Mar

25

What’s A House Buy Nowadays

Filed Under Getting A House Buy | Leave a Comment

In some areas of the country home values have dropped by as much as 22% (in isolated areas even more).

So as a buyer, how do I know if I’m getting a deal of a house buy or just paying retail?

First of all you need to establish what similar homes are selling for in the area which you are looking.  You may need to contact a realtor to look at solds (records of sold houses) in your area.  You will want to look for comps based upon the features and square footage of the house in question.  For instance if you are looking for a three bedroom, two bath bungalow with a two car garage and a finished basement then you will want to compare solds that are comparable to those features and see what the prices are for homes sold within the last six months.  Any older than that and you are looking at perhaps higher or lower values that don’t reflect the current prices available now.

Frankly, I would never trust a listing price.  For example a house next door to me sold for around 60K two months ago.  They did some repainting and installed some copper where thieves had removed it in the basement.  It is now listed for $167,000.  That is what the house was worth three years ago.  It’s now worth around 80K.  Even at that price it is no longer a house buy.

In some neighborhoods you can value houses by looking at what a fair market rent would be for the house.  So If a house would rent for $1000 then you might say that the P and I payment should not be over $1000.  That formula might work in an area where fifty to 65% of the homes are rental homes.  At today’s interest rates that may mean the house is worth around 120K.

If you want a house buy you should be shopping to find undervalued houses.  You could tell your Realtor that you are willing to buy a house with some fixin’ needed or that you are looking to purchase a short sale home.  That’s is a home that was almost foreclosed upon but was sold to an investor with a discounted mortgage.

Not all short sales are deals.  Back two or three years ago mortgage companies were too lenient on  appraisals and financed homes at much more than the mortgage would support. I have seen seventy thousand dollar homes with mortgages of 170,000 on them.
When the seller sells on a short sale the bank will certainly not discount down to 70K for the new buyer.  Who cares if the mortgage was discounted 50k if the house is still overpriced by fifty thousand.

Your best bet might be to hook up with an investor.  Tell them you want to get a house buy.  Tell them you want a house at least ten thousand below what it should sell for in this market and what kind of house you are looking for.  An investor will go out and find a deal for you and then tie it up so you can come in and purchase his option.  There is one thing that needs to be done to make this plan happen.  You need to be ready with your financing.  That means pre-approved with a commitment letter for the price range you are shopping in.

That’s how you get a house buy.