1. Be realistic. Reread the tale of two investors above if you still don’t understand how being unrealistic can and will cost you dearly.
2. Get off the fence and get in the game. If you’re waiting for the market to drop, reread the tale of two investors above to remind you of how much waiting can cost. Learn more about timing real estate markets.
3. Know the true market value of your target property.
4. When making an offer, be able to support the amount of the offer. Pulling a low ball number out of thin air isn’t going to work. If you don’t understand why, reread the four things you need to understand in bold type above.
5. In a short sale, the bank will only accept your offer if it’s a better alternative to foreclosure. This means that the bank will take the fair market value of the property in its current condition, subtract the costs of foreclosure and selling it as an REO, and the "fudge factor". The "fudge factor" covers the costs that will accrue if the bank has to take the property back at foreclosure and includes lost opportunity, risk of vandalism of the vacant property after foreclosure, declining market risks and time to sell as an REO. The "fudge factor" will be the only area the bank will be willing to negotiate. This is the supporting amount mentioned in tip #4.
6. In REOs, the bank can be more "motivated" during certain times of the year. They will generally be more likely to entertain low offers at the end of the month, quarter and year. The banks want to get real estate off their books and these calendar targets can create motivation. But remember, be realistic. Just because it’s nearing the end of the year, doesn’t mean the bank is going to jump at an offer that’s ridiculous.
7. Having access to REOs before they are listed can give you a big advantage.
8. Don’t get emotional or stuck on any property. Real estate investing should be run like a business. Keeping emotions out of it allows you to make rational decisions.
9. Understand and accept the risks involved with these types of properties. To get the good deals, you will have to accept risks involved with them.
10. Retain the help of an expert Realtor with experience in these types of properties to help you. Don’t think you can do it yourself. That mindset can cost you thousands. Besides, as the buyer, you don’t pay for their services.
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