Matthew P. Klein

I want you to look at the house pictured on the left. Take a good look at it. This is 1950's brick ranch with three bedrooms, one bath, on .23 acres (corner lot) with a one car attached garage. Sales price?

$15,995.

No this is not located in Cleveland, Ohio. Some of the best deals you'll find in the Northern Ohio market aren't in Cleveland. They are actually in cities outside the immediate influence of Cleveland. Think lower property taxes with a higher monthly return on rents. Think fewer restrictions on property transfers and no point of sale inspections with hefty repair escrows locking up your cash. Think getting in and out of a property like this for under $30,000. Have I got your attention yet?

To get deals like this one, do not call just any Realtor. Call a Realtor who knows this market, knows how to negoitiate a deal, and can stay ahead of the market to give you a maximum return on your time and money.

I'm expecting your phone call.

Whether you are an investor buying in the $200,000 + price bracket or a buyer looking for a place to call home in that range, I've got something important to share with you. When you see the list price on a home, it doesn't necessarily mean that the property is priced at retail. Even if the property is in a less than desirable condition according to YOUR standards, the list price does not necessarily reflect an accurate price point for it's current condition. In fact, the property could be priced at much less than what it is really worth. This is not an uncommon practice especially with REO property.

Why?

There could be any number of reasons but the one I tend to gravitate towards is the frenzy that an underpriced property creates. It creates an auction like atmosphere without having to pay the auctioneer. Please let me illustrate. Months ago I had a John and Sally Homebuyer who were crazy over an REO. The property had gone from failed short sale, to sheriff sale, and was now returning on the market as an REO. It was priced less than the previous short sale listing which had an offer on it. So what was the result of the underpriced listing? It created flurry of activity on the property and a lot of offers. I advised John and Sally that it was going to be necessary to go over the asking price on the home in order to have a shot at getting. At this point, John and Sally made two mistakes. First, they assumed that with a strong amount of cash and minimal financing, their offer under asking price would be more attractive to the seller. Second, they gauged the list price as the top end of the market for the home's current condition. Both were against the advice of their Realtor.

What happened?

The home sold over the asking price. It was more than $20,000 over the asking price to give you a better idea. John and Sally Homebuyer fell of the face of the map. They did not return my phone calls or emails. Alas, sometimes dealing with buyers is like dealing with my wife.

Even when I am right, I am wrong.

So what is the lesson?

Listen. Pay attention. This is one of the strategies being employed in today's market for corporate seller's to get maximum return. You know that saying that if it is too good to be true, it probably is? It stands to reason here as well. The low price will suck you into a bidding frenzy and once you've gotten "house fever", the seller's know that it's "game over".

Dear Investor,

This really should go without saying but I find more often than not it doesn't. Therefore I am issuing a reminder. The Realtor who has specialized in the area of residential investment real estate is a different breed from your average Realtor. If you are considering a Realtor who has anything remotely close to the following posted, beware:

"Specializing in Luxury Homes, Vacation Rentals, Commercial Real Estate, Residential Investment and Bank Owned Properties"

You get the idea. Specializing requires significant exposure. The time investment required to specialize in any one of the above categories is not trivial. Each of them requires a different skill set. Selling commercial is not the same as luxury and luxury is not the same as residential investment property. These are niche markets and if you can find a Realtor who has invested a lot of time in that niche, you're in the gold.

So if you're looking for a Realtor who specializes in residential investments, how do you find them?

Know who they are first. They have several identifiable characteristics.

•(1) The professional is looking for the same thing you are, the maximum return on investment. YOU are their investment. When you're interviewing them, they will be interviewing you. It's a two way street. Reasoning? The title "Investor" has gotten a bad rap in many corners of the Realtor community because it has been abused rampantly over the past decade. The name is commonly used to refer to the buyer, who takes a Realtor around to thirty houses, spends fifteen hours of total time viewing, buys one house, and the Realtor receives a $1000 commission. If that Realtor has a split with their broker that $1000 whittles away quickly. Add to that taxes and you can see why many Realtors are reluctant to work with investors. If you're the type of investor who thinks that is a good deal, please stop reading and go somewhere else.

•(2) They will tell you what to expect upfront. They do not like to waste time. So if you receive questions about your financial capability, experience, exit strategy, financing or cash sources, good standing with the state(s) your corporations or LLCs are in, and documentation of all of the above then chances are you've got someone who knows what they're doing. These are questions that need to be answered in advance of an offer being written. If your Realtor knows in advance the answers to these questions, the fewer speed bumps you'll hit later in the purchase. In turn, you should be able to get a few references from either the Realtor's contractors or investors. These are important and it is not uncommon for the two to overlap.

