Real estate agents have made going after expired listings part of their marketing strategy for years, but these listings can have just as much benefit for investors. If you’d like to learn more about expired listings and how they can help you make money in real estate, read on below. This is your guide on what expired listings are, why they benefit investors, and how you can find these listings in your area.
What is an expired listing in real estate?
In today's market, when homeowners agree to market their property for sale with a particular real estate agent, they sign what's known as a listing contract. However, every listing contract includes a clause that says if the listing agent is unable to find a buyer for the home by a certain date, the relationship between the two parties dissolves and the sellers are free to market their listing with another realtor.
When this happens, the listing becomes known as an expired listing. Though it's not a requirement, once a listing expires, most sellers usually take some time to rethink their marketing plan before going under contract with another realtor. Some even decide to go a different route and try to market their property as a For Sale By Owner (FSBO).
How real estate investors can use expired listings
While we'd never want to wish anyone ill, it's important to note that, as a real estate investor, you stand to benefit greatly from expired listings. For starters, the sellers behind these listings are usually desperate to receive an offer. Often, they've already been on the market for a long time with little success -- sometimes as long as six months or more. They may be more willing to negotiate with an investor, even if you're looking to score a deal on the property.
Additionally, since these sellers are likely no longer working with a specific real estate agent, they may be even more open to negotiating if you forgo working with your buyer's agent as well. At that point, they would not have to factor paying commission into their closing costs, so they may be willing to pass some of that savings onto you in the form of a lower sale price.
However, if you decide to go this route, we highly recommend that you contract with a real estate attorney to help you draw up the purchase agreement.
How to access expired real estate listings
Given that level of opportunity, many real estate investors make prospecting for expired listings a regular part of their business plan, which begs the question of how to generate expired listing leads. Luckily, there are multiple ways that you can go about this type of lead generation.
Search the MLS
If you're working with a buyer's agent (or you happen to have your own real estate license) finding expired listing leads should be relatively easy. All you have to do is look them up under your local multiple listing service (MLS). Many MLS systems have an option that allows you to filter available listings by those that have recently expired. The only catch is that this feature might give you the former listing agent's name and phone number rather than the homeowner's.
Look them up in public records
If you don't want to pay a broker just to use their multiple listing service, you can also look up expired listings in public records. In the old days, this meant driving to the county courthouse and asking to see their listing records, then paging through hundreds of active listings just to find one expired lead. Luckily for today's real estate agents and investors, many public records systems have moved online.
Utilize real estate websites and social media
Popular real estate websites and their social media accounts are other potential tools for prospecting. While these sites may not let you refine your search specifically by listings that have already expired, they do list the day that the agent started marketing the listing, which is typically close to the time the seller signed the listing contract. Going this route is more of a gamble, but it can be done.
How to approach an expired listing
There's no denying that approaching the owner of an expired listing takes a certain amount of finesse. After all, you want to present yourself as a solution and avoid coming off too strong or overbearing. With that in mind, you'll want to do the following before you reach out to anyone.
Research real estate marketing tips
Prospecting for expired listings has been part of every good realtor's marketing strategy for a long time. To that end, there are tons of guides out there with helpful information on how to approach these homeowners. Do some research and think about reaching out to a broker in your community for tips. You never know what helpful tips and tricks you'll pick up in the process.
Create an expired listing letter template
As the name suggests, an expired listing letter is a letter that you'll send regarding any homes that have recently expired. Many real estate agents use this as a tool to market their services, but you can modify this practice as an investor.
At its core, your letter should explain who you are, the fact that you've been looking to purchase a home in the area, and that you may be willing to make them an offer. Specify that if the homeowners are still interested in marketing their property, you’d love to discuss things further. Then, be sure to include your contact information in case they would like to get in touch with you.
Fortunately, mailing addresses can be found in public records, so addressing and mailing the letter should be fairly easy.
Consider following up with a phone call
This is where things get a little tricky. Some real estate marketing guides recommend following up on your letter with a phone call. Others suggest that this step may be too invasive. At the end of the day, it seems to come down to your personal preference and how badly you want to buy the property.
If you do decide that you'd like to give the owners of the property a call, you'll first have to find their phone number using the white pages or a similar website, if the owner has their phone number listed.
Once you're ready to make the call, be kind, be courteous, and keep it brief unless you get an enthusiastic response. Like you did in your letter, explain who you are and that you saw that the property was recently up for sale. State that you're looking to purchase a home in the area and you think you may be interested in the property. Then, gauge whether the owner is interested in hearing more about what you have to offer.
The bottom line
Expired listings typically represent a wealth of untapped potential to investors. Whether you’ve just started thinking about investing in real estate or you’ve been investing for a while, regularly prospecting these types of properties should be on your to-do list. The information above should give you some context on how and why expired listings are so important to real estate investors.
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