Welcome to 2014, and a recovering Real Estate Market. So what is an investor or buyer to do to make sure they get a deal?
When markets go up, speculators jump in making the markets go up faster. Phoenix and Las Vegas are seeing a huge surge in volume of homes being sold, and yet they both still offer great deals if you do your homework. And yes investors that have no business being in real estate, and speculators are buying homes.
My advice now is still buy and hold. Leave the flipping to the people who do it for a living.
The key to success in the Real Estate game just like any other area you want to achieve success, is doing your homework. It doesn't matter if you are buying your first home or buying your 15th investment property. Doing your homework and buying right is where you make your money.
As a homebuyer looking for your own home, schools, location, commute and other factors are added to the equation. As an investor, it is strictly a money question. I know several investors who will buy property site unseen if they get the right numbers on paper.
Short sales are still happening although banks are more reluctant to approve them in recovering areas. The banks are also taking a closer look at the sellers finances to make sure they really can't afford to be there. If they can, you aren't getting the house. If you need help with a short sale, there are a lot of resources out there, but the key is an aggressive agent who will make the banks nuts so they'll make a deal.
Short sales are where listing agents really make their money. Otherwise it is the buyers agent that is doing the work to sell the house. If you are selling a property and have it priced right in this market, the listing agent won't have a lot of work to do unless the property is over the FHA loan limits.
So how do you buy a short sale and get a deal? The key here is to do your homework and know the property up front. Ideally if you have an aggressive buyers agent, you won't have much work to do. Most of the time when I talk with frustrated buyers, I find their agent telling them "It already has offers". That is just a lazy agent.
Patience and Persistence Pay
I bought my own house after I lost out on the bidding war when the winner backed out the same day the bank approved the sale. I watched the house for nearly a year while the other buyer tried to work with the bank and gave up. I kept in contact with the listing agent and less than two hours after it was back as an active listing, he had my offer agreeing to all of the banks terms in his hands. By the end of the day, the offer was accepted and the deal in escrow.
Short sales are funny, if they are an "approved short" that means that the bank has already agreed to the price. Most of the time, these are at market value, and not a deal to an investor. You can spot these because they are listed for more than about 14 days.
Aggressive Short Sale agents will price the house slightly low, and get a bidding war started. Using the top 5 bids and solid market data, the sellers agent will approach the bank and explain why they should take the deal. Sometimes it is very difficult to get to the person at the bank that has any authority. When agents do this they can get a dozen or more bids on the very first day, and may not accept any other offers.
This is where having your own agent can hurt you. Short sale agents might have to give up part of their commission in order to get the deal done. If you walk in the door with your own agent, the selling agent may not be inclined to work hard on your offer for half the commission. This isn't always ethical, but it is the reality.
If you are after any kind of standard sale, having your own agent is normally the smart way to go. Some listing agents will push the limits to try and bring in their own buyer, most of the time this isn't the case. If it is, you don't want to work with that agent anyway.
A good buyers agent will ask to present your offer to the seller directly, and explain to them how you came up with their price. This face to face negotiation is invaluable in a standard sale, and pretty worthless in a Short or Foreclosure situation.
More than once at these face to face negotiations, I was able to learn something the sellers agent didn't know that I could use to get the deal done. Money isn't the only motivator in the real estate game. Kids changing schools, move date flexibility and other financial stresses are just some of the aspects of a deal that you can use to help the seller out.
If you don't get a short sale offer accepted the day it goes up, keep in touch with the listing agent. Let them know that you are interested in the property, that you know they have other offers and remind them things change as you leave your card. Use property watch alerts on Realtor.com or your favorite real estate site to see when the house closes or doesn't. If the sale doesn't close in 45 days, remind the agent you are still interested, and then every 30 days after that until the house closes or pops back on the market.
For my personal investing and buying, I am still focused on shorts, and foreclosures. I think this is still where the best deals are for right now. I am starting to look more at standard sales for friends and clients. The recent market changes have motivated several investors and second home owners to be very flexible when it comes to selling terms.
The difference in costs of being an agent/contractor and getting the work done in house to fix up a foreclosure and what my clients pay is closing the gap, making standard sales more cost effective at the end of the day.
If you are looking for a deal, watch your target area, and the minute a short sale pops up, jump on it. If you miss out, keep a watchful eye out, you still might just get it. The deals are out there, you just might need to work a bit harder to get them.
