This is the number one thing I hear from buyers. They tell me their wishlist of features in their new home. Pool or no pool, 3 bedrooms or 4, mountain views or waterfront. Then always the end of this list is “Oh, and I want a deal”.
Let’s examine exactly what this means. A deal to me means buying something below the market value. This becomes a problem on two fronts. Firstly you have to find someone who is willing to sell something below what it’s actually worth. Second once something is priced clearly below market value it’s inevitable many other buyers will notice this too.
So getting a ‘deal’ is no easy task. Some people think that buying something at 20% below what the seller paid in 2006 is getting a deal. Actually that is irrelevant. All real estate in Scottsdale is a good deal compared to 2006. But getting a deal is only relative to todays market valuation.
So my advice to buyers is really not to hamstring yourself with the idea that there are tons of amazing deals out there. Walking in to equity is no easy task. But I have seen a number of buyers who were waiting to pull the trigger until the found a home that was priced significantly lower than market value. What’s actually happened for some of these buyers is they’ve missed the market gains in 2012 which would have given them significant equity.
How Can I find a Deal?
Ok so while I don’t think finding a deal should be your main focus. I’m not saying it’s impossible. Here’s some ways you can explore to find a property that’s under market value.
Lender Owned / REO
Lenders are not particularly pricing homes well at the moment. Most people think lender owned is a good way to get a deal. In the current market I’d say that questionable at best.
In August in Scottsdale there were 40 reo sales. Average days on the market was 163 and slaes to list price ratio was 1.01. For all sales the stats were 0.98 of asking price achieved and only 96 average days on the market. So from that banks are staying firmer on asking price than average and the homes are staying on the market an additional 67 days. That does not sound like a deal to me. Trust me if there was value there buyers would be all over it.
That said a bank will occasionally take a low ball offer on a home that’s not moving.
High Days On The Market
When a home has been on the market a very long time there is a chance to offer below market value because the seller may be desparate to sell. In most cases this is not the case. High days on the market can just indicate an over priced seller who is stubborn.
The more information you can get on why the seller is selling may help you find out the ones who are really ready to accept an offer below market value.
This is the best way to find homes valued under market. However, it has a lot of inherent risks. You are buying in cash pretty much sight unseen. Definitely there are chances to buy below market value if you know what you are doing.
Short sales are still happening. They are much harder to find in most areas now and are being priced often 10 to 15% below market value. The key is speed. Making sure you are first to get an offer in and accepted by the seller.
These take the most work to find. These are homes that are priced under market value but are not being snapped up. Sometimes the home just has bad photographs in the MLS or maybe the agent selling the home has not managed to get other agents in to view the home. This just takes time in the MLS running numbers on areas and price per square foot looking for a home that is just priced incorrectly.
Sometimes there’s a home that needs something to maximise it’s potential. If you can do that bit of work cost effectively that will give you the quick equity you are after. This relies on knowing well priced contractors and vendors and having the vision to know what a property needs.
If getting a ‘deal’ is high on your wish list. Work with your agent to examine all the opportunities above. Or just call me as I always have a list of properties that I feel offer good value to the buyer.