Finding deals in the MLS

A question I'm frequently asked by investors is "can good deals be found in the MLS?"

The MLS is certainly a widely used and efficient marketplace for real estate. That's certainly good if you are a seller. But are there really any good deals for buyers? Or are all the prices bid up to the point of making them unprofitable?

Below are 6 strategies for improving your chances in a competitive market.

1. Know your neighborhood. Detailed knowledge of the specific area you are shopping in will allow you to make decisions quickly and often grab a property before other buyers can do their homework.

2. Offer sight unseen. Most purchases allow for a 10 day option period at little or no cost. Why not lock the property down and back out during your option period if the property turns out to be a loser during inspection.

3. Offer way over asking price. This sounds counter-intuitive. How can a person get a great deal on a property by offering well above asking? If you find a property that is grossly underpriced (it does happen), your best bet is to write a strong offer and secure the deal. Here is a scenario I see from time to time: A property is underpriced by $50k and the offers come flooding in. Within a couple of days, the listing agent is so buried that he pulls it off the market or stops accepting offers and presents what he has to the seller. Most buyers offer asking price or a few thousand dollars over hoping to win. But my strategy would be to offer $20K over asking. Blow everyone else out of the water and still pickup a house for $30K below market. The buyer that tried to make $50k ended up making nothing..."pigs get fat and hogs get slaughtered". Be a pig. Not a hog.

4. Pay cash. Many buyers will accept a lesser cash offer over a higher financed one due to the higher probability of closing and elimination of issues related to appraisals and repairs.

5. Owner occupy. Especially when dealing with federal foreclosures, owner occupant buyers can get an exclusive "first look" on properties before investors even get a shot. A warning....don't even think about buying an investment property and posing as an owner occupant. There are stiff penalties associated with lying to the government, your lender, etc. But you could always move into your new purchase and turn your existing home into a rental.

6. Only bid on properties that are worth more to you than anyone else. In other words, always be thinking about who else might want to buy this property and for what use. Don't get outgunned. A good example would be a fixer upper on a large prime lot in an area seeing a lot of new construction. You can't hope to win a bid with the plan of fixing up the home if builders are willing to pay an exorbitant amount for the land for the purposes of redevelopment. This just isn't your house for your model.