With REOs getting bid up to stupid prices that can only be rivaled by the unruly amounts being paid by investor-types at non-foreclosure auctions - What is the average investor to do when it comes to finding deals? “Highest and best” has become a nice way of saying, “bring on the buyer who needs a deal so bad they’re willing to slash their margins and/or compromise the quality of their final product.”
Flash back to 2011...I could lock up an MLS deal lower than asking price and turn around and sell it for more than the bank had it listed. Sounds crazy right? Not really. I had the market knowledge (neighborhood specific) and I was willing to do the legwork. It amounted to sifting through the crap for other investors, weeding out the deals that made no sense, and delivering to them turds with a capacity to shine. I was providing a service for which they were happy to pay. I kept the deals I wanted to rehab, and made smaller chunks of cash on those that weren’t as appealing or didn’t hit my radar at a time that made it convenient for me to handle the purchase. The newly-formed LLCs were flowing!
Welcome to 2013...I’ve got one deal that I acquired via typical REO, and I’ve had to go to great lengths to complete the project while complying with assbag deed restrictions. Am I still rehabbing and wholesaling? More than ever. Am I still finding deals on the MLS? Yup. You can too...
Get deals that others already have under contract - Remember when I mentioned the folks paying too much for REOs and auction properties? Combine them with the 203k retail buyers and it forms a superhuman tool with little market knowledge, limited capital, and financing hurdles. Even my tiny brain registers this as an opportunity.
You can track closing dates that get extended on the local MLS. You can also see when an overpriced property went under contract ridiculously quickly. Contact the listing agent and let them know you’d be happy to purchase the house if the deal falls through. It’s not a bad idea to put a reasonable backup offer in writing if it will force the current “buyer” to “shizzle or get off the pizzle.”
Some of my best deals are those that have come back to me after someone already had them under contract. Don’t ignore this low-hanging fruit. You should also keep good records of your rehab budgets so you can refer back to them and make a quick decision when deals find their way back to you. They come back...Like herpes, but way better...
Find your happy place - Sorry...this strategy has nothing to do with herpes. With the market gaining momentum there are opportunities in fringe neighborhoods. If you live in an area with enough neighborhoods to see a decent amount of disparity in property values (obvious rental areas, war zones, and everything up to the high-end), there will be good neighborhoods that accelerate right now. These will be the areas have always been “okay”, but are considered the stepchild of the trendier “frat boy is moving in because he got his first job” neighborhoods. Here comes the important part - You can buy houses in these neighborhoods for list price or thereabout, do a great rehab, and sell to your retail buyer while hitting your % of ARV standards. No fighting the seller for every penny. No bank addendums to sign. In fact, when an REO hits the market in these areas you’ll see it get swarmed by the people I mentioned earlier. “If it’s a foreclosure it must be a good deal” is the thought process. Eff that noise. Work with standard sales.
Lastly (Some of you will hate me for this one)
Don't bother with short sales - How is this a way to find deals? Unless you're an expert you shouldn't be wasting your time working these. Do something else. Start a fire in the urinal. The smart money is on those who wait for the experts to work the negotiation then buy them as a wholesale deal. Find the short sale junkies in your market and get up in their kitchen.
There you go. A few simple ways to hammer listed properties and keep your business thriving. Don’t make things complicated. Follow obvious trends. And don’t forget to be awesome.