Do you believe that you can get a good deal in today’s real estate market? Many people are reluctant to buy a house today because of the news they have been hearing lately.
Listen to a story of three home buyers. Buyer A, we’ll call Adam. Adam bought his house shortly after the last bottom of the market cycle. He was watching the market prices and waiting for prices to stop falling. Home prices had been dropping so Adam waited to buy until prices were on the rise again. He didn’t want to buy a home that was losing value, after all.
Adam waited until he was sure that prices were on the rise again to buy his house. By the time he was ready to buy, so were hundreds of others who had been waiting out the down market. It was hard to find a house that met Adam’s needs and when he did there were other people bidding against him on the same property.
Adam ended up paying more than the current market value to get the house he wanted to keep other buyer’s from stealing it away from him. Adam was happy with his purchase because within a few years his property had appreciated in value
Bruce, buyer B, bought his house 5 years after Adam. He kept hearing Adam talk about how his property had increased in value and Bruce wanted to get in the game. He had a hard time finding a property he could afford. When he did eventually buy, it was near the end of the upswing of prices.
After a year, prices started dropping and Bruce found his house was worth less than what he owed for it. Adam was disappointed to see his home value dropping, but he still had a house worth twice what he owed on it.
Carl (yep, buyer C) bought his house 2 years before Adam. When he was looking for a house to buy, the market was flooded with properties nobody wanted. Prices were dropping and everybody was afraid to lose money. But Carl knew how to find the good deals and there were plenty to be found.
Carl bought a house from a seller that had already moved to another state. The seller had been trying to sell the property for 6 months without an offer. The seller was tired of making mortgage payments on a property he didn’t want so he was willing to sell to Carl for what he owed on the property.
Since the seller had owned the property for 12 years and prices were still well above the price he bought it for, Carl got the property for half of what it appraised at. By the time Adam bought his house, Carl’s house was worth almost double what Adam paid for his, but Carl only owed half of what Adam owed.
Today there are even better deals than what Carl bought. The lenders are in trouble and need to unload properties or go under. The FDIC has already closed several big players down and more are on the edge of failure.
There are several thing to do to make sure that you are getting a good deal in the current market.
- Know your market. Study what properties are selling for, not list prices.
- If you are planning to own a home long term, short term market fluctuations don’t matter.
- Make sure you know what repairs are needed and make your offer accordingly.
- A good deal occurs when a seller is motivated to sell for less than market value. Look for the motivation.
Knowledge of the local market is important to determine what similar houses are selling for. This is what determines the true value of a property. A house is only worth what someone is willing to pay for it. It is better to buy the worst house in a neighborhood, than the best. There is no $500,000 house in a $250,000 neighborhood.
Don’t be overly concerned with prices dropping. If you get a good deal relative to today’s market, it will still be a good deal when the real estate market shifts whether prices are going up or down. Over the long term, real estate generally increases in value.
What looks like a good deal can become a bad deal if you end up having to spend too much on the property after the purchase. Be sure your contract allows for re-negotiation once you have had a thorough inspection. Have professional contractor’s give repair estimates to determine repair costs before removing all contingencies.
Look for signs of motivation in the seller. This is what makes the deal. There are many reasons a seller may be motivated to sell below market value.
- Divorce
- Job loss
- Relocation
- Bad Tenants
- Abandoned properties
- Mortgage rate adjustments
- Foreclosed properties
Finding a deal in the current market is easier than it has been for years because there are so many motivated sellers. Foreclosures are epidemic. Peter Conti is an expert mentor who teaches real estate investors how to get deals. The same techniques can be used to buy your own home at a big discount. To find more information about how to buy foreclosures get Peter Conti’s ebook Insider Secrets to Buying Foreclosures.
Allen Davis
Founder, RealEstateSearchDirect.com
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Todays market is a perfect one for buying a home in, and knowing the market is very important. A very efficient and effective way to get to know your market is with a real estate agent. I recommend Taylor Morrison, check out their website at http://dreambig.taylormorrison.com/?utm_source=bc
You can get a lot of great deals. And if you have cash up front – You have a LOT of power in the negotiating game. Cash speaks louder than paper or anything else in real estate.
That’s a good point Investor. Cash can be especially enticing in these credit tight times when some sellers have had their deals fall out of escrow because the buyer couldn’t get financing.
It’s always possible to get a good deal on real estate, but you just have to look and have to know where to look. Good post, thanks for sharing.
Of course there are good deals in today’s market. People have such short memories when it comes to real estate cycles. It always seems like it’s never going to get better when you are in the midst of a downturn. But it always does get better. It’s amazing to see people afraid to buy a home for $200,000 when the same home sold several years ago for $300,000. There are plenty of home buyers and investors out there today who do know better, and many of the bargain properties are being overbid. Interest rates are still at record lows, and opportunities like these only come around in a lifetime. People like Bruce B get burned for staying in the middle of the herd, when the right move is almost always to move against the herd.
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Yes you can get a good deal in real estate markets. Though real market is on a downward surge, knowing where to look and what to look for can help you get a good deal.
It’s all about timing. If your knowledgable and time it right (with a bit of luck thrown in) then there are always good buys out there. Now is the perfect time – prices are low and looking like they will rise again soon.
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Right now is a great time to jump in on real estate deals. I recently purchased a home in California that was just about half off from it’s peak 2 years ago. If you are a first time buyer it’s even more of an incentive with the government’s credit.
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