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    Are the deals drying up, or is it time for a change in strategy?

    In many desireable locations, the well is going dry. 

    LAS VEGAS NEVADA, fore example is one of the hardes hit foreclosure and loan default cities in the nation, but some investors are complaining that it’s too hard to secure a deal, and the competition is too fierce to obtain the margins necessary to make a profit.

    According to a recent Wall Street Journal article, even investors with cash are finding it hard as many banks receive 20 offers in days on properties – often escalating the prices well above asking price.  Other outside groups are buying blocks of homes, sight-unseen and many investors cannot afford that risk.

    Meanwhile, In Spokane Washington…
    We’re seeing an increasing amount of inventory for Bank Owned Propeties.  I have made agressive cash offers on dozens, for many of my investor clients.  Most were too agressive for the bank’s liking.  Most, were extreme fixer-upper’s with no room to make the necessary repairs and sell in today’s market for profit.  Four to five years ago, we saw rapid appreciation where one gained value in their home while the grass grew, we’re not so fortunate in today’s market.  To make money on a flip, the property has to be bought right.  The numbers have to work before you buy, or they never will.

    No matter how many flashy elements, slabs of granite, travertine tiles or plasma TV’s you put into a home, it’s still worth what it’s worth and if you paid too much, well good luck turning a profit.

    What’s my point you ask?

    My point is that buying bank owned properties is a numbers game.  You cannot get hung up on the two or three propeties you didn’t get.  Educate yourself on price, needed repairs and your exit strategy.  Make you best offer with those factors in mind, and walk away if you don’t get it.  Try-Fail-Adjust.

    In 2008 and 2009, banks would jump for quick-close cash offers.  The quick exit seemed to be a viable strategy for them to get many of these propeties off their books, but it affected the bottom line poorly.  Today, banks are looking at bottom line net AND the strength of the buyer.  Most will counter a 5 day close with a 25-30 day close, and will not rush to close any sooner.   It’s become a timing game.

    As a property ages on the MLS, banks strategically drop the price small frations at a time.  Depending on the age of the price redution and the current price, I speculate that most banks have a formula or range that would be an acceptable offer (at least I would if I were in their shoes).  It will take multiple offers on the SAME house over time to get the deal you want. 

    Patience Grasshopper

    Just as the banks have strategised a plan to yield the highest and best offers possible, you must strategize a plan to get them where you want.  The swing hard make ’em hurt method hasn’t worked in a while (i.e. $100,000 property and offer $30,000), most times this will get shut down right away.  If your end goal was $70,000 I’ve found it wiser and more efficient to start closer to your goal and hold firm over multiple offers several week’s apart.  Don’t worry if someone comes in and pays $90,000 – you weren’t willing to pay that anyway, let them have it.  Eventually, barring any interest to the contrary, your $70,000 offer will start looking attractive.   The trick is to have multiple irons in the fire and negotiate many deals at once.  And you must have a great agent.

    Like me. 🙂

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