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Archives for January 2019

Undervalued Properties: Effective Ways to Buy Them

sample of Undervalued Properties available in the market

Planning ahead is the nature of being an investor. Every financial decision is weighed against how the markets will shift in the future. When it comes to real estate, you’re looking for diamonds in the rough. Undervalued properties are essentially what you’re going to be looking for. Every now and then, you’ll find a gem that fits the mold of increasing in value.

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How Do You Go About Buying Undervalued Properties?
Focus Is the Key

The question then is: how do you go about buying these undervalued properties? How do you find them? Combing the market without having an idea where to search out these prizes can prove to be tedious and fruitless. To help pull you out of that rut, we’re going to provide some tips on how to find and buy undervalued properties.

How Do You Go About Buying Undervalued Properties?

As you might come to expect, as any investor will know, searching out undervalued properties requires research and focus. However, once you have an angle on what signs point toward undervalued properties, the search becomes a little easier. There are deals to be had in every corner of the United States. All that you need is to be a little forward-thinking.

slightly damaged house but valued lower than its actual value

Compare the House to Its Peers

To have the best chance of finding that one house hidden in the weeds, you need homes to compare it to. For this, you’ll need to look a bit beyond simple looks. The best undervalued properties may very well end up being the houses that aren’t pretty to look at. They may have an ugly paint scheme, peeling wood, a rickety porch, and that’s only on the outside.

Here’s where the forward-thinking comes in. 

To find the best undervalued houses, you need to see their potential. Compare a $250,000 house to the houses neighboring it that are worth twice as much. It may have been a great house once, but time and use have scraped away its former glory.

abandoned house

Oftentimes, the burden falls on you to return it to its original glamour.Putting in a little legwork is good for investment. It may take some spending, some hard days in the sun, and a whole lot of work, but the end result is a house just as good as the rest on the block, perhaps better. Buying a house that doesn’t quite stand up to par is seeing the future that it holds. It’s an exercise in boldness, tenacity, and insight.

Investment always has a few risks to it. However, if you play your cards right, this crummy house that you polish up to a sheen can exponentially increase in value as the neighborhood develops. It may not look like much now, but given time, its value will catch back up to it. All you need to do is provide it the means to do so.

Examine the Market

This may seem a little bit obvious, but thorough examination always overturns new leaves. However, what you’re looking for now are houses that have been sitting for months on end. 

Usually, there’s something about these houses that make them somewhat undesirable to would-be buyers. There’s any number of reasons that have led it to this waitlist: overpricing, low quality housing, skeptical seller, you name it.

The primary factors that determine whether a house will sell quickly are price, location, and condition. Each of these variables may independently be responsible for houses left gathering dust on the market, or it could be a combination. However, just as these factors determine a house’s worth, they are also indicative of their potential.

A house that has been left on the market because of an overpriced offer can be difficult to wait on becoming undervalued. You may not want to wait on these houses quickly dropping down to a reasonable, profitable level. However, the longer they wait, the more likely it’ll be that they’ll become open to new offers. 

the interior of an abandoned and damaged structure

Sitting on a house isn’t comfortable for any seller.

 As far as location goes, you’re going to have a bit more luck. Areas that have experienced sudden changes in economic stability tend to have houses that plummet in value. This is an excellent time to capitalize on undervalued property. While the location for the time being isn’t as presentable as you’d like it to be, you’re looking at the long game. The region will recover, and when it does, the value of your real estate will rise with it.

As we’ve already addressed, the condition of the house plays a heavy part in how long it’ll stay on the market. For the most part, no one wants to buy an ugly house. What’s not to focus on is the looks, but rather the potential. Once the house has been renovated, it’s going to be much more impressive than when you snagged it.

Study the Sellers

A fantastic way you can go about buying an undervalued property is by looking at the people selling them. Sellers will tell you a lot about the value of their property, and can give away just how undervalued their house is. What you need to look out for are the motivated sellers that want to get their property off their hands.

There are a few questions to ask when you find a motivated seller. Why do they want to get their property off their hands so quickly? What are the circumstances surrounding the seller? How willing are they to negotiate? 

Negotiation is going to be the key factor here. While the seller may be looking at a reasonable price for their property, an understanding of the situation can make that price malleable.

