The words "real-estate investor" are enough to make many buyers grit their teeth. With inventory tight, these all-cash rivals are hard to beat when it comes to nabbing properties.
If you can't beat them, you might as well learn from them. How do they pinpoint the best deals? And how can you make your offer stand out from others?
We asked Doug Clark and Mike Baird, the two investor partners behind Spike TV's "Flip Men" reality show, for their tips on navigating the homebuying process intelligently.
In this month's Buying Advice, we'll also look at the kinds of problems a home inspection can turn up, and how having one done can save you money — both at closing and on your utility bills. And we'll check in with the latest housing statistics, which point to a slow but continued recovery.
For "Flip Men" Clark and Baird, every purchase begins with a lot of homework. "We start by studying the neighborhood," Clark says.
As soon as a traditional listing or foreclosed home becomes available, they scrutinize the surrounding three blocks and look at the following factors:
- How many homes are on the market and how long have they been on the market?
- What condition are these properties in?
- What's in escrow? What have houses nearby sold for in the past 90 days?
Buyers must take the time to learn the marketplace and look at a lot of homes, so they will know real value when they see it. "We see more than 100 homes for every one we buy," Clark says.
Learn what's out there and figure out what features you like so you can jump when you see the perfect fit.
And in order to move quickly and land that prime piece of property, you must be preapproved for a loan and know what terms you can offer a seller.
- On our blog, 'Listed': With flips flopping, investors becoming landlords
With fewer homes on the market, buyers will often find themselves bidding against several other bidders. Without cash or the ability to offer a much higher price — for fear that a property won't appraise — buyers have to focus on terms that make life easier for the seller.
- Can you get a home inspection and other due diligence done right away?
- Can you close in two weeks?
- Can you put a larger amount of earnest money down to show your commitment to closing the deal?
On one property the pair flipped recently, they accepted a bid that was $15,000 less than the highest offer because the buyer's agent convinced them they could close quickly.
"You want to make sure you can offer the right terms and conditions and are ready to go," Clark says. And you need to have an experienced agent who can communicate that to sellers.
"Don't just get your relative or your friend from high school [to represent you]; you want someone who really knows the industry," Baird says. So many people, he says, sign a buyers agreement with the first agent they meet, rather than shopping around. Experienced agents who are working full time can get out to — and get you into — properties before other bidders.