I wrote a post not long ago about about foreclosures, and how they aren’t always the great deal people make them out to be.  That led to two things…

  • People asking me how to get a good deal on a property if foreclosures are not the Grail…
  • Agents that specialize in foreclosures complaining that foreclosures are always great for consumers…

Let me start with the second point.

It is faster.  No they aren’t. In fact, they often are the worst deal.  The initial price might be more attractive, but that doesn’t mean that the cost of ownership is lower, or the investment potential is greater.  Purchase price is only part of the equation.  There are costs of repairs, deferred maintenance and hidden damages to consider.

Of course, sometimes foreclosures CAN be great deals… but don’t assume.  And ALWAYS get a property inspected by a GOOD inspector.  Not your cousin (unless he is an ASHI certified inspector) or Dad (also with a certification).

On the the first point…

It depends on your goal.

If you are looking for an investment property, it would begin with figuring out where you want to be.  Don’t think of a ZIP code or a region, but a couple of neighborhoods.  Find out what sales have happened in the area.  Learn the houses.  Know what the price should be for different homes.  This is where having a Neighborhood Expert real estate agent can come into play. That is what we do…  Not anything-anywhere, but something-somewhere.  With this information, as property comes on the market you can recognize the ones that are potential deals.  And then, look further into those properties.  See what room there might be to manuever.  Find out how motivated the seller is.  Inspect the property.  And remember, you aren’t the only investor in the world.  And while there are over 9000 properties listed for sale in Gwinnett County and almost 500 in Lilburn… but there aren’t that many deals.  I see a LOT of properties that are selling in a few DAYS.  Those are the deals.

If you are looking for a property to live in, it is tougher.  You likely aren’t going to find the perfect house in a situation where the sellers are ready to give the best deal… especially if you have fallen in love with it.  But, what IS likely is that you can find a closer to perfect home.  There are a lot of properties on the market.  And if one doesn’t work, there is another.

How NOT to get a deal…

There are some strategies that generally don’t yield results.  You can find an agent that will play the game with you, but you will likely end up frustrated and on the sidelines.

  • Low-balling…  As a caveat, I just closed a property for a buyer that they picked up at $220k which had been listed at $300k.  If was honestly a great deal… but it was by NO means a $300k property.  But it was also somewhat unique, and sort of a lightning strike.  The seller was ready…  Of course, had the property been listed at $260k 17 months ago, it would have been sold.
  • Wrap-Mortgages and other “TV Guru” schemes…  Sorry, but the vast majority of those are crap.  Sure, someone might be able to pull it off, but I just recently ran across an associate that was trying to fix a situation where a buyer wrapped a mortgage… poorly… and the seller stopped making their payments.  The result was that their deal turned into a giant loss and a pile of legal fees.
  • Stretching…  Get something that you can afford.  Sure, this is a great time to upgrade, but make sure that you aren’t over the ragged edge.
  • Exotic mortgages…  Just say no.  Unless you are a VERY saavy investor, most of the exotic products can lead to exotic trouble.  They do have a place, but that might not be in YOUR portfolio.

I hope that helps.