Am I wasting my time with recently sold properties???

Question

I'm currently shopping around the Denver / Lakewood  / Golden areas of Colorado. The market here is so crazy that unless you have cash it is hard to get a chance at anything close to a deal. I have been racking my brain to think of a way to get to these people and I have considered direct mail and other options but they seem overdone here.

MY LIGHT BULB IDEA is to look up recently sold properties on Zillow and mail the new home owners quickly after they purchase a house if they got it for a bargain. I would essentially be turning these buyers into wholesalers by offering them more than they purchased the house for (if the numbers work). They make some cash, I get my foot in the door of home ownership, everyone wins!

Anyone have any recommendations or deal breakers as to how this strategy won't work?

Bill S. · Answer

So I will deviate from the crowd a bit here. IF you want to put in some work, you can get a better deal than with an agent. That said you have to WORK. Target an area with a personal letter saying you want to buy in the area, you are pre-approved and would like to save the sellers the real estate fees. Send them out and see what happens. You need to be willing to spend some money on this up front. Cash for mail.  Probably around $5,000. Use @Michael Quarles criteria and be prepared to mail the list 6x and you should have at least 1,000 people on it. You will save much more than the 6% fee if you know how to value property and are patient.

If you don't have the money that's fine. Just hire the agent and let them earn their fee.

Bottom line: Don't start if you can't let the process run the course over the next 6 months.

Michael Quarles · Answer

Hello Justin.

Good to meet you.

To your question of marketing to recent buyers.

Two things have been consistently true.

1- you can’t expect a lap dance at Church.

2- you shouldn’t expect to find a wife at a wedding dress fitting.

Now there is a third

Highly unlikely to buy a house at a discount from a recent buyer.

Go after

30%+ equity

5+ year ownership

SFR

Under median.

Happy house hunting

Bill S. · Answer

@Derek Stewart I am not new to real estate. I am an agent and I have brokered deals for others as well as myself so I do know what I am saying. I also mail each month and buy off market properties at well below retail from those mailings and I don't spend anywhere near the $20K you suggest is required. I stand by my advise that a beginner who invests time and money in learning even in Denver's competitive market would have success. That is if they use direct mail of the budget I mentioned with the mail piece I mentioned as well as learns how to value property. This is not easy and most won't do it for which I don't fault them. To say it's not possible or even inadvisable, I wholeheartedly disagree.

Now while technically, the seller pays the broker's commission, in my experience with most off market deals, sellers are willing to at least split the difference and mark down the property half of the commission they might expect to pay. If not, move on to the next.

Matt M. · Answer

Forget driving for dollars and door knocking. It will be a waste of time for you. You hired your agent to get you a home. He/she is getting PAID to do this. Make him get beyond sending you an "auto email" and find you a home. If he doesn't, then find someone who will.

Our inventory has doubled and more will be coming online shortly. I'd avoid "distressed" homes since your cash reserves are low. Sure you can do the work, but trips to home depot cost a lot of money. All those trips add up. That's how I get a companion pass each year on Southwest.

Look at the "back on market" homes and others that are 30+ days on market.

Derek Stewart · Answer

@Justin O'Malley if you have a good/great credit score, preferably great credit and you have a good salary, you can get a loan.  There a lot of first time homebuyers programs that can help you immensely if you do not have a lot for a down payment.

I can refer a couple great lenders to you if you would like.  And if you decide you want to rehab a home while you live in it you can look into loans like the 203k loan.

Chris Lopez · Answer

@Justin O'Malley Some of the properties that you sold for under market value, are ones bought by investors or wholesalers. They are not going to turn around and sell it to you. They have their own plans.

Are you looking to buy a place for your primary residence? If you are, you're going about it wrong. The last four months have been the best time to be a buyer in Denver in recent memory. The market slowed more than usual when you consider seasonality.

Finding off-market deals is really, really hard and expensive. Wholesalers and flippers often spend 10k to 20K a month in marketing and can close in cash in a week. If you're buying a primary residence, your conventional financing offer does stand a chance.

I've had clients try to do the samething for over the last year plus. Guess what? They've bought nothing. Whereas other's bought a "good" deal from the MLS, own a home and have seen a year's worth of appreciation, principal paydown etc. If you have the time and resources to find off-market deals do it, but most people don't---- and it's not as easy as courses and gurus make it out.

Derek Stewart · Answer

@Justin O'Malley I personally think it is bad idea.  If you think they got it for a steal then they do too.  And no one gives up a good deal with out making the next person pay...Especially in this market.

Go on neighborhood walks and knock on doors or call expireds.  And search constantly on the MLS.  I just sent an investor, what will be a cash flowing 3/2 with no rehab needed in the hot up and coming west Colfax area.  And it is priced generously under $350k. With average rent in the area for the specs @ $2,500.

Matt M. · Answer

Where are you looking here in town? If you think right now is crazy, just wait a few months. You should really have a sit down with your Realtor about missing properties. What is the hold up? Are they just not sending them to you? Are you sure your search parameters are correct? Marketing to new home owners is a waste of time. You'd have to pay above and beyond to get me to move out of a new home.

We started buying our clients new homes with cash to compete and get the best deal. Then we sell it to them as soon as their loan can close.

Jay Hinrichs · Answer

Ditto and as we know most wholesalers never actually close.  so most that do have a specific reason for the house and its not common they are going to put all the cash out and then turn around and sell it a month later.. UNLESS they got one of those once every 5 year deals and it was too good to pass up.. I suspect its a pretty dry well that one

Bob B. · Answer

I get calls and mail all the time after buying a house.  I assume they call me because tax records show I'm an absentee owner.  I think it's a waste time but maybe you'll have some luck.

Am I wasting my time with recently sold properties???

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