Listed Leads
Hi all!
I notice that the question is always asked, whether or not a property is "listed". Does this mean that if the property is listed, there still has to be a commission paid to the agent. Does it mean that the owner can not sell on their own after listing? I am trying to find out why being listed is relevant. I have located some very good deals some of which are listed. For Investors using bird dog services; would you not want leads that are listed? Any feedback would be helpful. Realtors?
There are, in essence, only two ways to make money in real estate: One is to find bargains and the other is to add value.
Finding bargains means you have to find a property where the owner either does not know what the piece is worth or for some other reason must sell the property below value. (Foreclosure, tax sales, etc.).
So leaving aside forced sales we have to find a seller who is unaware of value. That means finding an inefficent marketplace. In an efficient marketplace the buyers will bid up the price of anything in the market to very close to its value.
So MLS services are a kind of efficient marketplace. They make it possible for a seller to advertise widely the availablity of a particular product among a group of buyers who are known to be interested in product of that kind. The initial cost of that advertising is very small (the time to find a broker and sign a listing) so everybody has access to the efficient marketplace. There are no "barriers to entry".
Therefore the assumption is that any listed property cannot be a bargain because it is available and advertised in an efficient marketplace.
There are exceptions to this rule. Sometimes a parcel has some hidden value which the market in general has not recognized. Sometimes even in an efficient market the property is presented badly. Sometimes even an efficient market moves slowly and the seller is under pressure to sell quickly.
But for the most part this rule is true.
Therefore, the only way to make money on listed property is not by buying at a bargain price (which is very difficult to find) but by adding value. This means renovation (either serious or minor) or other routes to adding value.
In addition an investor using a bird dog usually assumes that he can and will find any bargains that do exist in the MLS service without the bird-dogs help. Maybe not a valid assumption but . . . .
So if you are going to bird-dog for an investor using the MLS you'd better find an investor who makes his money adding value not one who's only interested in buying at a bargain.
Thank you CommercialKing,
That does put some light on it. The subject property is listed in the MLS, but the owner has listed it in the newspaper as well. It is priced at $70,000+ below the appraised value and a "must sell". I am very familiar with the property as well as location, and comps show that the value is not inflated. Just trying to get a feel for what investors are looking for. I know what I would be looking for, and that's what stands out to me; a substantial spread. In researching the subject property, I found some recent sales of equally valued property that stated "forced sale" for a ridiculously low price. I am looking at possibly purchasing my first flip. Thanks for all your help
I'm originally from MI.
That sounds like a great deal, unless you have to pay a fortune for the 70K equity.
How long as it been listed?
If it's been a while, try to figure out why. I have never seen a property w/ 70K instant equity last.
Is there a catch?
If this is your 1st filp, you might consider using a broker (esp. one that does flips) or agent to help protect your interests.
I'm with CJ. Sounds too good to be true. But things that are too good to be true happen all the time. You say its $70K under the appraisal. How do you know? Have you seen the appraisal? Has the property deteriorated inside or out since the appraisal was done? You have a hot lead-- now you are in the due diligence phase.
This is always a little tricky because you don't want to point out that the property is undervalued but you do want to find out why. If the seller has an appraisal he's willing to wave around then you can flat out ask him-- how come so cheap?
I am not trying to flip this one myself, but to prepare myself to do so in the future. I only had brief contact with the seller, and after finding a bird dog questionnaire on this site, recognized that I didn’t ask nearly enough questions. It has been listed since January 2004. The owner states that it is appraised at 203K; Comps appear to verify that, but I have not seen an actual appraisal. I have been unable to contact him again, but have left messages. Owner has a small business that does contracts in various states, so I am assuming maybe he needs to relocate. How soon would he like to sale “yesterday”. I don’t believe that it has deteriorated. It has a new kitchen floor and appliances. It is an upscale High Rise condo, and so I am guessing that they must be maintained at a certain level. I am still trying to contact him again to ask additional questions. I do know several Realtors. Would they require this kind of information in order to list it? If so, I can get that information. Thanks guys
Hi again,
[ Edited by ojedra on Date 06/05/2004 ]
If I chose to try and flip this myself, what would be my next step, other than finding out why it has not sold etc? Would I just make an offer?
Should I be moving to the Wholesale topic now?