Question: We are considering making an offer on a rental house. It is not for sale now, and the landlord is an absentee.
Do you have any tips on making an offer on a property when you’re not sure if it’s for sale? And how do we figure out the property’s worth before making an offer?
M.B., Monroe
Answer: Some of the best buys in real estate come from making an offer on a property that isn’t officially for sale, because you are not competing against other prospective buyers. If you find a house you want to buy, follow these three steps:
* Determine the market value of the property.
* Locate the owner.
* Make an offer (preferably below market value).
The easiest way to determine market value is to work with a friendly real estate agent who is willing to look up sales of comparable properties on the multiple listing service computer. The agent can enter the specific property type and location and the computer will print out a list of recent sales of comparable properties in the area you are analyzing.
If the agent works in the area where the property is located, he or she should be able to give you an accurate estimate of its true market value. Agents also have access to property-tax records, which will give you the name and address of the legal owner of the property.
Of course, real estate agents work on commission. Some agents are willing to provide free service as a means of building a long-term relationship. But if the property you are interested in buying is not listed for sale, the agent can’t earn a commission on your purchase, so you may have trouble finding a good agent willing to give you his or her time for free.
You might offer to pay the agent a fee for negotiating a deal with the property owner. If you are computer savvy, you can also do a lot of housing market research on the Internet. You can find the public access version of the Northwest Multiple Listing Association’s computer listings here: www.nwrealestate.com.
An alternative is to contact a local title insurance company and ask for a property profile. For a small fee, the title company will give you the tax assessor’s information on the property, which includes its assessed value, lot size, square-footage of the house, number of bathrooms and bedrooms, etc. The structural information on the home isn’t always accurate, but at least it’s a place to start.
The profile also includes a plat map showing the boundaries of the property, a copy of the last recorded title conveyance document, which may include the last sales price, and sales data for similar properties in the area. You tell the title company what parameters to use in searching for the comparable sales.
For example, if you are looking at a three-bedroom house on a 15,000 square foot lot, you could ask for all recent sales of three-bedroom homes on that sized lot within a two-mile radius of the property you are analyzing.
Once you have established the market value of the property, you have to make contact with the owner. Mail a letter to the owner’s address shown on the property-tax records, or use the name and address to look up the owner’s phone number. If it’s a rental property, ask the tenants how to contact the owner.
The farther the owner lives away from the property, the better the deal you are likely to make. Out-of-state landlords are particularly good candidates for low-ball offers. Managing a rental property from long distance is a hassle.
The rental market has improved this year, but some landlords may still be open to selling if the price is right. Keep in mind that even though the roaring home sales market has slowed, you probably won’t be able to get a steal, but you should be able to negotiate a fair price and hopefully pay a little less than full market value.
Have a figure in mind before you contact the owner. But before you make an offer, ask, “What’s the lowest price you’d be willing to take for your property if I bought it today?” The answer might surprise you. There’s an old saying in real estate: “The first person to name a number loses.” So try to make the seller go first.
If the owner’s asking price is far above what you are willing to pay, negotiate a lower price or walk away. Don’t fall in love with an investment property. This should strictly be a business decision. If you have done your homework ahead of time, you can make sure that you don’t end up overpaying for the property.
Mail your real estate questions to Steve Tytler, The Herald, P.O. Box, Everett, WA 98206. Fax questions to Tytler at 425-339-3435 or e-mail him at economy@heraldnet.com.
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