Do you want to buy a house at 30%, 40%, or more below “fair market value”? It’s certainly possible. Investors are using these strategies every day, across the country. The same techniques that work for investors will work for you–saving you a bundle of money and resulting in “more house” than you’d thought possible.
The strategies will work for anyone, so long as you have some patience and some flexibility in timing and location.
Note: These strategies will all work on properties listed on the MLS. They work even better for properties that aren’t listed. If you find a property that isn’t listed, that’s another advantage for you: You’ll have little or no competition for the property since it isn’t being advertised for sale.
Tip #1: Vacant Houses: Look for vacant houses. Because no one’s living there, by definition that’s a house that someone else (the owner) doesn’t need. He or she is somewhere else, likely paying a mortgage or rent on another property. Still, the vacant house is costing the owner money every month. There may be a mortgage, a line of credit, utilities, maintenance, taxes, and more.
Insider’s Tip: Some localities charge a lot more tax for vacant houses. Example: Washington D.C.’s residential tax rate is $0.85 per $100 of assessed value. That’s pretty good. But if the house is vacant, the tax rate soars to $5.00. If it’s a “blighted” vacant property, the tax rate is an incredible $10.00. Owners of vacant property in D.C. and many other places are highly motivated just because of that huge tax rate. If it’s listed on the MLS and has been on the market for perhaps 30 days, make a low offer. If it’s not listed, contact the owner and begin negotiations.
Tip #2: Bad Rental Properties: Real investors stake out the courthouse–specifically the landlord-tenant cases (usually held one day a week). Whether the landlord wins or loses, he/she may just want to get rid of the property. You might also find these properties’ owners by advertising online through sites such as Craigslist. Bonus Tip: Contact property management companies. They’ll know their properties with bad tenants, and they may know whether the owner is interested in selling.
Tip #3: Inherited Houses: These can be very similar to vacant houses. Sometimes they’re vacant; sometimes not. (If not, it’s usually a relatively living temporarily there.) Often, the heirs don’t have a use for the house, and they’re not interested in becoming landlords. Meanwhile, there are those recurring monthly costs, as with vacant houses. Inherited houses often aren’t in good, updated condition, and the heirs aren’t interested in spending thousands of dollars just to fix the place up. They want to sell quickly and get whatever money they can out of the house.
Investors check records at the courthouse and contact probate attorneys. You can do the same. Plus, tax records (which you can research, or have them researched by a real estate agent or a researcher) will usually show which houses are in trusts or have been inherited.
Tip #4: Absentee Landlords: These are out-of-town owners who’ve rented their house out. This is different from “bad rental properties.” In many cases, the tenants are OK. But the out-of-town owners are ready to “move on” or cash in on the property. They have much less of an emotional attachment.
Tip: Look for properties that have been owned by the current owner for 20+ years. These owners are more likely to be interested in selling, and have little emotional attachment to the property. They’re also likely to have more equity in the house, making them able to accept your lower-priced offer. A real estate agent can quickly research the tax records and find owners who meet these criteria.
An investor-friendly real estate agent can help with any of these. (Some investors use agents; others don’t. So this isn’t a plug for agents, but there are things they can do–such as pulling comps [determining the property’s value by looking at recent comparable sales]–that the average person can’t.)
As with any offer, the lower you go, the less likely the owner is to say “yes.” On the other hand, the owners of the types of properties listed above are much more likely to accept low offers than is the typical seller. These are the classic “motivated sellers.” They want to sell. In some cases, they need to sell. You’re offering a solution.
Tip #5: Property Condition: Many of these properties won’t be in great condition. Some will be completely livable. Others will be very dated (inherited houses tend to be) or damaged in some way (bad tenants). You should get a home inspection done and can even make the purchase contingent on a satisfactory home inspection. But be willing to buy the property in as-is condition. What you’re saying is that, if you buy it, you’re not going to ask the owner to make any repairs. (What you’ll do is discounts his/her offer to account for needed repairs and maintenance.) The sellers in most of these cases isn’t eager to do all sorts of repairs, and may not even have the money to do so. Make it easy for the seller: Buy in as-is condition.
Those are 5 strategies that investors use to find and buy real bargain properties. You can do the same thing.