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Home Buyers Rule in Depressed Real Estate Market

Sep 16, 2008
Right now in the U.S. there hundreds of thousands of home owners who want to sell their property, but can find no buyers.

If you are a qualified buyer you are currently more valuable that an NFL first round draft pick. Yes, you are king and every home seller is your subject to do with as you will - almost!

The point is, this is one of those rare periods in time when you can get the best possible deals simply for the asking. The trick is to know what to ask for.

Financing

You will find that in most cases you have the least amount of maneuvering room in the area of financing. Most highly motivated sellers have little or no equity in their homes. They either bought near the top of the real estate bubble or they have refinanced every penny of wealth out of their home.

If you are lucky enough to find there is some equity in a home there's a good chance you can do a no money down deal by asking the owner to carry-back that equity in the form of a note and second mortgage. That's called a "seller carry-back".

The seller carry-back was very popular in the early 1980's. That was during a period when it was near impossible to sell property without some form of seller financing like the carry-back. That was possible in those years because mortgages were assumable by the new buyers. Investors learned how to use an All Inclusive Deed of Trust (AITD), sometimes called a "wrap around mortgage" to buy with no money down.

Since mortgages are no longer assumable it is rare that you will find a deal that works with a wrap around. You may find a mortgage that allows a buyer to assume the financing after qualifying. That seldom works in an investor's favor, but it is worth investigating if all else fails.

To use the seller carry-back today you have to buy 'subject to' the existing financing. That means that after you sign a promissory note secured by a trust deed for the owner's equity, you take title to the property and just continue making payments on the first mortgage. Investors should learn the details of how to buy 'subject to', because it can be very powerful in this real estate market.

Among the other methods of buying, you might consider a lease-option or a 'short sale'.

Inspection and Repairs

Homeowners are desperate to sell, so they will be open to performing any repairs or improvements that you ask for in your purchase offer. That means you should require is through pre-inspection of the property. That inspection should include:

Heating and air-conditioning system
Plumbing and electrical systems
Roof and attic, including insulation
Walls, ceiling, floors, windows, doors
Foundation, basement
Any built-in appliances
Septic, wells
Swimming pool
Landscaping irrigation

Those are the things you should check before writing the purchase offer. Then you can include any repairs or replacements required in your offer. Don't stop there. In the purchase offer you state that the offer is contingent upon your approval of a report by a qualified home inspector.

A-S-K

Finally, you should ask for at least a few things that are not vital to the deal. If they have two cars, ask for one of them. Ask that they leave the lawnmower, child's swing set, exercise equipment, dining room set, etc.

If you don't A-S-K you will never G-E-T. If the home sellers are really motivated they may want to move as quickly as possible and be willing to give you anything that will make packing and moving easier.

Compensate for Falling Values

When you consider making a purchase offer on real estate, keep in mind that values continue to fall in many areas of the U.S. You must buy at a deep discount to compensate for the fact that the property's market value will be less in 12 months than it is today.

Whether you are buying for personal use or as an investment, there has seldom been a better time to be in a position to buy homes. Use your power with compassion. Be a wise and benevolent king!
About the Author
Mark Walters is a third generation real estate investor and founder of CreatingWealthClub.com. For a limited time Mark is offering his big guide to finding hard money loans for real estate investing free. Free guide to private money loans.  http://www.FindPrivateMoney.info
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