Many properties in the marketplace today fall within one of three categories peaking interest of investors/rehabbers.  Foreclosures, short sales and listings labeled as fixers.  So, which one will provide the greatest potential as far as return?  Property analysis is same regardless of the selling situation.

Here’s a fairly typical case study

Yesterday I went out with clients looking at an entry level project house for sale.  It came on the market that day and was listed at $169k.  Wow!  Houses in Beaverton listed for that price draw attention.  Very few properties for sale even come up under $200k (detached homes).

Looked like a decent deal at first glance.  Hey, you can practically break even on payments with 20% down using it as an income property.  Pretty interesting, on paper…  We arrived at the home and it did match the pictures a little too well.  Blue roof of several layers, single pane windows, cheapest sheet siding known to man, and best of all… trashed.  Rather bummed on this find.

After quick review of the surrounding homes and overall condition of the neighborhood it was estimated that resale in average to decent condition would fetch around $190k.  A rough guestimate of rehab costs was an easy $20k as long as sweat equity was involved and not 100% contractor labor. Question then is; At a list price of $169k is the home worth purchasing strickly for potential gain?  In my opinion there are more lucrative forms of real estate investment out there.

Taking a look at overall investment costs, just rough numbers:

Loan and closing fees: $6000

Carrying cost during rehab: $2000 (figure two months)

Material and labor costs: $20,000

Total investment: $28,000

From $169k add this $28k and we have a product that most likely isn’t going to sell for the money spent.  If a buyer is looking at keeping as a long term rental or primary residence it’s not too bad.  For $197k you’ve pretty much got a new house but for immediate resale… dream on, there’s no money in such.

My guess is that this particular piece of Portland Oregon real estate is not going to sell in it’s current condition for much over $160k and it’ll take a couple of low-ball offers to convince the seller of such.  Still, if you’re searching for fixer type houses for sale in Beaverton, Hillsboro, or any other Portland metro area you can do better.  Look for key words like “fixer”, “short sale”, and “foreclosure.” Check out the website and search all RMLS listings for free at www.maxwellsinclair.com.  Great investment opportunities are available with a little searching!

Listening to Non-Professional Advice

So you’re shopping homes for sale in the Portland Oregon area.  Good for you.  It’s a fantastic buyer’s market at the moment and mortgage rates are awesome!  Now all that’s needed is some expert advice from a relative or co-worker.  Make sure that the last house this person bought was in Detroit and about 20 years ago.  I’m  being sarcastic.

Hey, most people mean well but unless advice comes from someone who’s emmersed in the current local market it might be good to take it all with a grain of salt.  Keep in mind that real estate markets are not national and are dynamic.  What was common practice 6 months ago may not even apply today.

The purpose of a Realtor is to negotiate the best deal possible, protect your interests and watch out for pitfalls that’ll potentially cost you money.  Get advice from people and run it by your trusted real estate broker to see how applicable such can be at this point in time.  I can’t tell you how many buyers have missed out on properties because they insisted on listening to non-professional advice.  A good Realtor will keep you on track!

Not Shopping the Mortgage Market

Shopping the mortgage market can be a frustrating experience.  Mortgage brokers are required by law to give quotes in writing along with a Truth in Lending statement.  What’s known as a Good Faith Estimate (gfe) shows closing cost numbers.  Without getting into too much detail essentially this allows home buyers to compare mortgage brokers in the same format.  Like any other industry there are honest, ethical lenders and those who you may not want to do business with.

A good real estate broker should be familiar with how to read a gfe.  He’ll can potentially identify numbers that are blatently high by comparison to the norm or those which could even be missing from the equation.  By no means should your real estate broker be considered the mortgage professional.  Double check numbers by running line item costs past several lenders.  If the numbers are accurate they should fall within a small margin of eachother on all gfe’s.

Does the real estate broker have to know your personal information?  Heck no.  Looking at a good faith estimate does not disclose buyer’s income, cash reserves, or any confidential information.  It gives a general overall picture of home purchase costs that will be related to a purchase price.  The buyer’s agent gets all this as part of the transaction’s closing documents regardless.  It’s called a closing statement and all parties involved see such.  Sharing a gfe during infancy stages of home buying with your Realtor could really help save money!

Not Interviewing Real Estate Brokers

Unless you make a point to sit down with several agents it’s tough to find a good agent.  Some are actually rated by outside companies based upon client feedback.  After puchase of a home is completed buyers will receive surveys from monitoring companies asking for ratings of agent performance.  These companies are not related to the broker in any way, keeping feedback objective.  Third party companies like QSC (Quality Service Certified) allow clients to submit feedback that actually ranks agent performance on a scale.  Agent ratings are available to anyone who wants to review such before getting involved.  Very few Realtors are monitored!

Ask for a list of referrals from buyers/sellers who’ve done more than one transaction with subject agent.  No agent with good community standings is going to object to contact of past clients.  Might want to think twice if there are no referrals immediately given.

For more tips on buying Portland real estate visit our website.  www.MaxwellSinclair.com