Starting out buying a house
It is the first instinct of anyone buying a house to look at the local home prices then your present financing and “guessing what you can afford”. However, why do top real estate investors look at properties often out of their price range in a select area? The first step in buying a house is arming yourself with as much information about a location and the specific home sales in an area.
Deals are usually procured by those who are willing to “wait till the right time to buy”. This is probably the best way to get into or near a neighborhood you thought you could not afford. There is a time to rent, save up and a time to pounce on a deal in the market. There will always be fluctuations in prices and negotiating for the the best price on a home takes a thoughtful strategy.
I know of people that have bought homes at a greatly reduced rate in a fantastic area by keeping an eye on one particular region. I know a first time buyer that was quite the negotiator and strategist right out of the gate. Buying a house in Pasadena California (a pretty exclusive area) by hassling the bank enabled him to get a distressed property with about an acre of land at an unheard of price.
By complaining to the bank about the property as a fire, crime hazard he turned around and made an offer of $125k and got it! This was before the market crash! Pasadena was not in any way hit as hard in the market turn down so this buyer got an amazing deal in a good area when prices were high.
So how did this first time buyer know how to get such a good deal on a house? He worked in a service industry for the bank and learned all he could when he saw the property and formed a plan. The key (no pun) to buying a home the smart way is….. Finding all the property information you can, then making the reduced price offer.
This situation does not happen all the time, but knowing your local market and making some connections is the first step. With the internet you can go broad and look at several potential properties at the same time. Giving yourself the time to gather resources and capital saved will enable you in getting closer to the house you really want to live in.
Knowing the potential issues that could trigger a bank to sit down and talk to you about deeply discounting a distressed REO is one strategy. The other may be negotiating directly with a seller about the “issues” you found about the house in a natural hazard report. Every home seller wants the best price, this goes without saying however, the real property disclosures may greatly affect that valuation they had in mind?
The point is, you might not be able to leverage these kinds of ideas with every home on the market, but there are variables in any form of negotiation. Another thing to remember is the successful investor “buys with no emotion” they are not “married” to the property. Making an impulse purchase on a home just because of a particular facet is not a wise way to buy a house.