6 Tips for Finding Deals in a Competitive Real Estate Market
Home sales during COVID-19 have spiked. While that may seem surprising on the surface, it makes sense when you think about it. With so many months of being homebound due to the pandemic, it seems people are looking for more space.
Perhaps over the past year, you’ve been considering homeownership, but you need to find a home and homeowners insurance within a limited budget. Although the market is tight, you can still find ways to stand out as a homebuyer and discover deals. Here are some strategies you can employ to stay ahead of the housing curve.
1. Know the Secrets Behind a Multiple Listing Service
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You may first hit the house-hunting trail by visiting Zillow, RedFin or Realtor, along with local brokers' websites. But there's a hidden business that's obscured behind these listings. You may have heard of a multiple listing service, but there can be confusion in finding real estate deals with them. Knowing how the MLS functions can empower you while searching for a home within your budget. If you're unsure of your home budget, try using a mortgage calculator to help you determine how much you can afford.
How an MLS Works
An MLS is a cooperative of brokerages that partner in sharing and selling each other's listings, which are entered into a central database. The co-op establishes codes of conduct and listing guidelines for members to follow. Realtor and broker members of the National Association of Realtors manage MLS listings. A collective of associations and brokers that serve a regional territory may also manage an area's MLS.
The listings displayed on apps and websites are supplied from area MLS', but there are nearly 600 MLS databases across the country. Because of this, you may not have a complete picture of the available inventory. It's best to reference multiple feeds to avoid missing a home that fits your preferences.
Don't be confused by websites posing as an MLS provider, such as MLS.com. This website identifies itself as an advertiser in the fine print. The Real Estate Standards Organization, which oversees standards in listing data delivery, can provide more information about MLS.
2. Access Free Government Data
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For every listing you're interested in, you should identify the home's fair market value. Sometimes a sales price is hiked up to a figure that isn't validated by the home's market value. Having an accurate appraisal gives you a baseline of what the home's sales price should be.
The County Assessor’s Office is a Valuable Tool
Some apps and websites can give you an estimate of a home's market value. This data is usually sourced from a county's assessor's office records, which can provide more information and be accessed for free. The assessor's office is responsible for appraising properties to establish property tax rates.
Find the county where the home is located, and visit the county assessor's office website. The website should allow you to search for a parcel's most recently assessed value, which is based on other comparable lots with similar characteristics and sales prices.
For instance, the Cook County Assessor's Office in Chicago issues information on the metrics used to appraise homes, such as location, building square footage, age and construction type.
Note, however, the local county's assessor's office typically reassesses properties periodically. So if a home were renovated before hitting the market after its last reassessment, it would likely have a different appraisal estimate.
You should compare the listing's fair market value with recent home sales in the area. You can find this information in the recent-home-sales section on sites and apps provided by MLS data.
A dated lot for sale in a neighborhood of newly constructed or revamped homes, for instance, should reflect a sales price with this disparity. Use the assessor's data to do a comparative analysis of homes nearby, or ask your real estate agent if the most recent figures are available.
3. Use a Real Estate Brokerage
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You may be wondering why you should use a real estate agent if all of this information is obtainable. A good real estate agent can save you time and give you a layer of knowledge on real estate transactions that you can't get from just doing your own research. Having the correct numbers makes you a more intelligent buyer, but they don't save you the sweat of finding a new home.
That listing that's below market value with fantastic features on your favorites list? Say you found out too late it has a severe septic tank issue or a compromised foundation due to an irremediable termite infestation. An agent could've saved you the migraine and found a better home because they have boots-on-the-ground intel and know the best places to find real estate deals. They can also:
- Act as your representative in negotiations and schedule inspections, appraisals and more.
- Provide you with a general education on the overall buying process.
- Negotiate a more favorable closing price and other money-saving deals such as sharing closing or repair costs.
4. Ask About Off-Market Listings
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Real estate agents also know how to find real estate deals off-market. Their brokers may have hidden stock because of sellers' concerns for privacy. You could end up with a steal from these pocket listings, which may fit within your range.
