How to Identify Undervalued Properties

We may not be at a bottom in the real estate market at this time, nevertheless there are some super deals if you can spot undervalued properties. I have been a real estate broker/investor for over 20 years and have learned some valuable tips for spotting these undervalued properties.

Tips for Spotting Undervalued Properties.

1. Everyone knows by now about the record breaking foreclosures due to default mortgages that are on the market. Well, foreclosures are probably going to be the best way to get an undervalued property- and there are a lot to chose from. The benefits to getting a foreclosure is possibly receiving a 20-30% discount off the market value; giving you a low risk/high reward for a long term investment. This is mainly because lenders do not want to be property owners. Many of the banks want to write off these loses from their books. Just call up any bank and ask about their foreclosure list.

2. Pre -foreclosure properties are also another way to purchase undervalued properties. These are properties that are about to go into foreclosure but the sellers are still trying to sell it through Realtors or on their own. If it is listed by a Realtor, most times they will have a small additional sign saying "pre-foreclosure" so buyers are aware of the situation. The buyer can save a substantial amount with negotiations because of the emotions involved with saving someone from going into full foreclosure.

3. Realtors will help you find undervalued properties. Just let as many Realtors as you can know that you are in the market to find a great deal. You should develop relationships with real-estate agents who call you first whenever they see distressed properties. Each office has their own links to many resources that can save you time and money. Realtors scan listings for key phrases, like "must sell," "needs work," "vacant" or "motivated seller - these are indicators of an emotional seller.

4. Buying undervalued properties through tax Liens - This will vary state to state. Investors can purchase these tax liens for a set interest rate for a period of time. Typically the interest rates are high returns up to 18%. If the property owner cannot come up with the back taxes, it is possible for someone to buy real estate for only the property taxes owed - for 75% to 90% below market value. Click "here" for a list of state participants for tax liens.

5. Finding vacant homes can be another way to purchase undervalued properties. Desperate times will give you desperate sellers. When you see the grass tall and it looks like no one is living there, go to your local county records and try and make contact with the owner.

6. Whether you are purchasing a home to live in or as an investment, another way to find an undervalued property is to search for a home that could give you a high rental income that outperforms the area. If you plan to live in it, it's a great resale value to market to investors. Know your rental income for the area and see how the price compares for a cash flow analysis for the area.

7. Finding a motivated FSBO (for sale by owner) and asking for owner financing is another way that can help you purchase undervalue properties. You can save thousands of dollars of closing costs if you find a seller willing to give you owner financing. Value is relative to the total amount you lay out. A FSBO with owner financing can save you about 4-5% of the final purchase price depending of course on your terms.

8. You've heard the old saying when it comes to real estate, it is all about location. A good area to look for undervalued properties is in areas that are in demand due to being closer to jobs or desired amenities like lakefront or lake view areas. Look for homes that are vacant or in mild need of some cosmetic repairs in these time prime locations.

9. Find the least expensive home in the neighborhood/block that needs minor cosmetic repairs. Many people don't want to take time to do a few simple repairs and just prefer to have a move in condition. You could save thousands of dollars with a little ingenuity.

10. Internet resources like Buyowner.com or even Craiglist.com can help you find undervalued properties. As with Realtors scanning listings, buyers scan listings for key phrases, like "must sell," "needs work," "vacant" or "motivated seller on these Internet resource sites.

Just remember, no matter what the media is saying regarding lower prices ahead, it's all relative to location because real estate is regional. If you are in the market for an undervalued property, there has never been a better time till now, to start looking. Interest rates will be going up, you have motivated sellers, and you are closer to a bottom than you were 3 years ago. As long as you do your homework, you should be fine holding property for a long term investment.