It’s natural to believe with all the doom and gloom that is in the news about the housing market these days that there must be dozens of unbelievable bargains just waiting to be purchased. Unfortunately, the real deals don’t stay on the market very long to wait for the Buyer to make up their minds and arrange their financing.
In this market, the number one “Golden Rule” to remember is the old joke “He who has the Gold, makes the rules!” In this case, the Gold is the loans and/or cash and the first, most important, and most difficult thing to get in this market is financing. A Buyer shouldn’t even start looking at homes until they have completely nailed down their financing arrangements, including hopefully a pre-APPROVAL, not just a pre-qualification, letter. This will allow the Buyer to make an offer quickly and confidently when you they find something that does appear to be a bargain, and having their financing settled will make their offer stand out against other possible competitors in any bidding war.
It’s hard to believe there could still be bidding wars! But the best located, competitively priced properties are still going extremely quickly with multiple offers – my office just listed a very tired fixer upper in Manhattan Beach. The 2 bedroom home was basically a wreck but had a great location within walking distance of the beach and interesting architecture — it would take some real money and determination to make it habitable, but it was a true diamond in the rough. It was priced at $799,000, which if you follow Manhattan Beach real estate at all, you know is ridiculously low. Within 2 days, the client had 7 offers, including 2 all cash to choose from. The listing agent said the client was going to decide by tonight, so I’m not sure what it will end up at, but you can bet it went for well over asking price.
Another great property I saw recently in Rancho Palos Verdes had 3200 square feet and panoramic 180 degree ocean views. It was priced at $1,500,000 — not cheap, but much cheaper than that view usually goes for. It sold in 10 days with multiple offers. My estimate is that with about $50,000 of work, it will be worth at least $2,000,000.
These two deals were rare examples of properties that had a lot of equity built into them from the start. Most homes in this market, however, also have pent-up equity built in — the equity the Buyer will gain after living in it for a few years! No one promises, when you buy real estate, that the market will go straight up without a hiccup or two. But over the long-run, South Bay real estate has been a remarkably good investment, returning an average annual return of close to seven percent — much better than the stock market!
Trying to find the real deals on your own by using the publicly available MLS’s is not a winning proposition. If the home is really a deal, Realtors and their clients will have bought it already, because they will get to see it before it hit the Multiple Listing Service or at least get a call immediately that one of the really good ones has come up. Again, EVEN IN THIS MARKET, THE BEST LOCATED, MOST COMPETITIVELY PRICED PROPERTIES ARE STILL GOING EXTREMELY QUICKLY!
To really find a bargain, a Buyer needs to work closely with a Lender and a Realtor. The financing should be all lined up so the Realtor knows exactly what can and can’t be negotiated. And the Buyer needs to be very clear about their needs versus their wants, and exactly how much of a “fixer” they are ready to take on. Buyers need to really understand what they will compromise on — because every home is a compromise in some way unless you are fabulously wealthy. Buyers probably can’t have everything for the price they want to pay — the reality is that if the home had everything, than it should and will be priced higher, reflecting its higher value.
Will you give up location for size? Will you give up that dreamed for view for a better school district? Unless you are clear in your own mind about what you really need vs. what you want, you will not be able to decide quickly when your Realtor (hopefully Moi!) gives you that call that says “Guess what! A home just like what you are looking for just came into our office — it’s going to go fast!” But if you’re ready — the next bargain may be yours!