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.
(c) Copyright 2004, Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of Doghouse to Dollhouse for
Dollars, Joy to the Home, and other books teaches Real Estate
Investing and Design Psychology. For more articles, tips,
reports, newsletters, and sales flyer template, see http://www.doghousetodollhousefordollars.com/pages/5/index.htm
Article Source: http://EzineArticles.com/
June 2:
