How to Get Great Deals in a Falling Real Estate Market

When there’s talk of a housing bubble breaking, and an over supply of houses on the market, prices are sure to drop. This might signal the perfect opportunity for first-time house buyers to get the house of their dreams for a reasonable price, and for property investors to buy low.

Instructions

Difficulty: Moderately Challenging

1. If you want to invest in real estate or buy your first house at a discount, information is key. You want as much information as possible about market prices and locations, so become an expert in a particular target area.
2. Figure out what kind of property you want – size, location, style – and then figure out how much you have or want to spend.
3. Before you buy, realize that the property you buy may not appreciate for some time as the market continues to fall. Make sure you can afford the repayments on a loan, even as the value of the property drops.
4. Talk to potential lenders and find out how much they’re willing to lend you, should you make an offer on a home.
5. Find a realtor who understands what you’re looking for and your goals for the property.
6. Besides keeping an eye on properties advertised by realtors, get proactive and make it known you’re in the market by taking out an ad in your local newspaper or on Craigslist, to say you are looking for property.
7. If you do take out an ad, and give our your phone number, make sure you answer the phone. Potential sellers may call once, but if they get an answering machine, they may not leave a message.
8. If you see a garage sale or estate sale in the area you want to buy, stop and ask if the house will be coming up for sale. A large yard sale may be a signal that the owner is getting ready to sell.
9. Get out and drive around your preferred area and look for vacant houses, those in need of repair or those with lawns that haven't been mowed in a while. These may be early signs that an owner has lost interest in the house, but hasn’t gotten around to listing it yet. He may be interested in an offer directly from you to cut down on his selling costs.
10. Get information about foreclosure auctions. You can do this online at sites such as RealtyTrac.com (a link is provided in the Resources box), the leading online foreclosure marketplace, or by talking to your bank or mortgage company. When homes are repossessed and sold by lenders at foreclosure auctions, they typically sell at discounts of between 20 to 40 percent of what the property is worth.
11. Learn more about the foreclosure process as rules vary from state to state. You should be very familiar with the procedure in your area before bidding at an auction. One of the best ways to learn is to go to a foreclosure auction and observe what goes on.
12. If you go the foreclosure route, make sure you do your homework on the property. You will need know the estimated market value of the property, how much is owed on it and if the owner has any other liens against it. If there are outstanding liens on the property, you may be responsible for them when you buy.
13. There are a number of stages in the foreclosure process and it may be better for you to approach the owner of the soon-to-be auctioned home early on to offer a private deal. It will certainly be in the owner’s interest to sell privately rather than be dragged through the foreclosure process.
14. Haggle when you’re buying and be sure not to overprice the home or you’ll be sorry later.

Tips & Warnings

• The size of the foreclosure discount will vary by location. There may not be any discount worth talking about in communities that have a growing population, steady employment and strong real estate sales.
• In a foreclosure sale, find out if the property will be sold vacant. Sometimes a lender will not evict the current owners and you may have to take on the job yourself.
• A home sold by foreclosure is likely to be sold at a discount, but not always. Be sure to have prevailing market prices at your fingertips.