In many ways, getting a good deal in real estate is no different than buying mattresses or big screen TVs on sale. Savvy shoppers, who do their homework, know what, when, where and how to buy to get the best bargains.
However, unlike buying a discounted range or refrigerator that can save you hundreds, getting a good buy on real estate can save you thousands.
Therefore, before you go house hunting, take a minute to review these dozen real estate shopping rules of the road. A little KNOWledge can add up to big savings.
Know Where to Start
Nearly everyone (more than 90% of all homebuyers) starts their home search online. That’s not news. Most sites, however, list properties from the highest price down. Start your search from the bottom up, and you just might uncover a diamond in the rough for less.
Know Where to Look
Neighborhoods reflect life cycles. When a homeowner dies, heirs often put the family home up for sale. If it’s a home you’ve admired, express your interest to the family. If you name a price, your offer will be taken more seriously and might even be accepted if the family doesn’t want to deal with the formal real estate listing process. You can also search online for death notices and divorce settlements, as well.
Know When to Look
Most people start their homebuying searches in the spring or after school lets out. There’s no law, however, preventing you from shopping in the dead of winter, when there might be far fewer home shoppers competing for homes. Remember, competition drives prices up, not down.
Know What the Signs Are Telling You
When you see a rider attached to a For Sale signs that says, “Reduced” or “Back on Market: Owner Must Sell,” don’t be in a hurry to scoop up the deal. These homes may contain serious defects or may simply be way overpriced. But if you find, after conducting your due diligence, that you still like the property, bid lower than the reduced asking price.
Know What DOM Stands For
Hot properties sell quickly. Not-so-hot properties don’t. DOM stands for “Days on the Market.” The longer a house sits on the market, the more nervous a seller becomes. Tension ratchets up if the seller faces a job relocation, liquidity crisis or needs to move so he can enroll his children in a better school district. Use this time element to your advantage.
Know What For Sale Owners (FSBOs) Are Really Saying
To save money paid out in real estate commissions, a seller might list his home without the help of an agent. A couple of things are in play here. First, the seller might not know the true value of his home. Second, the seller might be more flexible in his price when there is no commission, or a reduced commission is involved.
REO stands for Real Estate Owned. Typically, these are properties taken back from their borrowers for non-payment. Because banks aren’t in the property-management business, where it can cost $1,000 a day to maintain a single property, they’re motivated sellers. That’s an opportunity for buyers. The bank has usually taken care of any titles issues and major hazards, but generally many of these properties require further rehab work.
Know How to Outmaneuver “Contingency” Buyers
Say a couple has come in with a full-price offer, but that offer is contingent on the sale of their house. But if the sellers are eager to move into their retirement home that is currently idle, you could jump in with a non-contingent, less-than-full price offer and have it accepted, because, as they say, time is money.
Know What the Future Looks Like
One principle of value that real estate appraisers apply is “anticipation.” Maybe there’s talk about a big Fortune 500 moving its headquarters to your town, which would likely boost employment and thus home prices. But, don’t get too far ahead of the headlines. In the 1940s, Gangster Bugsy Siegel thought he could transform Las Vegas, a dusty desert outpost, into a glittering oasis. His vision of a resort destination was eventually realized but his mob partners, to whom he was indebted financially, didn’t let him live to see it.
Know What Makes Sellers Tick
Yes, it may be hard to believe, but not every seller is motivated by the almighty dollar. Some sellers, weighing a variety of offers, might want to hand off their home to someone they believe will be an ongoing steward of their property or family home. Preservation-minded owners who live in period homes (Victorians, Arts & Crafts, Mid-Century Modern, etc.) are often a good place to look for these sentimental, not selfish, buyers.
Know How Builders Operate
Because developers can run short of funds, they will offer pre-construction sales on their unbuilt homes. This way they get the money to continue construction and show off to lenders the viability of their project. Meanwhile, you get a discount with the possibility of selling afterwards at or above-market value. Just make sure that the developer who’s selling has a reputation for quality, not cutting projects.
Know Your Government Agencies
The Department of Housing and Urban Development (HUD) oversees the Federal Housing Authority (FHA), which insures mortgages for single-family homes and multi-family properties. When a homeowner defaults on an FHA-insured property, HUD forecloses and sells the home, at a substantial discount because it factors in the cost of repairs to make the property viable. Buyers must live in the property as their primary resident.
We all love great deals, real estate not excluded. By doing your homework, gathering market intelligence, and staying persistent and patient, you too can find a home at a great price.
And you may even have money left over to buy that big screen TV, which, by the way, is best purchased in early February right before the Super Bowl or that new king-sized mattress that goes on sale in September, just in time for Labor Day.