Good afternoon folks,
Everyone is always looking for ways to buy properties at a deep discount, particularly now in 2015. So, I thought I would share with you…
23 ways to buy properties at a DEEP discount This lists many ways to buy properties at a discount. It is by no means exhaustive; there are many more ways than are listed here. It is also not a detailed instruction manual on how to implement these techniques. It is meant to give you a starting point, or a launch pad, from which you can do further research and expand your learning. Once you have chosen a few methods that interest you, you can read some books, take a few courses, and speak to other like minded investors. Your local REIA (Real Estate Investors Association) is the best place to find information on real estate investing, and to network with those who are successful. We encourage you to visit www.BostonAREIA.com
1. Title problems – Properties with unclear title have few buyers, because most buyers won’t spend money on property where they can’t get title insurance. These properties are therefore frequently available at deep discounts, from motivated sellers. So title issues = profit opportunities. Finding the deals: Title companies and real estate agents.
2. Delinquent tax auction – Typically properties auctioned for non-payment of taxes have no mortgage on them, because a lender will pay the taxes to protect their interest. Tax sales vary by state, and by county, and depend on the practices of the controlling jurisdiction. There are frequently different “levels” of sales. And different types – you can buy the actual property, or a lien certificate. Bargains can be found in the right locations, and frequently properties can be purchased for hundreds of dollars, rather than hundreds of thousands of dollars. There are tax sale courses available, and books by gurus. Unwanted properties = profit opportunities. Finding the deals – check with your local tax collecting office, or offices in areas where you would like to buy properties. BostonAREIA offers a course quarterly which teaches investors how to purchase tax sale properties in select areas once a year.
3. Pre-foreclosures – homeowners facing foreclosure can be highly motivated to prevent the foreclosure and save their credit. In addition, where the property values have dropped below the amount owed the bank, they are not as motivated to try to hold on to the property, but simply want to get out of the headaches. Motivated sellers = profit opportunities. Find the deals – Finding sellers who are not yet facing foreclosure, but know they are only a few steps away from getting notification by the bank, is usually done by marketing directly to the these sellers, via bandit signs, newspaper and internet advertising, etc. In most states, there are foreclosure listings on websites that specialize in this data.
4. Foreclosure auctions – Foreclosure auctions are initiated by lenders when the borrowers default on their loans. In the current climate, because there are so many defaulted properties, auctions are plentiful. It used to be that lenders always bought the property at auction because they were confident they could sell the property easily. Now, lenders are letting them go to bidders because they have so many properties on their books. Plentiful foreclosures = profit opportunities. Finding the deals – foreclosure auctions are always listed in newspapers.
5. Conventional REO’s – Once a bank forecloses on a property and is the high bidder (no one else bid as much as the bank did) they now own the property. Banking regulations limit the number of properties they can have on their books, so the banks are motivated to dispose of those properties quickly. Plentiful foreclosures = profit opportunities. Finding the deals – Looking through the MLS, you will see the same listing agents’ names come up over and over again. Contacting the agents who list properties for the banks is a way to find quantities of these properties to make offers on.
6. Builder auctions – When builders can’t sell properties quickly, they often sell homes at private auctions, as opposed to foreclosure auctions. The current market has excess inventory of new construction houses, and they are starting to show up in private auctions. Excess inventory = profit opportunities. Finding the deals – they are heavily advertised through local papers.
7. Tenant in common interests – Tenant in common interests frequently arise out of inheritances, divorce, or intentional purchase. They are an undivided interest in a property, along with other owners, and are difficult to sell, because there is little market for TIC interests. Lack of buyers = profit opportunities. Finding the deal – Look for real estate owned in divorce, probate, partition law suits. Online database subscriptions will help as in other techniques.
8. Builder leftovers – When the most desirable lots have been sold in a subdivision, the houses that are leftover can frequently be sold at a substantial discount. The builder is not anxious to advertise that he is selling houses at a lower price than the rest. Excess inventory = profit opportunities. Finding the deals – contact the builders directly, not the sale staff. You can find them through ads in the paper, driving by, yellow pages, etc.
9. Stinky houses – Whether from smoke, pet urine or other reasons, strong odors in houses turn off most retail buyers. The reduction in price resulting from the smell is almost always far more than the cost to correct. Experienced real estate investors claim that ‘cat pee smells like money’! Turned off buyers = profit opportunities. Finding the deals – agents all know houses that smell, but the problem is never entered on the listing. Network with agents and let them know these problems are not a problem for you.
10. Probate – It is not uncommon for the heirs to a property to be totally uninterested in holding the property. There are frequently disputes between the heirs, and they are often interested in the money only, and liquidating as soon as possible, since probate has sometimes taken considerable time. Uninterested property owners = profit opportunities. Finding the deals – Probate attorney listed in the notice in the newspaper.