•(3) Their inclination is not towards retail. The National Association of Realtors (NAR) correctly states that the seller who uses a Realtor on average nets more than the For Sale by Owner. In turn, surveys by the NAR also show that when the buying and selling public thinks of dealing with a Realtor they expect to pay retail. Think J C Penney's, Macy's, and Nordstrum's. Their natural disposition is to think discount. They do not "marry" a potential deal and can walk away from the negotiating table with ease. They will not put their car payment or house payment (if they have either) ahead of your success.

•(4) They are also going to be able to give you an additional advantage, a trained second set of eyes. Specialists are actively involved with contractors and home inspectors. They also may have done a few deals themselves. While you should never rely solely on your Realtor's opinion of costs and repairs, an added second or third opinion can help you spot things you might not have at first seen. It may be the difference between putting in an offer and simply moving on to the next property; saving you time. When you're looking over your next purchase for unseen problem spots, the professional is doing the same. The goal is not to sell you a particular house but to be sure that you win.

My market has an issue and I know my market is not the only market to have this issue. I've been watching foreclosures since I became an agent eight years ago. I've attended Sheriff Sales and I enjoy hunting bargains on and off MLS. I'm a nut. I know. However, I am seeing a disturbing trend in the last few years that is really starting to bug me.

As I do my neighborhood strolls looking at homes I came across two houses that I have seen vacant, stickered, and re-keyed by property preservation companies for two and three years respectfully. These properties have never hit the market as an REO. In fact, title is still in the name of the borrower. As I have found out, they were taken to Sheriff Sale two and three years ago both receiving no bids. One of them was taken twice to sale. The Sheriff returned the same for "Want of Bids" as it was put. After that, the record ends and the property sits. The City currently mows the property and since they would be unable to collect their exorbitant fees for mowing the postage stamp sized lawn, it'll fall on the taxpayers to foot the bill. Did I mention that the taxpayers have already foot the bill for the two banks in question?

Ohio has no law permitting squatter's rights but that isn't to say that in these times a new precedent could not be set. After all, it would not be out of the ordinary in Cleveland for someone to take up occupancy in a vacant home. Eviction proceedings in the highly liberalized court system in Cuyahoga County could take awhile and cost an owner a lot of money to do so, not to mention further potential property damage. So who is to say what would happen if someone decides to take up residence in one of these homes? The owner still has title, foreclosure proceedings ensued, property goes to Sheriff Sale and does not sell. House is empty, who is on the hook here? Incidentally, I'd love to hear from any of these banks as to why this practice is becoming more and more common. I'm not talking about a dinky home in the center of Cleveland where fair market value may be $25,000 repaired, the two homes in question are in areas where there is a substantial mix of homeowners and renters. It's one of the big targets for first time home buyers.

One more tid bit, it is only personal opinion. If this trend continues to grow, then why would the homeowners leave? If the foreclosure sale is only to be vacated or to receive no bids, wouldn't it be worth it to stay? At the very least, if it does receive bids and the property is sold at sale the homeowner would most likely have the opportunity to receive a cash for keys check. You're going to move anyway, why not prep and hold out? With the property then being on the books of the bank, they assume the liability and owner's name is free of any added assessments or court appearances for non-payment of taxes.

In conclusion, anybody got a clue as to why this is occurring? I'd love to hear some opinions on this.

All sales located within the Westwinds designated as single family homes (condos excluded from this list) within the past six months. Enjoy!

209 Seaward Way - Sold 10/21/2009 - $232,500 : FAIR MARKET

322 Westwind Drive - Sold 11/16/2009 - $300,000 : SHORT SALE

310 Long Pointe Dr - Sold 03/26/2010 - $310,000 : FAIR MARKET

31719 Tradewinds Dr - Sold 10/01/2009 - $335,000 : BANK OWNED

357 Harbor Ct - Sold 10/06/2009 - $355,000 : SHORT SALE

400 Harbor Ct - Sold 03/19/2010 - $457,900 : FAIR MARKET

384 Harbor Ct - Sold 10/16/2009 - $480,000 : FAIR MARKET

460 Anchors Weigh - Sold12/15/2009 - $490,000 : FAIR MARKET

More information on The Westwinds and other local developments can found at the Fine Ohio Homes Blog.