How To Buy A Property That’s Not For Sale: A Guide

With housing inventory reaching historic lows this year , many home buyers are looking into how to buy a property that is not for sale. This strategy can widen the range of possibilities for your home search but can also be more challenging than a traditional search.

While it could be harder to find an off-market home to purchase, many of the steps in the off-market home buying process are similar to purchasing a house on the market.

1. Get Your Initial Mortgage Approval

Getting an initial mortgage approval is a great way to prepare for buying a property that is not for sale. Since off-market houses can be harder to find, it’s extremely helpful for you and your realtor to know the loan amount you’re approved for so you can search for a home within your budget. Once you find the perfect home that fits your price range, having a preapproval letter is a valuable sign to sellers that you’re serious about buying their home.

To get preapproved for a mortgage, you must submit documentation to your lender that shows your identity, credit history, proof of income, debt-to-income ratio and any other information that may shed light on your financial situation. Once you submit your application, you should receive a Loan Estimate within 3 business days informing you how large of a loan you can get approved for. Since preapprovals are typically valid for only 60 – 90 days, it is best to get preapproved at the beginning of your home buying journey.

2. Find And Research Off-Market Properties

Off-market properties are naturally harder to find than those on multiple listing services, so you may have to use multiple avenues to find your dream home. Talking to your social and professional network or with homeowners in the area you’d like to buy is a great way to hear about potential homes before they hit the market. Online resources like Facebook and Nextdoor are also excellent sources to keep up with local real estate gossip and become familiar with housing prices in a certain area. Checking expired or pending MLS listings is also a great strategy.

Investigate Pocket Listings

One alternative way to find an off-market property to buy is through a pocket listing. A pocket listing is a home that’s marketed through private channels rather than through the MLS. Pocket listings have become less prevalent in recent years due to the National Association of REALTORS®’ Clear Cooperation policy which effectively bans pocket listings, but you may be able to find them using your personal network.

3. Make An Offer

If you’re able to find your dream home outside of the market, the next step is to make an offer to purchase the home. Since the homeowners may be surprised to get an offer, your offer must be especially compelling. Keep that in mind when deciding how much money to offer, the contingencies within the offer and the amount of earnest money you provide. Contributing a large amount of earnest money is an effective way to entice the homeowners into considering your offer by showing them you’re a serious buyer.

4. Go Through Underwriting And Get A Home Inspection

If the homeowner accepts your offer, there are still some hurdles to jump through before closing. Two of the most important final tasks are to go through underwriting and get a home inspection. While you may be preapproved for the mortgage loan to purchase the home, underwriting is the final step for the lender to approve the loan for this specific property. Once they complete an appraisal on the home and confirm through your income and credit history that you can afford the house at the appraised value, then you’ll be officially approved for a loan. While you may be tempted to forgo a home inspection to entice the homeowners to sell, it’s always a good idea to ensure the home’s structure and systems are functional.

5. Close On Your Home

If you get final approval from your lender and the home passes inspection, it’s time to close on the home. The closing process can take 30 – 45 days, but the prize at the end of the journey is worth it. At least 3 days before your closing day, you will receive your Closing Disclosure form that explains the most important details of your loan, such as the amount borrowed, the interest rate, estimated monthly payments, closing costs and the amount of money you’ll need to bring to the closing table. Other items you may need to bring to the closing table include multiple forms of identity, your closing disclosure paperwork and proof of your homeowners insurance.

Here is some additional advice for the hardest part of the process: finding off-market properties.

1. Enlist The Help Of An Agent

Working with an experienced real estate agent who can utilize their extensive network is critical. The right REALTOR® can learn about houses ready for sale through their network before they hit the market. They also have knowledge of expired or pending listings that may still be available. Finally, they can connect with potential sellers through networking or direct mail campaigns that you may not have had access to otherwise.

2. Search The Internet

As mentioned above, social platforms can be popular online resources for searching for off-market houses. You can use Facebook and Nextdoor to monitor and expand your personal network so you can hear any rumblings of someone willing to sell their home before they put it on the market.

3. Look Into Inactive Listings

If a seller took their house off the market and let their listing expire, they may still be enticed by the right offer from you. If a listing is pending, meaning the buyer has accepted an offer but the home hasn’t sold yet, you could also submit a backup offer that might be accepted if the first offer falls through.

4. Communicate With Homeowners

While there are many ways to research, one of the most effective ways to find off-market properties is old fashioned word of mouth. If you and your real estate agent tell all of your friends, family, co-workers and acquaintances that you’re looking for an off-market home, you may be able to directly connect with someone that is interested in selling.

There are several potential pros and cons to buying an off-market home.

Advantages

• You’ll have a larger selection to choose from.
• You’ll face less competition.

Drawbacks

• You might have a difficult time finding a homeowner who is willing to sell without listing the property.
• You have to act quickly with pocket listings.

The process to buy an off-market property is similar to buying a property on the market but with more in-depth research and negotiating with the homeowner to convince them to sell. However, if you find your dream home with homeowners who are willing to sell, the rest of the process can proceed as normal. If you’ve already found the right property for you, start the mortgage approval process with Rocket Mortgage® today!