11. Existing options – When a potential homebuyer purchases an option to buy a property, and then doesn’t exercise that option, if there is equity in the property, there is a profit opportunity. These options may have been created by real estate investors who were unable to follow through on a transaction, or home sellers having difficulty unloading a property. The owner of the option may not have the means to follow through, and may sell his option at a substantial discount. Cash shortages = profit opportunities. Finding the deals – your local Real Estate Investor Association for those investors not able to complete the deal. Options are frequently recorded in the registry of deeds. Or you can advertise that you purchase options.
12. Bankruptcy – When a house is sold in a bankruptcy sale to payoff debt, only the equity over and above that secured by mortgages is available to satisfy creditors. So there is typically profit potential only if there is equity. However, the owner of the house has no incentive to maximize that value, since they are unlikely to see any of the proceeds. Likewise, the Bankruptcy Trustee’s incentive is to make the sale as easy as possible. Bankruptcy Trustees are not always required to conduct public sales, so the opportunity to get a bargain exists because there is little motivation by the actual seller to maximize the sale price. Responsible parties without motivation to maximize the sale price = profit opportunities. Finding the deals – find the trustees and agents who handle bankruptcy sales in your area. In the MLS, some indication can be had if the phrase “Subject to Court Approval” exists.
13. Execution sales or Sheriff’s Sales – If a party in a civil lawsuit loses, there is frequently a judgment filed against them. If they do not voluntarily pay the judgment, a court order can be obtained to seize property owned by the debtor and sell it, to satisfy the debt. There are few execution sales so there are few services that track them. There is not usually an opportunity to inspect the property, and all cash is required. Few qualified buyers = profit opportunities. Finding the deals – Execution sales are published in newspapers.
14. Condemned property – If a property is declared unfit for human habitation, frequently the owner is very motivated to get rid of the property. Sometimes the property simply declined from inattention to maintenance, or occasionally a fire or natural disaster causes the condition. These are typically properties that require significant rehab, and can contain environmental issues such as lead, asbestos, underground tanks, mold, etc. Rehabbing a condemned property is not for the faint of heart. Few interested buyers = profit opportunities. Finding the deals – contact the local government and ask who is responsible for condemning buildings, then contact that agency and find out the procedure for obtaining notice.
15. Used mobile homes – Used mobile homes are difficult for owners to sell in many cases if the buyers don’t have cash. And difficult for buyers to purchase because of limited financing options. In many cases repairs are needed but the seller don’t have the money. Opportunities exist for investors to purchase and rehab used mobile homes and sell them taking back owner financing. Knowledge of laws in a given area regarding mobile home residents and titles is required, as well as the ability to effect the repairs. Specialized properties (not land) = profit opportunities. Finding the deals – drive through mobile home parks, bulletin boards, craigslist, newspapers.
16. Owner unknown – for genealogy buffs, this method can be fun. Due to various errors or local mismanagement at tax assessor offices, parcels become labeled “Owner Unknown” for various reasons. Determine the last known owner of a parcel and begin your search for those to whom he sold or left the property in a will. Unknown ownership = profit opportunities. Finding the deal – Determine the last known owner by finding an abutting property which was likely to be part of a larger property along with the parcel in question.
17. Out of area land owners – owners of property who live outside of the immediate area are sometimes disinterested in their properties, or tired of the effort involved in maintaining and renting the property. Or they may own raw land that is not returning any cash flow and costing money in property taxes. Either way, disinterested owners = profit opportunities. Finding the deal – lists of property owners can be obtained from the assessors’ offices, or from real estate databases, either online or CD, usually by subscription.
18. Distressed owner bargains – Rather than distressed properties, you can seek out distressed owners. Database subscriptions are available for information on probates, divorce, arrests, guardianships, evictions and other life-altering events. You can contact burnt-out landlords, couples seeking quick sale of joint property, etc, to make discount purchases. Owners with life changing events = profit opportunities. Find the deal – subscriptions to information databases are available online.
19-23 – IRS sales – When companies and individuals owe taxes to the IRS, the IRS can seize the property and auction it to satisfy the debt. The property is auctioned to the highest bidder, or held by the IRS if no one bids on the property. There are several ways to buy property when the IRS is involved.
19. Buy the property from an owner before the IRS takes it
20. Bid at the IRS sale – www.irsauctions.gov
21. Buy from the IRS after they own it
22. Buy the right of redemption from the previous owner once the IRS has seized the property
23. Buy real estate which has gone to a nonjudicial sale, but which the IRS has the right to redeem properties owned by organizations not interested in being property owners = profit opportunities. Finding the deals – sales are frequently advertised in local newspapers and on irsauctions.gov.