How to negotiate your best deal

when buying Atlanta foreclosures

The first thing you need to know is that for the most part, THE SELLERS ARE NEGOTIABLE! One of the prevailing myths is that the foreclosure sellers are firm on their prices. This is turning out to be more and more not true. Occasionally you will find some asset managers who have adopted a strategy of listing drastically below the market, trying to start a bidding war. These homes will usually sell quickly and for more than list price. But these would be homes priced at 50 cents on the dollar or less. And I mean 50% of the real price today, not the imaginary, inflated price from a couple of years ago…

Nevertheless, generally today, most of the asset managers are pricing aggressively but not so low that there would be bidding wars. We see many instances where these sellers are taking as much as 15-20% less than list price, especially on foreclosures that have been on the market for awhile. So, knowing that the low offers will not be surprising or insulting to the foreclosure sellers in today’s market means you should not be shy about offering less than what they are asking.

Inspections

If you want to leverage the best deal today in the foreclosure market, it really makes sense to do your inspection before you make an offer on a foreclosure. An as-is offer will have a much better chance of being accepted than one contingent on an inspection. Most of them will not have the utilities turned on, so you have to assume that you may need to replace the furnace or a/c and the price should reflect that. You may get lucky and not have to replace those items, but allowing for that scenario would be a good way to approach this.

Timing

When you offer can have an impact on whether the sellers are willing to negotiate. Most of the asset managers have quotas and are under the gun to get a certain number of houses under contract per month. In the last week of the month you may find that there is more room to negotiate than right after the first of the month.

Financing

Whether you have a financing contingency is a critical factor in how much the sellers are willing to negotiate. If you can arrange the financing before the offer is made so you can make either a cash offer or a fully approved loan offer, you will find the sellers are more negotiable in that case. Some investors use an equity line on their personal home to purchase and then plan to refinance later after they have done the repairs and gotten the property rented. You should make sure that the second loan is preapproved before you start on this approach. Cash is king in the foreclosure purchase arena.

Closing Time

The faster you close the better the sellers like it. The asset managers have quotas for how many they close in a given month as well as how many they get under contract, so by offering a quick closing, before the end of the current month, you stand a much better chance of getting a low offer accepted.

Earnest Money

When you offer earnest money on a foreclosure purchase, it is generally non refundable once the inspection and financing contingencies are waived. When a purchaser offers a substantial earnest money deposit it definitely causes them to sit up and take more notice. The more you put down the more serious you appear to the seller. When low-balling, large earnest money checks are one way to help your offer get accepted.

So these are some tips to getting your lowball offers accepted. Happy house hunting! If you want to start searching for Atlanta Foreclosures click here!

$1000 Cash Back to Georgia HUD HOME Buyers

There are a few restrictions:

• Property must be listed after June 4 2008. These properties must be NEW listings not relistings of homes which had contracts fall through or price reductions
• The property must be fully under contract (contract must be signed by HUD) during the first 30 days of it’s listing.
• This is only available to OWNER OCCUPIED properties
• The type of financing does not affect the allowance.

The $100 downpayment on insured properties is still in effect, so when you combine it with this new incentive, there couldn’t be a better time to buy a HUD Home! There is a lot of inventory and you can probably find one to fit your needs! There are plenty of HUD homes on the market and if you call me at 770-HUD-HOME I can help you get one!

After 22 years in the real estate business I can tell you that the foreclosures are offering opportunity like we have not seen since I have been selling property. Atlanta narrowly missed being on the top ten list for the highest foreclosure rate in the country in 2007. According to the Atlanta Business Chronicle, 2.5% of Atlanta homeowners were in the foreclosure process in 2007. In every price range, in every neighborhood, we can see the stark reminders of those poor folks who reached too high, didn’t pay enough attention, or had the unfortunate luck to get an expensive illness without insurance. Many of these houses were simply vehicles for loan fraud. Whatever the story, there are so many that it is really pretty amazing. Many are beaten and bruised and will take a lot of elbow grease too bring them back to life. On the other hand, there are some still have tracks in the carpet where someone vacuumed and cleaned, they still have their appliances and window treatments and are ready for their new homeowners. 

It’s really pretty amazing in the some areas. Neighborhoods like the West End, South DeKalb, East Point, Mechanicsville, Lakewood, Stone Mountain and  many more have literally hundreds of homes on the market today under $50,000. These aren’t shacks or mobile homes. These include brick homes in quiet neighborhoods with hardwood floors, and are frequently livable and rent-able as they sit. As you look in other areas in every price range you see the same thing. If there ever is a time when it might make sense to take the step into home ownership this really may be it.

