Not every foreclosure may be a bargain today, but there are amazing deals to be found on distressed properties all over the country.
Still, if you want to make big money by buying foreclosures, or at least be able to brag to your friends about just how great of a deal you got on your new home, you’ll want to check out the following 10 pro tips for getting the biggest discounts.
1. Cash is King
Cash buyers definitely have the upper hand in the current market. No seller want to take a chance on tying up their property for months, hoping a buyer’s lender will come through.
Cash offers give sellers confidence, and they’ll often accept a lot less than if your offer is contingent on obtaining a mortgage. If you don’t have the free liquid funds, can you use monies from a poorly performing retirement account, partner up with someone else, or find another way to borrow cash early?
2. Close Fast
The faster and sooner you offer to close the more likely your bid is to be accepted.
3. Use the Math to Your Advantage
Sellers are often unrealistic about their asking prices. Break down the math and show them just how much it will take to make repairs or remodel the home, as well as how much they could stand to lose if they delay making a deal any longer.
4. Track Property Listings
You may not always get your first offer accepted, but that doesn’t mean you can’t make a deal happen. Keep tabs on potential properties and opportunities when sellers may become more motivated or have more negotiating room. How soon will their home go to the foreclosure auction block? If their property listing expires or they reduce the price, they are likely getting scared and may be open to new negotiations.
5. Follow the Path of Least Resistance
If you have the stomach for it, go after properties that others are afraid to take on and that are receiving very few inquiries. Ugly houses and those with structural repairs often offer the biggest discounts and most flexible sellers. Do your homework, get quotes for repairs, and you may find huge profits to be had, while being able to demand your own terms.
6. Negotiate Your Real Estate Agent’s Commission
If you are working with a real estate agent, you may be able to negotiate their commission. Even though the seller pays their commission, higher fees mean less net profit. When dealing with bank REOs, this is what they care about most. If your real estate agent is willing to only receive 1 percent versus another offer coming in at the same price with an agent demanding 3 percent, guess who is most likely to get the deal?
7. Pay Attention to Local News
Are values rising in your area, or were new scary numbers released that may push more sellers to make a move? Are there upcoming revitalization projects pumping cash into improvements that will provide faster appreciation once you buy? Or is the city giving away properties to increase tax revenues or even offering tax breaks to investors buying in certain neighborhoods?
8. Timing Your Offers
Banks have monthly and quarterly figures to report, and making an offer just in time to help pump up their numbers could enable you to get away with more than normal. When it comes to individual sellers, right after the beginning of the month – when all of their bills are due or have left them without any free spending money – can be a good time to strike.
9. Advanced Negotiation Tactics
Work on your negotiation skills and strategies. How about conducting your foreclosure purchase negotiations in your office, just at the time you have to feed your pet piranhas or boa constrictor? Maybe invite them down to your indoor shooting range in the basement. “The pictures on the targets? Oh, those are real estate agents who didn’t work hard enough to get my offers accepted in the past.”
10. Beat ‘em Down after Signing
Just because you signed the deal doesn’t mean that there aren’t opportunities to dig up even more gold. After conducting your inspections perhaps the seller needs to come down on their price further or give a credit at closing for repairs that need to be made?