estate agents and brokers usually will be most familiar with properties on the MLS, they might also be savvy about finding off-market deals because they might be privy to information about properties that might be going on the market soon.
If you are serious about investing in real estate and finding off-market deals, you might consider creating a list of the top real estate agents and brokers working in the area(s) where you are looking to buy. Once you have made this list you can reach out to brokers and agents via phone or email to inquire about whether or not they know about any off-market listings.
However, before you reach out to any real estate agents or brokers, check their website, because their pocket listings might be available online on their website. It is important to remember that even if a certain broker or agent might not be able to help you right now, this does not mean that they might not be able to help you in the future. Therefore, you should leave your contact information with anyone you might speak with, so if something changes, they will be able to contact you.
If you are an investor looking to buy and flip residential properties, consider sending out direct mailings, postcards or advertising in your local newspaper
If you are looking to buy and flip residential properties, you might even send out direct mailings and postcards to the people living in the homes in an area where you are looking to flip. You might even consider placing an advertisement in your local newspaper, explaining your desire to buy homes for cash.
Some homeowners might not be ready to sell their homes until they see an opportunity or offer. If you are serious about doing this, you need to have a solid plan in place, do your research and do your due diligence, so you are most effectively using the tools at your disposal to see a solid return on your investment.
Related article: How To Start Flipping Homes in Toronto
Network with estate attorneys
This approach might seem a bit unorthodox but consider the following.
Estates can be a great potential opportunity for investors because estates usually have issues or might have creditors who need to be paid back quickly or those who are left to deal with these estates want to get this property off their hands. If you are actively befriending and building relationships with estate attorneys, you might learn about properties that might be available soon.
You might also even consider joining networking groups and community groups and letting others know about your desire to invest in real estate, this could help ensure that if an opportunity arises to buy an off-market property you might hear about it before someone else.
Do a public records search for short sales and foreclosures
Something to consider is that frequently short sale and foreclosure opportunities are usually a matter of public record. If you keep up with public records and announcements you might be able to learn about properties that might be available during real estate auctions. You can check your local newspaper, local, municipal, and provincial government websites to learn about these opportunities.
Real estate Auctions
Real estate auctions are great for investors because they present investors with a variety of off-market properties to choose from. You might consider making it a habit to browse real estate auction websites to see if you see any properties with potential.
Befriend real estate wholesalers
A real estate wholesaler’s job is to put a property (usually a distressed property) under contract and then they assign or resell to another investor within days of purchasing the property. Befriending wholesalers can be a great way to learn about investment deals.
However, it is important to keep in mind that real estate wholesalers are acting as a middleman, you probably are not going to get the same deal that you would get if you went directly to the source.
Speak with local builders, contractors, and tradespeople
Local builders, contractors, and tradespeople can be great resources if you are looking to learn about properties where the owner or investor ran out of money to finish the job. Make them aware of your intentions to invest in real estate since they can help you learn about deals. This can be a great opportunity for savvy investors, who can come in, finish the home, and make a profit.
While websites like Zillow and Trulia primarily feature properties listed on the MLS, but you can occasionally use them to find off-market real estate deals in Toronto. Zillow can be great because it will allow sellers to list their homes for 30 days before their home is listed on the MLS.
Pros for sellers considering taking an off-market approach when they are selling their home
An off-market sale allows for sellers to keep the sale of their home private
You might wonder how famous people (high net worth individuals, politicians, celebrities) buy and sell their homes but you never see their homes for sale anywhere? This is possible because off-market deals which allow for sales to be private and no information about the sale will be publicized.
An off-market deal can be great for people who are looking to maintain some degree of privacy in their real estate transactions. This can be great for people who are being forced to sell a home or property because of divorce, the death of a relative or loved one, financial issues, etc.
An off-market sale can be great since it will be less overwhelming and this way the whole world will not be seeing photos of your home and your belongings on the internet because once your home is listed on the MLS it will be a part of the public domain. An off-market sale can be great for those who do not want a lot of random strangers coming through their home during various open houses.
Increasingly in Toronto, for higher-end, luxury homes that are worth more than a certain dollar amount, increasingly, luxury homeowners are selling their luxury homes in off-market real estate deals in Toronto.
An off-market sale allows sellers to test the market without having to commit to anything
The great thing about selling your home off-market is that you will not have to commit to anything. This means you can have people come to see your home and you can gain an idea of the saleability of your home, how the local market reacts to your home and its price.
This way if your home is priced too high for the local market, you can lower your home’s sale price before listing on the MLS and can avoid publicly reducing your asking price.
Additionally, selling your home off-market means that you will not need to commit to anything. If you are considering selling your home in the near future, an off-market sale can allow you to test the waters. This way if you receive a great offer you can choose to accept it. If you do not receive a great offer, you will not be losing anything either.
An off-market sales allow you to sell your home with less pressure since your home is not officially listed on the MLS
Selling your home off-market allows you to avoid having the dreaded number of days on the market if you were home were listed on the MLS. This eliminates the pressure or anxiety about whether or not your listing is ok or having your home sit on the market and have buyers wonder what is wrong with your home and lead to you receiving lowball offers.
Selling your home off-market can be great for higher-end homes that would take a while to sell no matter the market condition, even if the market were competitive.
An off-market sale allows you to have more control while you sell your home
When you sell your home off-market, you will be selling your home on your terms. This means that you can dictate who can see your home, when your home is available for showings, etc. Also, when there is a smaller inventory of available homes for sale with a lot of buyers, and off-market sales will allow you to be more selective without going public with the sale of your home.