A good source to find information about the state of the seller’s position, as well as the overall value of the property, can come from any involved real estate agents. An agent won’t publicly announce an eager owner, but networking goes a long way. A private one-on-one with an agent can help reveal a method toward a bargain deal - especially if you provide a little motivation yourself.

multiple units of duplex type houses

Making the agent’s life easier is one of the quickest ways to negotiate a better value for the property. If you guarantee that you can close on the house quickly for a cheaper asking price than what is asked for, a motivated seller may become pliable. What’s important to remember is that they want to get this property off their hands. If that involves taking a lower sum, then so be it.

Pay Attention to the Economy

We mentioned before that economic shifts help determine undervalued property. If there’s a huge layoff in an oil centric city, property values may fall. 

While things may seem grim in the short-term, and not very enticing, what’s important to remember is that the economy bounces back. Temporary upheavals in job security, economic growth, and property values spell out opportunity.

Attention to detail is critical. 

If you’ve found that a section of the country has been hit hard by layoffs, recessions, or other changes that impact the worth of local real estate, it’s worth paying attention to. If you succeed on investing in undervalued properties in the present, all that’s left is to wait for the region to bounce back.

a lakeside property

Counting on the inevitability of economic resurgence will return these undervalued properties to better standing. With proper timing, though it may feel unsavory, these areas create prime investments.

Focus Is the Key

The presence of undervalued properties on the market is never going to be forefront. 

Most investors are going to be concerned with obvious, prime real estate. 

If you’re going to find new opportunities for investment, you’re going to have to wade in and search it out yourself. It doesn’t matter how many tips you know, undervalued properties generally don’t reveal themselves.

Any investor knows that focus, dedication, and tenacity are the strong points of a successful investment. You may not find what you’re exactly looking for now, but the real estate market is constantly changing. 

If you give it a little time, more and more properties are going to show up. Having a little bit of patience goes a long way.

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Filed Under: Financing Property, Property Investors Resources

How To Make An Offer on A House: Experts Advice

an agent demonstrating how to make an offer on a house with a miniature model

Let’s say you’ve taken the time and found a desirable property. It has a great location, excellent build, and would make a perfect addition to your portfolio.  As far as real estate opportunities go, you wouldn’t want to pass it up. The question now is: how do you seal the deal? You aren’t the only one looking at this property, so what can you do to show up the competition?

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How to Make an Offer on a House
1. Present a Written Offer
2. Research Other Offers on the Property
3. Make your Price Competitive
4. Maintain Communication
5. Start with a High Down Payment
6. Limit Contingencies
7. Obtain Mortgage Pre-Approval
Keep Up the Morale

Knowing how to make an offer on a house can mean the difference between losing a valuable property and adding new real estate to your repertoire. Real estate purchases come burdened with all manner of components, contingencies, and amendments to take into account. However, even after you gain a thorough understanding of the process, there’s still more to learn. Our aim is to help improve your real estate investment skills by offering a few choice tips to further hone your knowledge base. 

The end goal of any investment is in the payoff. 

No matter how much research you do, it means nothing if you can’t close the deal. With a little help, patience, and study, you’ll learn a bit more on how to make an offer on a house.

How to Make an Offer on a House

The advice we’re providing is more or less a drop in the bucket of overall information regarding how to make an offer on a house. There’s always more to integrate into your skill set. The first step, before consuming any tricks of the trade, is to have a solid grasp on the intricacies of what goes into formulating a house purchase. You should have a better handle on where to proceed from there.

couple signing signing a contract

1. Present a Written Offer

When you’re wanting to provide a professional appearance and be taken seriously as an investor, get it on paper. 

While offers can be easily made through verbal communication, they won’t be taken as genuinely. Maintaining a written formality helps not only organize your offer, but creates an easily referable paper trail.

man writing something

Think of a written offer like a cover page and a resume. You’re pitching yourself as a strong potential buyer for this real estate property. You want to include things that highlight your commitment to the property, reassuring them you aren’t going to flake. You can provide compelling assurance for your contention, financial capability, mortgage endorsement, and more.

2. Research Other Offers on the Property

You need to know your competition. Chances are you won’t be the sole bidder on any property, turning opportunities into a dogfight. While you may not have the opportunity with every house purchase to dig into competing offers, the right real estate agents can often provide much needed intel. Where your own investigative efforts may fall short, others may excel.

