Multiple Offers on Homes Priced below $350,000 (Phoenix, Mesa: short sale, rental market, condo)

[Captain Bill]

Originally Posted by yukon

The sales back then were made to speculators, not investors,

Having lived in 4 bubble markets so far in my lifetime, I have to ask....what's the difference between investor and speculator?

A speculator is a person who is willing to take large risks and sacrifice the safety of principal in return for potentially large gains. They do this without knowing all of the facts.

The speculators during 2005 were buying blind thinking that the prices would continue to go up. They had no alternate plan or exit strategy except the speculation that they would sell at a higher price. Most had no experience with real estate at all.

Had they done their research they would have seen that the supply was increasing and the sales were decreasing at the same time the prices were increasing. That trend continued for a year when all of a sudden the supply overtook the demand, so the price declined to go in line with the falling demand trend that had been building.

The opposite has been in a trend during the past 14 or so months. The supply has been declining, and sales increasing, while the prices were still declining. Now the demand has over taken the supply and prices are beginning to level off so as to fall in line with the demand trend that has been building.

An investor is a person who purchases income-producing assets. An investor, as opposed to a speculator, usually considers safety of principal to be of primary importance. In addition, investors frequently purchase assets with the expectation of holding them for a longer period of time than speculators.

One type of investor is a landlord type investor who has built and studied a pro-forma and knows what the expenses and income will be, and has weighed the risk.

Another type of investor, which is operated as a business, is a rehabber. The rehabber, through his market knowledge, knows the approximate price that his house will sell for after repairs. He purchases the property at a given percentage less than the after repair value, and less the repair costs.

Example: After repair value minus 55% minus 40k repair cost = purchase price. This builds in a profit amount that the business needs in order to operate, with a cushion for error. That 45% builds in room for the repair cost overruns, holding costs such as taxes, insurance, utilities, HOA fees, etc., sales expense, escrow costs, and the business overhead expenses, and profit.

There are small rehabbers like myself who will do anywhere from 12 to 24 homes per year, to larger companies that will rehab 100 homes or more per year.

[yukon]

Ah, gotcha! Thanks for clarifying! I must now change all my former statements to "speculator is a 4-letter word in my vocabulary", and apologize to investors

Kidding aside, good explanation. Thank you!

[caliphs]

What about Buckeye, there are homes that are only four years old that sold for 200 thousand, and are now being offered for sale starting in the 40 thousand dollar range? We live in CA, and the same home if brought here would be over 800 thousand or more. We know a few people who have bought several homes to rent, but it sounds like from what your saying there are so many rentals available, maybe they'll be waiting a long time for a renter???

[dura]

It looks like there are currently eleven single family homes in Buckeye listed as active in the zero to $50K price range. Here are the MLS numbers if you want to take a look-see:

1. MLS #: 4188391
2. MLS #: 4157067
3. MLS #: 4187232
4. MLS #: 4189613
5. MLS #: 4174616
6. MLS #: 4057325
7. MLS #: 4174964
8. MLS #: 4141152
9. MLS #: 4188241
10. MLS #: 4135649
11. MLS #: 4147401

[Captain Bill]

Originally Posted by caliphs

What about Buckeye, there are homes that are only four years old that sold for 200 thousand, and are now being offered for sale starting in the 40 thousand dollar range? We live in CA, and the same home if brought here would be over 800 thousand or more. We know a few people who have bought several homes to rent, but it sounds like from what your saying there are so many rentals available, maybe they'll be waiting a long time for a renter???

The landlord investors check the vacancy factors where they are buying into an area and factor that into their expenses.

Most of the homes I see in Buckeye in the 40-50k range were originally around 100k.

I didn't see any for 40k that was originally 200k.

[w1ngzer0]

Originally Posted by caliphs

What about Buckeye, there are homes that are only four years old that sold for 200 thousand, and are now being offered for sale starting in the 40 thousand dollar range? We live in CA, and the same home if brought here would be over 800 thousand or more. We know a few people who have bought several homes to rent, but it sounds like from what your saying there are so many rentals available, maybe they'll be waiting a long time for a renter???

You live in LA or northern california?

[Rick Lee]

My wife and I have put in about five offers in the last six weeks. and have been outbid on all of them. We just started offering above asking price on the last three offers. It's been a hard lesson for my wife, who's Chinese and thinks asking price on everything in the world is just a starting point for asking 20% off. We need 3% seller concessions for closing costs (doing FHA), but can go up to around $340k comfortably. We're looking in 85331 (Cave Creek) and 85086 (Tramonto). Some of these have been bank owned, some short sales and a few regular sales. We're really getting frustrated. I'm only getting impatient because I know interest rates will skyrocket soon due to gov't. borrowing and overspending and that will cut down our buying power a lot.

[altus2006]

Originally Posted by Rick Lee

My wife and I have put in about five offers in the last six weeks. and have been outbid on all of them. We just started offering above asking price on the last three offers. It's been a hard lesson for my wife, who's Chinese and thinks asking price on everything in the world is just a starting point for asking 20% off. We need 3% seller concessions for closing costs (doing FHA), but can go up to around $340k comfortably. We're looking in 85331 (Cave Creek) and 85086 (Tramonto). Some of these have been bank owned, some short sales and a few regular sales. We're really getting frustrated. I'm only getting impatient because I know interest rates will skyrocket soon due to gov't. borrowing and overspending and that will cut down our buying power a lot.

You might have a better chance if you saved up enough $$$ to pay your own closing costs. If you can't save the money you can have FHA wrap them into the loan, unless the rules have changed with FHA lately.

altus2006

[Rick Lee]

Might? I know I would. But by then interest rates will have decreased our buying power considerably. Besides, what's the difference if we ask for 3%, but offer more than 3% over asking price? We're basically financing closing costs without taking a higher rate to have the yield spread cover them.

[altus2006]

Originally Posted by Rick Lee

Might? I know I would. But by then interest rates will have decreased our buying power considerably. Besides, what's the difference if we ask for 3%, but offer more than 3% over asking price? We're basically financing closing costs without taking a higher rate to have the yield spread cover them.

If you are competing with multiple offers, the sellers are aware that you are cash short and they will go with another buyer who is stronger, especially in the price range in which you are looking. Buyers with more cash are more likely to qualify for the loan.

altus2006