Finding Real Estate Bargains

When my husband Fred and I first started in Real Estate, many people we know wished us well, and told us, "If you find a bargain, let me know." It took me a day or so to realize that while we all love bargains, they are difficult to find in real estate. Why? Because we live in a free market economy, and most sellers are unwilling to sell for less money to one person if they can get more money from another.

There are several situations where you might find homes selling for less than market value. But there are risks involved with these purchases that the buyer must be willing to accept. Also, as market conditions change, the number of below-market value homes will also fluctuate. Today we are in a situation where there is a shortage of inventory. In plain English, relatively more people are looking for homes than are selling homes. This tends to increase values. Several years ago, homes languished on the market so values were not rising quickly.

So where can you find real estate bargains?

1. Bank-owned properties
As we were going through the height of the foreclosure crisis, bank-owned properties were readily available. Today there is one foreclosed property in Waltham, and 12 in Boston. While Fred and I have had success selling bank-owned homes, there are risks the buyer takes. The seller has not lived in the home and knows nothing about it, and the burden of due diligence is totally upon the buyer. Frequently utilities are turned off, and the buyer must negotiate with the lender to turn them on in order to obtain a good inspection. And in Massachusetts, once you close on your home, it is all yours and you have no recourse if you find anything wrong after closing.

2. Short Sales
Short sales occur when a the selling price of the home is below the amount of mortgage owed. Sometimes you can get a home below market value, but the process can be laborious, and you may end up negotiating a higher price with the lender. If you have plenty of time, a flexible moving plan (that is you do not have an expiring lease that needs to be renewed), and you have found the home of your dreams, this may be for you. Be prepared to wait several to many months before being able to close. Make sure the listing agent has short sale experience.

3. Estate Sales
An estate sale happens when heirs sell a home left to them in somebody's will. Most often the heirs just want to get rid of the property and can be flexible about pricing. There are several challenges with this type of sale. Once again, the person selling the home has probably not lived in it, and doesn't know much about it, so your due diligence is extremely important. Also, sometimes a license to sell is required. This is a document from the probate court allowing the sale. While acquiring this document is mostly procedural, it can take a long time. And there are not many homes that come on the market in this situation.
So yes, you can find bargains in real estate. But you and your agent must be diligent and move quickly if you identify such a home. But realistically, most homes sell at market value, and if you will only consider purchasing a bargain, you may end up renting for a long time.
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Annette and Fred Reynolds are realtors who live in Waltham and work throughout eastern Massachusetts. For more information about any aspect of buying or selling real estate, don't hesitate to contact them at 617 306-2906. They would be delighted to answer any questions you have.