While the big lenders are tightening up on the 100 percent loan products, both HUD and Fannie Mae have really great loan products available for people who buy their foreclosures.  HUD is financing homes for owner occupants with $100 down payments. They are only doing this with their insured loans and some of them come with escrows for repairs. Fannie Mae’s Express Path financing offers 100% conventional loans to owner occupants and these are the only options for this kind of loans out there that I am aware of! 

If you are ready to look at foreclosures as a home buying option you can see my foreclosure page here. There are links to search for foreclosures by neighborhood and suburban city. There are also links to Fannie Mae, Freddie Mac, and HUD foreclosures. 

HUD homes continue to be a bargain for owner occupants with the $100 down payment option available on all properties beginning with the extended listings on October 5 2007. Then the properties listed on the General List (Owner Occupant preference) after October 10, 2007 are also eligible. This applies to the insured properties and the uninsured IF the buyer is using the FHA 203K loan to purchase! This is a program available to Georgia residents, and they must be owner occupants. One restriction on the program is that if the homeowner bids over the appraised value, then they must bring the “overbid” amount to the closing.

If you want to see what HUD homes are on the market look at my Atlanta Foreclosure page and you will see a link to HUD homes near the bottom of the page. While HUD homes are listed by Realtors and are in the lists of foreclosures that you can search by neighborhood, the only way to get an up to the minute accurate look at what is available is to go to the HUD site. Properties will still show active on the MLS when they are actually under contract. If it is on the HUD list, they are available!

If you find a home you want to see or bid on call me. You must have a registered HUD broker to make a bid and if you forget my phone number just call 770-HUD-HOME and you will find me!

For years it has been difficult for landlords in Atlanta Georgia to buy properties in affluent areas and make a profit renting them out.

The reason for this is that the rents have not kept pace with the housing prices. Prices have been steadily rising in the sought after neighborhoods and school districts, and it is now difficult to find a home inside the perimeter in a good school district under $300,000. Most neighborhoods are priced considerably higher. Yet the rents are still fairly low. There are clean well maintained homes in good Buckhead neighborhoods that take several months to rent at $1800.00. Yet the same house may sell from $450,000 to $500,000 and even with 20% down the payment will be $700-$1000 higher than that! 

If an investor were to put 20% down on a $400,000 house your principal and interest at 7% (which is normal for investment property), the payment would be $2,129.00 and that doesn’t include taxes and insurance which would easily add $600.00  more! Yet the house that will sell in a normal market for $400,000 will rent for $1,800 to $2,000 at the most! The payment would be $2,729.00 per month and they would be lucky to rent it for $2,000.00 per month! Doesn’t sound like a great investment!!!

But the Times they are a changing!

Why are the rents so low? There are literally thousands of apartments,lofts, condos and multi use high rises under construction right now inAtlanta. The builders apparently have no shortage of optimism.

 The quality of construction is high and the developers offer great deals to prospective tenants. They will waive deposits and give the first month free to a credit worthy renter. Some are even offering second month (prorated over the year) free, and these are frequently brand spanking new units with master baths, walk in closets, upscale kitchens and solid surface countertops. Units that used to rent for$850 -$950 are now renting for $695-$795. Luxury units that used torrent for $2300-$2500 are now renting for $1500-$1750. This affects the rental prices homeowners can get for their houses if they are transferred and can’t sell in the sluggish sales market. These kinds of trends drive more people into foreclosure.

Because of the debacle with the sub prime loans, and the abundance of foreclosures in the Atlanta market the tide has finally started to turn.Because of the high volume of foreclosures, and the abundance of lower priced homes on the market the investors can now find positive cash flow.

It’s not so much that prices have fallen across the board, as much as the number of opportunities for discounted properties has increased. It used to be that an investor could come into a high rise or town home development early and buy a unit at the initial price and by the time the project was finished the prices would have risen to the point that the investor could sell as the developer was selling the last few new units and make a nice profit. Those days are over. Those investors have been left holding the bag so to speak because some of the complexes have strict limits on how many can be rented out and some of these investors, now can’t sell or rent! So now we see some of these investors cutting their prices and getting out, and many more foreclosures in the newer properties and better areas. It is finally now possible to get a bargain that is discounted to the point where you can get positive cash flow as an investor.

If you go out of the affluent areas there have not been virtually any houses for sale under $100,000 for the last ten years anywhere inside the perimeter, Now we have over 500 houses for sale under $100,000 and 250+ under $75,000! I have seen decent brick ranches for sale for $65,000 in quiet working class neighborhoods, and I recently sold a 3000 square foot brick two story on a full basement for 137,000 about 15 minutes from downtown. Move in ready with a decent kitchen, new (black) appliances and refinished hardwood floors throughout. Yes it is very possible to find rental property with positive cash flow and that is the FLIP FLOP