We closed on the house and now we are moved in. There are different approaches to finding real estate for less than it’s value, and in the current market it is not that hard to do – except they are not being appraised at fair market values currently, but are being appraised at the current condition of the market since it is not a fair market. Finding a great deal on a primary residence is a great investment opportunity. Here are a few house hunting tricks to make sure you get a place worth more than you pay.
I know tricks that will have people coming to you to sell their house for much less than the place is worth, but when you are house hunting, you don’t use these tricks, since those houses are not the type of house you will probably want for your primary residence. You want to choose the house you want. Look at houses listed on the MLS and for sale by owner homes as these people are most likely keeping their homes up. If you want a fixer, you’re best deal would be to track down abandoned properties. When looking at houses on the MLS make sure you take note of location, size, and taxes. These are the 3 biggest factors. My wife cares about the looks, so I let her look through them all first, pick good ones, and then I run through them.
Location is the first determining factor in how much a place is worth. If you don’t know what areas are worth more than others than you’ll soon find out. Next make a note of the square footage. This is the second biggest factor – an immaculate ranch is nowhere near the price of a rundown mansion. The third is how much the taxes are. Most people look for low taxes, but unless there was a large project done to the house that was never reported or they are claiming it is not yet finished to get around paying the taxes on it, the taxes often reflect and are actually directly tied to the assessed value. So look for high taxes, and a low sale price. Each city, town and village have a different tax rate, so a house in one town can have half the taxes as one in another town but still be worth more. So, when comparing values by taxes, do it by location.
Once you’ve got some narrowed down, look up there actual numbers. Google “the county name”,”the state abbreviation”, GIS (e.g. for Orlando, FL you’d google “Orange County, FL GIS”). GIS stands for geographical information system. Most counties have these available online and have tax information and assessed values tied to it. Right now mostly all the GIS systems require you to use Internet Explorer to view them. Every one is set up different, but will probably have a district field, house number field, direction field, and street name field. Go to search and put in the district (probably a drop down menu of all the cities in the county), and type in the house number and hit search. This usually narrows in down enough. It will list a couple houses and click on the specific one and it will take you to a map of the land and show you information about it (likely at the bottom and usually including the assessed value). Here you can the actual value of the house, and it’s actual taxes. You can usually click on something to take you to the tax statement which will list any issues as well, such as delinquent water and sewer or other taxes. If they are delinquent it gets tacked onto the next year’s taxes making it look like it’s worth more because of the higher taxes. You can also find out what didn’t get reported sometimes. Say, on the MLS it says “Finished LL” and taxes read 1700 square feet for the first floor and 1700 square feet of unfinished basement. Then you know the owner did the updates and it’s not yet reflected in the taxes and ultimately the value of the property. Also, click on a button that likely says Inquiry and then on all plots of land around the house to check the others out too. Make sure the house is not the most expensive one in the area. If your house is the most expensive – it’s value can’t raise as fast and can lower quicker. If it’s the least expensive, the value can only be brought up quickly, but not lowered much.
I hope this information helps someone. As far as ours, we got one at 75% of it’s value. It was a short sale, so the people were going into foreclosure and instead of letting that reflect bad on their credit for 7 years decided to sell before that point by making a deal with their mortgage bank to sell it for less than what they owed on it. Then all parties have to split up the loss. In that case it was the seller, the bank, the private mortgage insurance company, and the government since they were subsidized. And they had to remove a lien in the last 2 days before it closed. It closed in under 30 days – the fastest short sale the mortgage company has ever done. Most take around 3 months, but we pushed the envelope.
By the way, never think of your primary residence as a real asset. The only way it becomes a real property investment is when you sell it. If you never sell it, you never make any money from it. The rule of thumb is, if you can’t count on it as a source of income, it’s not an asset. It’s a liability since it costs you more than you make off it. Some people may argue with that, but that is an investor’s rule.
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