How Do I Buy Properties For Below List Price?

3 Replies

So I just started investing in real estate and I have had no luck closing on any of my deals, or even getting under contract. The real estate agent who was showing me the properties actually quit on me when I put in my last bid. She didn't even submit it and this was only the 3rd or 4th house i have made on offer on. What I learned from this little incident was to just go directly thru the listing agent, but that still doesn't solve my problem of getting the sellers to accept my bids.

The first thing I thought was maybe my offers are too low, so on my last i really dialed in and was a precise as I could be. The house is this example has a list price of 89,000 and an ARV of about 118,500. Here is an example of the numbers:

  • Max Purchase Price = [Sales Price]-[Fixed Costs]-[Profit]-[Rehab]
  • MPP = 118,500 - 15,964 - 10,000 - 25,331
  • MPP = $67,205

My fixed costs include 6% from the ARV in real estate agent commissions + 5500 in closing costs + 2654 in 3 months holding costs.

To me this seems like a very comfortable bid based on the ARV but all my bids have come way under the list price. In this example the difference is 21,000. The other bids I have put in have been about the same.

A few of the houses I put bids on however have sold for the list price??? How? I have went back and reanalyzed those deals and could not come up with any profit based on the list price, the comps, and the rehab. I have even gone with different contractors to get lower bids but the rehab bids have all been about the same.

Am I not doing something right? is their a secret to getting my offers accepted? The real estate agent I was working with quit on me in the example above and said that homes are selling at 98% list price. I said even one's without kitchens, doors, and walls...She said yes and hung up.

So now I'm wondering:

How Do I Buy Properties For Below List Price?

I can summon up your problems by singing you an old country song..."Lookin for love in all the wrong places".You are targeting the wrong properties and in the wrong way.You don't want real estate agents bringing you properties that are on the the MLS for the whole world to see and have to compete with,you will lose.You want to find the most distressed properties that needs lots of work being sold by desperate people who will take any bone you have to throw at them.You need to find them before they hit the MLS for everyone to come running.You need to find a local investment club and attend their meetings to learn how to market yourself and make desperate property owners come to you.Read some books on wholesaling properties to learn how to find them before anyone else.

I think what you're finding out is more to the point that the area you're investing in may be too competitive to find deals on the MLS. Ultimately, I'm buying one house a month off MLS and have been for about the past 3 years running now. Currently have 60 and closing on #61 in a couple of weeks. And yes, I have a couple more offers out there that I think I'm close on.

All but 2 were listed on MLS. The two that weren't were actually from a fellow BPer who saw where I was investing and offered to wholesale them to me. He found a couple of really good deals. 

One thing I would say though is that I don't believe that MLS is a non starter. Maybe try going further out in your area to see if you can't find another place where the MLS can have some deals.  Ultimately, the real deals are in the following places for me:
1) MLS - govt deals (HUD, homepath, etc). These govt homes are discounted far more aggressively than the bank owned stuff - especially as they continue to sit. The longer they sit, the higher the discount.....

2) Bank owned stuff that sits for awhile. As you start to get out to 3, 4, and even 5 months, the banks may just be willing to take a nice haircut off the list price. Initially no. But if they sit long enough, yes. Target properties that have been sitting on the market for 4 or 5 months or more. And then wait for a nice price reduction. It means the bank is willing to negotiate so get an offer in.  

3) Initial listings that are simply mispriced. Every once in a blue moon, someone will mis-price a home. You'll know it immediately and it'll be gone in a day. Get your offer in and hope that the only other investors that see it are greedy. Those are the ones that you can even do well on bidding over list. :-)

I do think every area is different. And each requires its own niche for investors to find deals. But I wouldn't automatically count MLS out. At local REI meetings, I'm hearing that people can't find any deals. But I'm finding them fairly regularly. So are some friends of mine as well.

They're out there. You do need a realtor that is going to keep at it though. And you need to account for the area too. If its too hot, go further out. Find some smaller towns with good schools and good rents and you might surprised to see there are still some deals to be had.....

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