Investing in real estate in the holiday season
Real estate investors that have been buying properties for the last 5-10 years look forward to the holiday season. If you have not been buying real estate for many years here is your insider tip #167! The holiday season isn’t just for celebrating, it’s also for opportunities to make some deals!
If you had a property to sell, but were not very motivated to sell it and wanted close to full price, would you let it sit on the market over the holidays or would you pull it off and list in the Spring market?
The answer is, of course, list in the Spring market when there are more active buyers. Why do sellers keep or put their properties on the market in November and December if the Spring market would be more favorable? Because they need to sell them! Sellers keep their property on the market hoping someone will make an offer. If a seller has a property on the market over the holiday season, there is a very good chance they are a motivated seller. Motivated sellers aren’t necessarily someone you should propose low-ball offers to this time of year, however. There are many different situations, and your offer should reflect that. The seller is usually willing to accept a lower offer to get the property and the expense and liability that goes with it off their plate. After all they want to enjoy the holiday season as well!
What kind of action can we take as investors during the holiday season? One action is to look at REOs, or foreclosures. If you are familiar with the Pacific Northwest real estate market, you may have noticed that through the last few years demand and prices have climbed strong every year. In 2011 to 2013, REOs were a great investor market. Investor bank balance sheets and the real estate market were not fully recovered from the recent recession. Banks would list REO properties below market value, knowing they needed extra work. Many of these properties were purchased by investors looking at the fundamentals of the transaction. Not only would the banks price below market, but they would come off their list price significantly after 30 days because they did not want to hold the non-performing asset in what was considered a down-market from the bank perspective.
From 2014 to present, we have noticed that REOs were being listed at full market value. Banks were also not nearly as motivated to come off price because the market had appreciated and demand was increasing, especially with such a fantastic loan environment for the banks. REOs were listed near, at, or above market value. The combinations of single family demand by home owners buying REO and the investors trying to buy, fix, and flip properties virtually dried up the flip market for the average investor. This forced new investors to buy at inflated prices. Record apartment and commercial pricing came along with this up-market trend. With so much money available to commercial buyers, prices climbed.
At the end of the calendar year, lenders and sellers need to get non-performing real estate off their books before they head into the next year. This is the kind of situation that can be a potential gold mine for investors. Banks, at the end of the year, want to get rid of as much real estate as they can. While we are always looking for apartments to invest in, we are back to writing offers on single family homes over the next two months to see who we can help in a need-to-sell situation.
If you didn’t quite pick up tip #167, it’s time to write offers on market property, especially bank-owned. Contact one of our real estate investment brokers at Extant at (509) 258-5000 for expert deal advice and resources.