Using brokers is the best course of action because of their market knowledge. But if you're committed to finding off-market homes, there are other rocks to look under, including the following:
Connect With a Wholesaler
Wholesaling is a real estate investment strategy. A buyer, known as a "wholesaler," purchases what's typically a financially distressed property from a seller and then resells it to another investor at a higher price. The seller is usually a bank or other lender that auctions off the property for a reduced figure below the home's mortgage value.
A wholesaler enters into a contract with the original seller and owner who holds the property title. The wholesaler usually has 30–45 days to sell the property to another investor or end-buyer, which would be you in this case.
You can connect with wholesalers by searching for real estate investment associations online or on social media for real estate investment groups.
Talk to Contractors
Contractors may also know of off-market homes that are being and will need to be fixed up. Tap into your circle to see if anyone knows a contractor, or ask your current contractor if you’re using one. They could provide you contact information.
5. Search for Homes Foreclosed by the Government
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If you don't want to go through an intermediary, you could rummage through county records or foreclosure notices or use the U.S. government. Certain federal agencies, including the ones below, repossess and auction off financially distressed homes that have fallen behind on federal home loans:
- The U.S. Department of Housing and Urban Development: Along with the Department of Veterans Affairs and Federal Housing Administration, HUD seizes and sells homes with flagging mortgage payments. Fannie Mae and Freddie Mac: Although these are government-sponsored entities, you can view impounded homes at HomePath.com and HomeSteps.com.
- Internal Revenue Service: The IRS also auctions off the seized property of all sorts, including homes.
- U.S. Department of Agriculture: The USDA forecloses defaulted single-family and multifamily homes. Use the sub-navigation menu right above the title to find properties.
- U.S. Department of Veteran Affairs: The VA uses a third-party property management service company to market foreclosures, but most homes are situated near military bases of some form.
- U.S. General Services Administration (GSA): The site features foreclosed homes pinpointed on a map.
- U.S. Marshals Service: The U.S. Marshals has an asset forfeiture program. These homes have been claimed because of criminal activity related to the FBI, DEA, and Bureau of Alcohol, Tobacco, Firearms and Explosives and U.S. attorneys’ offices. Independent vendors market and sell these properties.
6. Factor in Home Insurance Costs
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Before buying any home for a bargain price, observe its current conditions and location. Be mindful of the following “rusty nails,” which could leave you with a too-high homeowners insurance premium:
- Rickety walls, plumbing or electrical systems
- Poor construction quality and dated building codes
- Proximity to coastline
- Flooding risks
- Swimming pools
- Earthquake zones
Also, ask the current homeowner or the seller broker for the home’s loss history report. These records detail any damage claims on the home. Cross-check it to ensure that repairs were properly handled.
Even if everything is in good shape, you should still get a home inspection. You don’t want to overlook anything where your money might end up down the drain, reversing the savings you may have gained with the price you closed on.
In a competitive marketplace, you have the power of transparency at your fingertips — for the most part. Detail every feed, inventory list and local broker simultaneously. Even with the best data, though, searching for a home is time-intensive. At least now, you're a little savvier, which will save you time in finding the right home at a reasonable price.
About the Author
Before writing for MoneyGeek, Eric Brown wrote marketing collateral for JPMorgan Chase & Co. He holds a CFA Investment Foundations certification. His other published work can be found in The New Yorker, The Washington Post and Modern Luxury, among other outlets. He was also a Licensed Real Estate Salesperson with Century 21 in New York City.
- Census.gov. “Monthly New Residential Sales, February 2021.” Accessed March 22, 2021.
- Cook County Assessor’s Office. “Using the GIS CookViewer Application to Find Comparable Property Index Numbers for Appeal Submission.” Accessed March 19, 2021.
- Cook County Assessor’s Office. “How Residential Property Is Valued.” Accessed March 19, 2021.
- Cornell Real Estate Review. “Between We Buy Houses and We Buy Wholesale.” Accessed March 20, 2021.
- FDIC. “Real Estate and Property Marketplace.” Accessed March 22, 2021.
- Insurance Information Institute. “What Is a Loss History Report.” Accessed March 22, 2021.
- National Association of Realtors. “Benefits of Working with a Real Estate Agent to Buy and Sell a Home.” Accessed March 19, 2021.
- National Association of Realtors. “Existing Home Sales.” Accessed March 22, 2021.