Lets say I buy a 3 bd 2 bth in nice neighborhood the house is an REO needs light carpentry work, house valued assessed at $ 270,000 I Buy it from bank for $95,000, I immediately place it on MLS for $250,000 on a Monday morning I announce on the listing that there will be an open house on Friday morning between 9am to 11:00 am, Now that Friday morning comes, I have 13 people waiting anxiously waiting to get in the home, I first tell the 13 people that I will be taking offers now Friday up until Sunday night at 9pm, you can’t believe how many of those 13 bid on the home, I get a bid for over 250,000 then another over 260,000 then finally one for 270,000 fin
ally at Sunday night I get a call for 275000 the highest bidder wins… the best way stragedy. To sell a home in a down market.
This is not my actual experience, but its what I’ve learned from an investor on youtube…
Several stars have to line up for a deal like this to happen.
Insisting on ‘grand slams’ like this, or suggesting this is typical, is a credibility killer by whomever put this example out for public consumption.
That said, if you have a reputation as an actual closer/buyer; have cultivated a relationship with the gatekeepers at a given bank’s REO department, or with the agents handling the bank’s REO’s; then you might get the chance to buy a pocket listing at a significant discount.
The ‘problem’ I have with deals like you’ve described is that the actual, juicy deals are rarely houses (rarely, as in, hen’s teeth) that need just ‘a little light carpentry.’ They normally need a complete overhaul/rehab.
Banks aren’t stupid. And they haven’t been dumping pretty houses on the market since about mid 2008. Furthermore, the pretty REO’s are being scooped up, in about 14 major metropolitan areas by the thousands, by corporations working with the government.
The great thing is these corporations aren’t buying the dumps that can be truly purchased at profitable discounts.
So, we’re back at buying dumps at discounts …just like we’ve always been doing. So, the question remains, “Where are these discounted dumps, and who is selling them?”
Where? B, C, D neighborhoods.
What? Vacant. Uninhabitable. Not marketable; unsold.
Who? Absentee owners. Incompetent FSBOs. Smaller banks that have no system in place to rehab and resell vacant beater-houses. Those suffering from any of the 4 “Ds” …divorce, debt, disease, or death.
This really isn’t a secret, but suggesting that REO’s at 50% off; that need a board nailed back on, are easy to find, will wear you out looking for. I would rather narrow my search to the beater-fixers the bank is scared to own very long. They fear getting sued, fined, burned for owning. Even then there’s normally a fair amount of competition for these properties, in densely populated areas.
So, there’s another little, dirty secret nobody shares much. It is the deals in the outskirts. If you’re willing to drive a little, or you already live in Hell’s half-acre in the sticks, you’re likely to land deals that few others want to deal with, much less fight for. I’ve found LOTS of deals in tiny towns. Sure, there’s fewer deals, but there’s also fewer competitors (generally speaking).
There’s a sweet spot for pretty house flipping, however. These are houses owned by people who bought two, or three, years ago, that haven’t experienced any equity growth, and now need to sell for one the 4 “D” reasons mentioned above.
These can be profitable Sub2 deals. I love these. Especially the upper end homes. They’re captive prospects! Who else are they going to sell to …without coughing up a wad of cash to sell? nyuk nyuk
Hope this helps.
Market statistics are showing that the average discount between foreclosures and standard real estate sales is getting narrower and narrower.
According to Zillow, home buyers could expect a 7.7 percent discount when buying a foreclosure home versus the same home in a non-distressed sell, down from 9.1 percent in September 2011, and a dramatic slide from its August 2009 peak of 23.7 percent. Zillow compared the actual sale price of foreclosed homes nationwide to the estimated price of the same home were it to sell in a non-distressed transaction.
Whereas, NAR reports that distressed homes accounted for 22 percent of November sales (12 percent were foreclosures and 10 percent were short sales), down from 24 percent in October and 29 percent in November 2011. Foreclosures sold for an average discount of 20 percent below market value in November, while short sales were discounted 16 percent.
Finding the kind of cash cow you are describing is highly unlikely and if found will be snapped up in record time by savy investors. The competition for these kind of investments is very high.