An off-market sale helps you avoid the stress and expense of having to prepare your home for multiple open houses and multiple showings
You can avoid spending a lot of time and money preparing your home for multiple open houses and showings by not listing your home on the market because off-market homes tend to have fewer showings but more serious buyers visiting. This means fewer showings for you and less stress about having last-minute unannounced showings.
Cons for selling your home off-market
Fewer potential buyers mean less competition over who will buy your home
The more people who see your home, whether they see it on the MLS or see it in person, the more likely that you will be able to see your home more quickly and get more money for it. If you are not listing your home on the MLS where more potential buyers can see it, you risk potentially leaving money on the table.
You will never know how much you could have been able to get for your home
If you are not listing your home on the MLS (not listing it on the open market) you might be forced to accept an offer to buy your home that might be for a lower price than a market can bear. When you are doing an off-market sale for your home you will never how much you could have potentially gotten for your home if you had listed it on the open market where more people could have seen it.
Given Toronto’s tight real estate market during the fall of 2019, it is not uncommon to hear about bidding wars were the final sale price for a home increases by tens of thousands of dollars or more. If fewer potential buyers are seeing your home, it will be harder for you to have a bidding war that would drive up the price.
Pros for buyers who are considering buying a home that is off the market
Buying an off-market home or property can be great for buyers and investors since if the home never goes onto the open market where you are competing with a lot of other buyers, you might be able to get a good deal.
Off-market real estate transactions provide buyers with a competitive edge when negotiating with sellers
If you are looking to buy a home in the City of Toronto or the Greater Toronto Area (GTA) you might be up against a large number of prospective buyers and get into a bidding war. If you find an off-market home for sale, you might only be competing with one, two, or three other prospective buyers.
Provides buyers with the opportunity to take their time doing their due diligence before they decide to make an offer
When you are looking to buy in a competitive real estate market, like the real estate market in the City of Toronto and the Greater Toronto Area (GTA) chances are that you and the seller will be rushing to close this deal. The seller will probably want a quick sale and you (the buyer) will not have the time to do your due diligence before closing.
However, this is not often the case with off-market real estate deals in Toronto, for listings and transactions. In these scenarios, sellers are not usually rushing to sell their homes. Given that the competition is usually much lower for off-market real estate deals in Toronto, prospective buyers will have more time to look at the property and do their due diligence before deciding to make an offer. In the end, the buyer and seller will probably be much happier and less stressed than if they were rushing to close this deal.
Buying an off-market home provides buyers with the opportunity to be more flexible when negotiating with the seller(s)
If you are buying an off-market home, chances are that you and the seller(s) will not be in a rush to negotiate so you can close the deal. Eliminating the time constraint and pressure to close the deal quickly means that you and the seller will probably be more relaxed when it comes time to negotiate.
This could potentially lead to a deal and contract that you might not otherwise be able to get if you were buying a property or home on the open market. For example, if you are still developing your new home, you could try to delay the transaction for a few months or include a rent-back clause which will allow you to rent the property from the new owner for as long as you need.
Buying an off the market home, allows you to have access to homes that are not on the MLS
Buying an off-market home can be great if you are in a housing market with limited inventory because this is another way that sellers can use to sell their home. This means that you could potentially discover a home or property that could be a hidden gem that other buyers would never learn about because they are only looking at homes on the open market, homes that are listed on the MLS.
Less competition from other potential buyers means you might be able to get a deal
The fewer potential buyers who are seeing a property, the less likely for there to be a bidding war. This means that you potentially might be able to get a home for less for the home if you are buying it off-market as opposed to buying a home on the open market since competition usually drives up prices especially in competitive real estate markets like the Greater Toronto Area (GTA) real estate market.
Provides buyers with more time to do their due diligence and make a decision before making an offer
If fewer potential buyers know that a property is for sale, it could take a seller much longer to sell the property this way, which can provide you with more time to decide whether or not you are ready to make an offer on a given home.
Allows you to inform sellers about your specific objectives when buying a home (even if the seller has not officially decided whether or not they want to sell their home
If you are buying an off-market home, you can be honest with the seller about your specific objectives with buying a home even if the seller has not officially decided on whether or not they are looking to sell their home. This provides you with the opportunity to discover the best home for you and be honest with the sellers about what you want.
Helps you avoid spending too much time looking at too many homes and the masses of buyers at open houses
Buying an off-market home and looking at off-market homes can help you narrow down your search, so you will not be seeing too many homes and dealing with masses of potential buyers at open houses. This way looking at homes will not feel as tiring or overwhelming.
Cons for buyers who are considering buying a home that is off the market
You will never know how much the home would be sold for if you are not buying it on the open market
If you are buying an off-market home, you have no idea how much the home would sell for if it were being sold on the open market. This means that you could end up paying less than the home would go for on the open market. Or you might end up paying more for an off-market home than it would go for on the closed market. However, you will never truly know how much a home would be sold for on the open market since the sale was not open to the general public.
Hopefully, after reading this article you will now have a greater understanding of off-market real estate deals in Toronto are and how they can be beneficial if you are looking to sell a home and/or buy a home. It is important to remember that off-market real estate deals might be great in some instances but not ideal in others.
If you are looking to sell your home and you have questions about what would be the best way to sell your home (off the open market) or listing it on the MLS, consult a professional real estate agent or broker who you trust, who has experience selling homes in your area.
If you are looking to buy a home that is not listed on the MLS, you should also consider consulting a real estate agent or broker working in the area where you are looking to buy. Real estate agents and brokers will be familiar with the inventory of available properties on the MLS, they might also know about off-market deals.