How to Save 10% or More When Buying a House
For most people, the buying their house is by far the biggest investment they will ever make. Most people also think of themselves as bargain hunters, able to find a good deal on any purchase they make.
However, when purchasing a home, most people follow a path that leads to them paying full retail value for their home. You know how it’s done.
You find a Realtor to show you the houses on the Multiple Listing Service, look at several houses with them and then make an offer on the house that you like the most in your price range. Most of the time, at your Realtor’s suggestion, that offer will be within 8-10% of the asking price, which was likely set at the appraised value of the home.
If you’re lucky, that price is accepted. If you’re not lucky, the owner will haggle with you over the price with counteroffer after counteroffer.
If you’re doing any quick math, you realize that you will very rarely, if ever, get a true bargain when you buy your home following this formula. You need to do something far different in order to become a real estate bargain hunter.
The Real Estate Bargain Hunter’s Dilemma
Many people, after looking at several homes with their Realtor, begin to despair that they will never find the house they want for a price they can afford. If you’re one of those people, or if you just don’t like to pay retail price for anything, read on for some great tips on how to buy real estate at a minimum of 10% below it’s “retail” price.
Now that you understand how NOT to buy a bargain property, let’s look at a few simple things you can do to maximize your dollars when buying real estate.
Working With Realtors
First, let’s assume that you are already connected with a Realtor. That is not a bad thing. A real estate agent is essential in some transactions and that is why we own our own realty firm in Murray, Kentucky called Cornerstone Realty and Rental.
If you are connected with a Realtor, you need to do your own research on what constitutes a reasonable price for the type of home you want in your area. You can check your county assessor’s office and your county clerk’s office to see what the homes you are interested in are valued at.
Many people have deed and property valuation information online at places such as http://netronline.com/ I highly recommend becoming acquainted with your county clerk and assessor’s office employees, because they can really help you find out what properties have been selling for outside the normal realty channels.
Once you know what is truly a reasonable price, remember that you are in control of the transaction, NOT your Realtor. It is going to be your name on the Deed and on the loan and you need to be comfortable with what you are paying for the property.
With that in mind, don’t ever be afraid to make a low offer. In order to get a 10-20% discount on the property, you are going to have to make more than one offer. Most people don’t want to give that much of a discount and they already have commissions coming out of their pocket.
Therefore you should be aware that you will have to be patient. If the true value of a property is $100,000, perhaps only 1 in 10 people are motivated enough to sell it to you for $80,000. However, if you make 10 offers and spend an additional 10 hours looking at the properties, is it worth $20,000 to you? How about $10,000? I know that I would spend an additional 10 hours looking at real estate to get a wholesale price instead of a retail price EVERY TIME.
Dealing With Property For Sale By Owner
Much of the time, the best deals come from people who are selling properties by themselves. They seem to have a little more motivation to sell and they definitely have more room to negotiate because the have no commission to pay.
When dealing with real estate for sale by owner, the key is to find out what the seller needs. Find out what his or her hot button issues are and meet that need above all others. If the person needs to sell quickly, make sure you let them know that you can close in 2 weeks if necessary. That will make your offer that much more attractive.
My favorite thing about working with owners who are selling by themselves is that you get to interact with the seller face to face. You can develop tremendous rapport with a person in only a short period of time.
If you are a genuinely kind person and take a true interest in the seller, oftentimes the seller would rather sell to you than someone they don’t know. Simply being a good human being can oftentimes get you a discount of several percent.
Dealing With Real Estate Investors
The last option when seeking to get a bargain deal on real estate is to deal with real estate investors.
Many times real estate investors have acquired property at 30% or more below market value and they can afford to give you a 15-20% discount off the “retail” price if you can just close quickly and cash them out. Other times, real estate investors have held their properties for a long period of time either as rental property or as fix and flip property and they just need to get the house sold so they can move on to the next property.
Regardless of WHY they want to sell, real estate investors are often the best place to start when looking for properties below market value. Most of the time, the investor can show you what the true market value of the property is and is willing to discount that figure substantially right off the bat.
When that happens, just be honest about what you can pay and, if the property works for you, often you can make a deal happen. Let’s take a case study from a house that I recently personally sold:
3 BR, 2 BA House
Retail Value - $90,000
Sale Price - $75,000
Savings - $15,000 or a 16.67% discount off retail price
We were able to sell this house at that price because we had negotiated an even lower price and just wanted somebody to quickly cash us out. There are tons of real estate investors all over the country who can provide the same service.
The first thing to do would be to try to find a real estate investor in your area. Look for “We Buy Houses” signs or other advertisements from people who buy houses. After all, people who buy houses must sell houses as well.
You can also run Google searches for investment property, wholesale real estate, or rental property in your area and see if you have any investors advertising on the web. Lastly, local real estate investment clubs are a great resource for finding real estate investors who might be able to pass along discounted real estate to you.
If you search for real estate investment clubs in your area, you are likely to find multiple people with properties in your area and price range. For instance, here in Murray, we have the Western Kentucky Real Estate Investment Association.
We have a group of 20-30 investors who invest in real estate, from single family homes to commercial property. At any one time, our members might have 50 properties or more for sale in a variety of areas in Western Kentucky, from Murray to Mayfield to Benton to Paducah. That really increases your chances of finding the perfect property.
Conclusion
I hope that this article has helped you understand a little bit more about what you need to do to buy your next home at a substantial discount. Why pay retail price if you don’t have to?
You CAN find that bargain property with a little work and the knowledge of where to look, so don’t let the naysayers keep you from finding YOUR dream home at YOUR dream price.
About the Author: Greg Taylor is President of Creative Property Solutions, Inc. in Murray, Kentucky. Creative Property Solutions, Inc. is a real estate investment company that buys and sells houses throughout Western Kentucky and even some in West Tennessee.
Greg is also the founder and President of the Western Kentucky Real Estate Investment Association, which is a networking and education group for investors in the Western Kentucky area. For more information about Greg, Creative Property Solutions, Inc. or the Western Kentucky REIA, please call Greg at 270-761-HOME or visit him online at http://wkyrealestatedeals.com or http://creativepropertysolvers.com.
If you are interested in purchasing below market or wholesale real estate in the Western Kentucky or West Tennessee area, please visit http://wkyhomeseller.com.
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