"SIXTY DAYS
TO YOUR FIRST BARGAIN PURCHASE."
By Attorney William Bronchick
Finding good real estate deals is an art that
takes time to master. Like any business, customers are what drive
it. Your primary customer is the seller who is motivated to sell
below market value. Finding motivated sellers requires advertising,
marketing, salesmanship, and, like any business, keeping your
nose to the ground.
Nothing happens and nothing matters in real estate
until you find a deal. You cannot put together a deal without
a motivated seller and you can only convince a motivated seller
to do something creative or that involves a discounted price.
A motivated seller is one with a very good and pressing reason
to sell below market.
The most common problem new investors face is
finding bargain properties. Many who start out in real estate
investing quit without ever buying their first property. They
go through the motions of looking for deals for a few weeks or
months and then decide it doesn't work. They forget that finding
motivated sellers is similar to the salesman finding his first
customer . . . it takes persistence and hard work.
FIND THE MOTIVATED SELLER
At the cost of sounding redundant, the concept
is simple: find motivated sellers that are willing to sell their
properties at a discounted price or "soft" terms. Currently,
the real estate market in some parts of the country is hot, hot,
hot! Many people are complaining that the strength of the market
precludes investors from finding deals on properties. The popular
misconception is that in a rising market, even the most motivated
seller can find a buyer for his property at full market price.
The truth is, you can find deals in ANY market.
Real estate legend A.D. Kessler once said, "There are no
problem properties, just problem ownerships." The definition
of a motivated seller fits squarely within Kessler's idea. A logical
person knows that time, money and effort can solve virtually any
real estate problem. However, some people are too emotional about
their real estate problems or have other motivating issues to
deal with.
Some of these issues include:
- Divorce
- Lack of concern
- Inexperience with real estate repairs
- Time constraints
- Death of a loved one
- Job transfer
- Landlording headaches
- Impending foreclosure & other financial problems
FARMING NEIGHBORHOODS
Successful real estate agents utilize a technique
called "farming" to increase their business activity.
They pick a neighborhood or two and focus their marketing efforts
within that area. You should try the same technique. Start with
a neighborhood that is relatively convenient for you.
1. DRIVE THE AREA
Spend a few weekends driving around the area.
The goal for you at first is to learn about the area, the style
of houses and the average prices. Over time, you may expand your
farm area, but stick with areas that contain the type of homes
you plan to purchase. It is not necessary to begin your investment
career by learning every square mile of a large metropolitan area;
it is important to learn the value of "typical" homes
in your target areas. This knowledge will enable you to make quick
decisions about whether a particular prospect is a bargain.
2. ATTEND OPEN HOUSES
Visit open houses and "for sale by owner"
(FSBO) properties on weekends. Speak directly with owners and
their agents. Pass out your business cards. Make friends. Word
of mouth and referrals are a big part of any business.
Part of the process of finding a deal is to know
how to recognize one. Take a good look at the property and its
physical features. After viewing a couple of dozen open houses
in the neighborhood, you will get to know the value of the properties
and the different styles of houses. When someone calls you about
a house in that area, you will know the value by its description.
3. LOOK FOR UGLY & VACANT PROPERTIES
While you are driving around neighborhoods, look
for vacant, ugly houses. How can you tell if a house is vacant?
Look in the window! Of course, this practice may get you shot,
bitten by a dog or arrested. First look for the obvious signs
of vacancy - overgrown grass, no window shades, boarded windows,
newspapers, garbage, mail piled up, etc. If you are not certain
whether the property is vacant, knock on the door. If the owner
answers, be polite, respectful and ask if he is interested in
selling. In many cases, it may be a rental property, so ask the
occupants for the name and telephone number of the owner.
If the property is vacant, ask the neighbors
if they know the owner. Most neighbors are helpful, as they know
"ugly" houses hurt their own property values. In addition,
ask the mailman - they know all of the empty houses on the block.
Leave a business card and write down the address of the ugly or
vacant properties. When you get home, look up the name and address
of the owner. Finding the owner of a vacant house can be difficult,
which is why the persistent people who find the information make
the most money. The name of the owner can be found by calling
your local tax assessor's office or by looking up the deed recorded
with the County land records.
If you want to contact the owner, it takes a
little more digging. Try speaking with the neighbors or asking
the post office for a copy of a change-of-address form on file
for the property. Online services, such as www.infousa.com, will
search public databases, such as the Driver's License Bureau and
the Department of Motor Vehicles.
Some cities, towns and counties will "tag"
a house with code violations. This is often a sign of a neglected
or vacant property. Ask your city if you can obtain a list of
such properties or find where this information is publicly recorded.
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