Buying , fixing up, and selling houses is fun! I’ve been doing it, one way or another, for the last 5 years and in earnest the last two and half years and if done right it is profitable.
So this little section of my website is going to tell you a little about what I have learned over the years.
By far the most important is buying right.
Very few houses placed on the open market i.e. in the MLS or advertised in the newspaper or wherever, sell for much less than “market value”.
The MLS is the most “efficient” system to dispose of houses at their true market value we have. When a property is listed at a true discount the Realtor who has the listing will generally be inundated within days with offers including offers for more than the asking price. Every sub market in this town has it’s local experts who look every day at the MLS and know exactly what’s going on. When a property is under priced by the listing agent they pounce on it on behalf of their clients or for them selves. The market works.
Currently of course we are inundated with so-called bank owned properties (REO’s) or properties where the owner is still in the house and the selling agent has listed the house “subject to bank approval” i.e. a “short sale”, meaning the property has a loan against it for more than it’s worth.
Stories abound about how stupid and irrational and difficult to deal with lenders are. Many Realtors won’t even show houses to their clients if it means waiting for some silly “loss mitigation officer” to make up his or her mind to finally approve the short sale. Many if not most agents don’t even bother with these listings because of the heartache involved.
Bank owned properties are generally priced too high in order for you to make a decent profit. Before listing a property for sale, loss mitigation departments are generally required to obtain a professional appraisal and a broker price opinion. So what makes you think that these people, who presumably have their employers best interest at heart and who deal in this stuff day after day, are going to sell little old you their property cheap so you can re-sell it and make a bundle? They make mistakes read on.
You must become more knowledgeable than them.
That’s it. You must become so comfortable in your chosen market that when you do see a deal where the “experts”, meaning the agent and the lender, have made a mistake , you can pounce on it and “steal” the property.
Do they make mistakes often? But of course. Are they under pressure to dump properties at certain times of the month? Probably, I don’t know. Are they under pressure at certain times to sell a certain number of houses? I would assume so. Did the previous three so-called buyers get rejected by the new lender and did this particular deal just get back on the market and did the lender decide that “this house has to go today? May be.
Did the appraiser and the Realtor tell the lender that the house in question needs X amount of work and did you discover they are wrong and you can fix the problem much cheaper than they thought? Well?
So how do you learn all this and how do you learn about values and such?
Work. Hard, old fashion work my friend. Such as: Deciding on a part of town you are comfortable with and then learning all about it. Seeing every house listed for sale in and out. May be that is 100 houses, I don’t know. Looking up and driving by every sale in your chosen price range and area. Finding out how these houses sold and how long it took. Finding out what concessions the sellers had to make and weather or not fraud was involved.
Learning what things cost. How much it costs to do a bathroom and a kitchen. Finding out how much a roof costs and how much to do a yard all over with pretty flowers and a new lawn and fence. Learning how long all that takes and finding out who is going to do all that for you or weather you are capable or willing to tackle this yourself.
Alright, so now I have done all that what’s next?
Now you get make offers. Many offers. A lot of offers. Dozens of offers. So many offers that the Realtors you were working with have all left you in disgust because they can’t make any money off you because you are too tough. So many offers that the listing agents representing the lenders get to know you and remember you may be a little and when they get your third offer on the same property within 30 days you might just get lucky.
Because you are now so confident of your values and you know what things cost you can make offers without any conditions whatsoever and beat all those other fools who first have to have their contractor look at the house before they can commit.
Because you are now so confident that you know what you are doing you can give the seller a cashier’s check for, say, $10,000.00 as non refundable earnest money and promise to close any time it suits the seller.
Because you are now the expert you can make an all cash offer and not worry that you can get the financing. You know you can get the dough.
Do you get the picture?
To be successful you must concentrate and specialize. Do you live in Portland, Eastside Westside? Pick one and go from there. How about Bend? There are a lot opportunities out there.
A final word about buying right.
If you are just getting started you will no doubt be a little discouraged or daunted by my remarks above. Don’t worry. Rome wasn’t build in one day. Take your time. Learn. Stumble along. Your first deal may be a failure and you might only break even, but so what? You have to learn somehow.
Better to barrel ahead and learn on the job then to endlessly analyze and worry about the what ifs . You can always recover and do better next time.