Before
getting your home ready for selling, always consult a REALTOR®. Each
property is different and the following story should be used as a guideline
to get you ready for prepping your
property.
Whether you are a first time home buyer or a real estate investor, to
make a good profit in real estate, you must buy right. Check out
all property types available to find the best transaction for your specific
situation.
Consider fixers, distressed sales, repossessions, multiple listings,
for sale by owners, and vacant properties just wasting away.
Distressed Properties
Recognize the difference between a fixer and a distressed property.
Distressed properties may be fixers or just unwanted houses. Divorce,
job loss or transfer, death, financial difficulty, and other
problems often
force a sale for less than market value. Just because an owner’s
problem causes a distressed sale does not mean the house requires
fixing.
Repossessions
Although the repossession market seemed dried up last summer, houses
are beginning to appear on foreclosed lists again. Lender Rob
Kramarz with Nationwide Mortgage (www.seetloan.com) says that
this may be the
beginning
of another real estate investor boom.
Look for great bargain properties for sale by HUD, VA, Freddie
Mac, Fannie Mae, and Bank-REOs (acronym for real estate owned).
Real estate
agents try to discourage you from repos and switch you to multiple
listed homes. Do not listen to negative remarks about how hard
it is to find a
good deal property. Find another agent. Even in the hot market
at the time of this writing, when the average house sells in
less than three weeks,
we found two properties for at least forty thousand dollars under
market value.
Paying a listing service to mail you lists of repossessed properties
is a waste of money. Actually, by the time you get these lists,
the houses are already sold. Many web sites listing foreclosures
thrive on the web
for no charge to you.
Take a flashlight with you to view a repossessed property. With
no electrical service and boards covering windows, viewing dark
rooms is tough.
A good real estate agent will have her own flashlight, but you
want to see what you want and not what she wants you to see.
HUD
In our area, new HUD listings post online late Thursday night
or Friday morning. New "Daily’s," homes previously sold which
fell out of escrow, post Saturday morning. Properties not sold during the
bid time stay listed as daily’s. Bids, due by the following
Tuesday at midnight, must be submitted by a real estate agent who
has
completed HUD registration. Don't waste your time using a Realtor
who is
not familiar with selling HUD homes. Any mistake causes the
bid to be rejected. Don't
use an agent who says you must bid way over minimum bid. Find
an agent specializing in HUD homes who wants to work with you
on your terms.
Many
bargain HUD homes do sell for far more than the minimum bid.
Hold out for the one property which doesn't get way overbid.
(I bid about
$40,000 under
minimum on our second home owner-occupant mountain cabin.)
We submit many bids and win enough to make it pay us well.
HUD only allows one repo purchase as an owner-occupant every
two years from the
date of closing.
Rely on your gut instinct and don't let your real estate agent
unduly influence you. It is not a difficult process for your
agent to make a computer
bid. You need an agent willing to make a few bids to get
a successful bid. This is like winning a lottery, with the odds
in your favor.
Bids must have a lender’s loan commitment statement. Lenders unfamiliar
with HUD requirements also waste your time. Any mistake causes you to lose
the purchase. Not all lenders understand HUD’s bid, finance,
and purchase process.
When placing a HUD bid, raise your offering bid to cover some
of your closing costs. This means you get HUD to pay your
closing costs and save out-of-pocket expenses. Also, the higher sales
price impacts the market
comparable sales in your favor for sale later. Your purchase
price influences the values of the market area. Keeping prices
higher for active
sales during
your renovation time protects your investment potential.
Don't get attached to one particular property. We placed a
bid on a home I loved in Apple Valley and lost it by a few
hundred dollars. The
house came back on the list later, not at all uncommon for
HUD
repos. But, by this time, we had already purchased a better
distressed property.
VA
Cleaner than HUD repos, homes owned by the Veterans Administration
are also offered on a bidding system through real estate
agents. The VA partially fixes up their repossessed homes. The VA sometimes
offers vendee
(seller) financing with few processing costs, low interest,
and no prepayment penalty. You do not have to be a Veteran
to buy these easy to qualify for
homes.
As of this writing, the VA is changing the way these homes
are offered for sale. This is another reason you need a real
estate agent who stays
on top of recently revised marketing procedures relating
to government-owned
properties.
Less known government agencies such as Fannie Mae, Freddie
Mac, FDIC, SBA, the IRS, and GSA list repossessed properties
on their individual web
sites. These properties, rarer than HUD and VA, usually get
cleaned
and repaired before listing with real estate agencies with
sale prices closer
to market value.
REOs
Banks often offer their real estate owned (REO) homes at bargain
prices. Depending on the bank’s resale policy, conditions of
the property, and available financing, REO opportunities vary
widely. Several banks lend on their repos while other banks just
want
out. Great
financing
becomes possible through the banks who offer in-house terms.
Ask for no points, minimal loan costs, and no prepayment penalties.
Check
with your
local lending institutions and find out how they market their
repossessions. Many of these bankers will give you their web
page listing available
property. Befriend real estate agents who specialize in listing
bank-owned repossessions
so they will notify you of a new listing immediately.
Multiple
Listings
It is hard to find a bargain in multiple listings, but not
impossible. Check out listings which have been on the market
for awhile.
Look for vacant houses, as these cost the seller money every
month. Make an
offer for much
less than asking price with a quick escrow. Many anxious
sellers jump on an offer if they think they will be out of their problem
in only ten days.
This is another reason you need a lender and an escrow officer
who perform fast.
I follow the multiple listings in our area on the Multiple
Listing Service. One of my agents emails me new listings
daily. You need
an agent who calls you the minute a new distressed property
listing becomes available.
Under-priced listings mostly get snapped up by the real estate
agents and their investors before they hit the market.
Just like making many bids, make many offers. You never know
when a seller’s problems reach a critical point causing abrupt
action.
For Sale by Owners
Houses for sale by owner may not always be a great buy, but
there is always at least one bargain out there. Many investors
prefer buying directly from the owner. If you have ever tried
to sell your home by yourself,
you probably met some of these investors. Cruel, hard, and
in
some cases, fraudulent investors dream up all kinds of schemes
to steal houses
from
distraught homeowners. Understand that the home seller most
likely dealt with these callous investors before you and
therefore may
view you with
suspicion. Earn their trust by working with them honestly
and compassionately.
Seller’s Motivation
Let honesty and kindness guide your actions with sellers. Finding
out the seller’s specific problem is the key to helping them and
yourself. Uncover the seller’s particular need and find a solution.
Because it is embarrassing for some sellers to let you in on
their troubles, extra sympathy and relaxed timing helps you
unearth their underlying
motivation.
Listen carefully, stop talking, and pay attention to details
which lead to understanding the real reason they need to sell.
The seller may need a quick escrow, need to rent back the home
for a while, or want immediate cash. You could give the seller
a loan of cash
with a note secured by the property. Ask an attorney about
your state laws regarding this type of purchase advance.
We offered a seller a $2,000 deposit
outside of escrow, which went toward the down payment, to
entice a money-hungry seller to commit to our low price.
Many sellers do not need all of their cash out. Owner financing
is a great deal for you. Usually, you get a lower interest
rate and you don't
have to pay lender’s points or prepayment penalties. Also,
these loans typically won't show on your credit report so you won't
have these payments counted against you. If you have a good
credit
report,
take a
copy with you to show to the seller. This prevents more inquiries
on your credit history and keeps your credit score from dropping.
Ready
to Buy
Be prepared to make an offer immediately when you find a bargain.
Make sure you are pre-approved with a great lender who can
close quickly.
Distressed sellers and fixer houses offer you a great way to
get into the real estate investing business.
