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Real Estate 101: Investing for First Time Sellers PDF E-mail
Tuesday, 07 November 2006
Sample ImageLet's get one thing straight right from the very beginning...Real Estate Investors are not evil and they undoubtedly serve a necessary purpose in our economy and the well-being of the industry in general.  When an investor buys a property he or she expects to pay less than the market price for it in order to be able to make a profit.  Since investors are the people who step in and buy properties that need extensive repairs or buy properties quickly when nobody else can, this is usually a good thing for both parties.  Sometimes you find unethical investors who are looking to turn a profit without creating a win-win deal. Often first-time home sellers find out how expensive it is to hire a Realtor and, in our world of do-it-yourself, decide to sell their home without hiring a realtor.  When the worlds of real estate investing and "for sale by owner" collide we get problems.
The picture attached to this article originated as a postcard that I received in the mail.  I removed the name from the front to "protect the innocent".
It looks as though these investors are trying to buy homes from people trying to sell their own home, and a few things written here send up red flags for me:

"No Realtors or middlemen" says to me that these investors don't want potential sellers to get professional advice.  Professional advice almost always saves the advisee more money than it costs.  One of the biggest mistakes made by someone selling their own home is not knowing how much it is really worth.  If you were selling your car it would be stupid to ask the person buying it what it is worth. Isn't it a bad idea to ask an investor, who is interested in buying it, what your home is worth?  Asking a real estate agent to do a price comparison to get a good idea of your homes value could save you a lot of money in this case.

They claim to have foolproof financing, but that doesn't exist.  All financing can fall through.  I have attended a few real estate investment seminars.  20% seems to be the rule of thumb.  Investors like to find "deals" with at least 20% profit in them.  I can guarantee that the "guaranteed financing" these investors have would fall through if they thought there wouldn't be enough profit in it for them.

People who "take this deal" will do one more thing that may end up being costly.  When we talk about real estate, if more people know about your home, you have a better chance of getting a higher sales price.  If you limit yourself to just one buyer, you also limit yourself to the highest price that buyer is willing to pay for your house, regardless of what the open market would bring. 

In almost every situation this deal will cost the seller money in the form of a lower sales price.  It can be a win-win deal for some of those sellers that need to sell right now, but most people won't get enough benefit from this deal to justify the lower sales price.  If you see something like this and are interested, please take some time and get some professional advice.  Usually it won't cost very much (it may even be free) and it will save you money in the long run.
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