You are not guaranteed to gain any insightful knowledge into what other offers are available. However, if you know that there are competing offers, then that’ll change the offer you should make to stand out. The more serious interest is coming from competing bidders, the more buyer-friendly you should design your own offer.

knight pieces on a chess board

The goal is to make yourself the best candidate. Once you have the buyer’s attention, you can negotiate from there.

3. Make your Price Competitive

Whether or not you know there are other offers on the house shouldn’t stop you from making a good starting offer. When you make an offer on a house, the process is usually starts with you making an offer and then the seller accepts, counter offers, or declines. Ideally, you’re shooting for either of the first two options. You aren’t out of the running if you receive a decline. You’ll simply have to make a better offer. An acceptance is ideal, but there’s a chance that an immediate accept means you overbid and spent more money than you needed to. 

The counter offer means that while your first asking price wasn’t quite what they were looking for, they’re still interested in you as a potential buyer.

two people discussing the contract

Depending on your initial offer, you may receive mixed responses. An offer that’s too low may eliminate you from the pool of potential buyers entirely. If they can’t easily find a medium between your offer and their counteroffer, it can gum up the process entirely.

Your goal is to provide an offer that fits in with the housing market of that area. Examine recent past purchases and draw your own reasonable conclusions based on those selling prices.

4. Maintain Communication

Communication is the variable that defines most adult functions. So long as you’re staying in consistent contact with the seller, you’re establishing a rapport. 

Being able to ask pressing questions about the house supplies you with the information you need to make an educated offer. When it comes to knowing how to make an offer on a house, information is one of the most valuable resources you can have.

The more you discuss with your buyer, the more confident you’ll feel when presenting an asking price. You’ll be able to leave an impression and show that you’re concerned and knowledgeable about housing condition, pricing, and upkeep.

a group of people discussing something

5. Start with a High Down Payment

Let’s take a look at two different offers. The first offer is for $255,000 with a down payment of 15% upfront. It’s not a terrible offer, and may draw attention. However, there’s a second offer being put forward at around the same time. 

This second offer is for the same price of $255,000, except the down payment is for 20%. If both potential buyers are of equal standing, the latter offer is the more attractive.

Showing that you have the financial security to drop a high down payment makes you an attractive buyer. The higher a down payment, the stronger your offer and less of a risk you’ll pose. Showing that you’re confident and ready to commit is indicative of your reliability as a buyer.

6. Limit Contingencies

Contingencies are in place to help the buyer complete steps to ensure the quality of the home they’re purchasing. There are several standard contingencies automatically included in the home buying process, and special ones can be added. When you’re learning how to make an offer on a house, however, knowing what contingencies are unnecessary is just as important.

If you believe you need to make a final step forward to close the deal, then you may look into removing some contingencies. This will make the process easier for the seller to help close the deal. It will also help your offer stand out among competition if there are multiple offers made on the house. 

real estate agent and client closing a deal

A seller will be more interested in offers with limited contingencies compared to those that maintain a list of final checks. It’s important to pay attention to what contingencies you think are safe to remove from the agreement. A heated competition for the purchase of a property may definitely call for a sweetened deal. However, homes that have been on the market for a while can be more patiently approached. If there’s no need to limit contingencies to finalize a deal, it’s safer to keep those in place.

7. Obtain Mortgage Pre-Approval

a house with a for sale sign

Having proof of mortgage pre-approval can be what decides an offer that keeps you in the running or not. The financial stability and security promised by that ensure a place in a competitive scene. For example, if you’re making an offer on a house against several other potential buyers, you won’t get far if you don’t have a mortgage pre-approved.

Sellers are interested in buyers that are vetted. Having the credentials to prove you’re serious ensures satisfactory assurance that you can handle the expenses the home will incur. 

Keep Up the Morale

There’s a chance that, even with a strong initial offer made on a house, that you’ll still lose it to a competing buyer. Knowing how to make an offer on a house will not guarantee that you’ll succeed on the final purchase. As discouraging as that may be, maintaining a positive outlook can help you net the next property that comes along. The housing market is always changing. You may miss out on one house, but that may simply provide an opportunity for the better offer coming along.


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Filed Under: Property Investors Resources

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