Where's The Beef?

Finding real estate "deals" may not be as easy as some think

With the way the media is gleefully reporting the dire straights of the real estate market and investing schemes hawk their programs to buy homes for pennies on the dollar, one has to wonder, "Where are all of the investors?"

Well, I can tell you that they are out there. Unfortunately, they are more and more disappointed in what they are finding on the market. If I had a dime for every time I heard, "I thought this is SUPPOSED to be a buyers market?" I'd be on a really nice vacation right now!

So, what are buyers/investors REALLY finding to be the case? Why aren't they seeing the "buyer's market?"

For one, they are confusing "asking price" with "value." Many buyers expect to get a significant amount deducted off of the seller's asking price, as a result of the "buyer's market." What they fail to understand is that many homes are already below asking prices that they would have been placed at a couple of years ago. Add to that sellers who actually price their homes aggressively and you'll understand why some sellers just won't accept 10% - 20% under their asking price. They feel their asking price is already a great value, compared to what it would have sold for before it became a "buyer's market" - and often it is.

However, I still have to remind some sellers that, just because a house "would have" been priced a certain way today, they cannot look at that as money "lost," unless they refinanced based on that higher price and cannot sell for that now. A house is only worth what it is in the current market.

So, each house must be individually evaluated in the market place. Paying "asking price" does not always mean that you are paying "full price" or that the property is overpriced. If the house is priced at $240,000 in an area where recent sales of similar homes average $250,000 - don't expect to get a huge discount off of the asking price, because it is already priced as a deal!

Buyers sometimes get an idea of a price in their head of what would be a "deal" for them and decide to shop that price range, fully expecting to find a dream home. They are often very disappointed by the quality of the properties they find. Usually, they are foreclosed properties and in a distressed condition - more work than the buyer would be able to handle and often the repairs negate any savings on the sale price.

So where are all of the "nice" foreclosures?

Well, even though foreclosures are up in the Milwaukee market, they aren't anywhere near the numbers that you read about in the larger, metro areas. And banks will initially list properties close to market value. If the property is in a good neighborhood and in good condition, it will be listed and sell like any other property. The ones which remain are those that few people want. To get a good deal on a foreclosure, you need to be willing to pay close to market value or be willing to buy a home which needs updating.

Even in today's market, seller's are still trying to test the market. These are unmotivated sellers - they have no reason to lose money on selling their house, because they do not HAVE to sell. They have already decided that they will wait out the market until they can get what they want/need. These are often the situations where I hear buyers say, "Doesn't the seller know it's a buyer's market?" They get frustrated by the seller's lack of co-operation. So the trick, now more than ever, is to know the seller's motivation. If the seller has been transferred out of town, is a representative for an estate or getting divorced, a buyer will have a much better chance at getting concessions from the seller.

Whether or not there are "deals" to be had depends on how and where you look. The smartest buyers know the market. They research or have their agent research their target neighborhoods for recent sales. They get out and see the properties - maybe even some higher than their price range - so they can compare and know a deal when they see it. They see the market realistically and understand that there may be a trade-off in certain price range - price vs. condition.

Just because it's a buyer's market, no one said deals would be handed over easily. It still takes work and patience on the buyer's part. But the deals are out there!