[NOTE: The Best Buys in this edition of the blog, like all other editions, follow the article.]
“Solid analysis identifies great opportunities…” That’s true in all facets of life, but it is especially true in this uncertain real estate market. Sophisticated investors have long embraced technology as a means to assess potential investments and track investments they have already made. Highly specialized technological tools are now available at no charge to most people who open a stock trading account with an online brokerage firm like Scottrade or Charles Schwab, for example. Most real estate brokers have a vast array of technological tools at their disposal through their Multiple Listing Service (”MLS”) system; and any serious buyer giving thought to a purchase would be very well advised to ask their broker to provide a list of comparable sales and active comparable listings for the last 6 months or so in the subdivision or area in which he or she is interested. These “comps” can usually be reduced to a simple, manageable “Comparative Market Analysis” (”CMA”) Report, using the data kept in the MLS system. Such a report will give a buyer a much better idea of how active sales are in a particular community… whether prices are stabile or are trending downward… whether foreclosures or other types of “distress” sales have had a particular impact on a community… and so on. Investors have used this information– and much more– for years; and house hunters looking for a new home in this uncertain market would be well advised to enlist all resources available to them before making a decision.
There are other ways to put technology to work for you. Most people who have purchased a home computer in the last decade or so have had some exposure to computerized spreadsheets for financial analysis. Probably the most common of these programs is Microsoft Excel. It has come pre-loaded on PC’s for years– at least in trial form. It is also a part of the MS Office Suite of programs, and many people have it loaded on their computers, even though they never use it. If you are considering a home purchase… or you are a casual investor looking to take advantage of the enormous opportunities this current real estate market offers… I would strongly recommend that you take the time and make the effort to get to know at least the basics of MS Excel. It really is not as difficult or time-consuming as you might think. With the aid of a simple interactive tutorial program like Video Professor, you can learn everything you need to know on a Saturday afternoon.
Then what? Of course, the uses for such a program are limited only by your imagination and creativity. But I will give you one possible “template” to use in any type of analysis– that is, whether you are a house hunter looking for your prinicpal residence or you are an investor. I call it a “Target Price Calculator” spreadsheet, and it is really simpler than it may sound.
You have found a home that interests you. You like the idea of buying a “fixer” because you know you can get a good price in this market, and you have a contractor you trust to do the work you may need– or simply desire– to have done. (Perhaps you are uncomfortable with anything more than cosmetic updates– kitchen cabinets… flooring… bathroom tile… it really doesn’t matter for the purpose of this example.) Your realtor has pulled comparable sales and other active listings from the MLS system, and you have a simple CMA report for this property. Among other things, that report gives you the average sales price of comparable homes in this community over the last six months, the high sale price and the low sale price. You believe that in this market, you should be able to purchase a home at least 10% below what the average comparable price is in this neighborhood, giving you immediate equity on the day you close the purchase. This should cover you in the event prices continue to decline. But you also have the issue of repairs or renovation costs. There are probably several homes you are interested in. How does one compare to another with respect to meeting your goal of having at least 10% immediate equity on the day you close the purchase?
Using Excel or a similar spreadsheet program, you can set up a simple form into which you can plug the pertinent numbers, and have the spreadsheet finish the calculations for you. This will give you a simple, bottom-line analysis for each property you are considering. The template for this “Target Price Calculator” looks like this:
In the above example, your target offer price would be $203,000 for the subject home. Of course, the above is a simplification. There are other variables that investors, for example, might add. An expense line might be added for purchase closing costs (and many sellers will pay a portion of a buyer’s closing costs in this economic climate)… or a line might be added for investor carrying costs. Further, these calculations can be made manually using this general template without using Excel. But for those who are considering several properties, or for investors who are constantly looking for opportunities, the use of Excel to set up automatic calculation of pertinent amounts is easy, convenient and very useful.
This is really just the “tip of the iceberg” with respect to the spreadsheets that can be created and the data that can be gathered and analyzed using a spreadsheet program. I create and use spreadsheets to analyze HUD bids, for example, or to manage HUD bids successfully entered. The possibilities are only limited by your creativity and imagination, and the usefulness of spreadsheets in compiling, analyzing and managing information so that you can make truly informed decisions cannot be overstated.
Having said all that, and having alluded to the ongoing opportunities currently offered by HUD Homes, Fannie Mae, Freddie Mac and bank-owned REO's, let’s take a look at a couple of this week’s “best buys.” My caveat on HUD Homes remains: HUD Homes are available for daily bidding. A home that may be available today, may well be under contract tomorrow.
(1)Vintage Full Brick Cottage in Sought-After Myers Park for under $300,000:
Listing Price Reduced to: $279,900.00. Full brick Myers Park cottage with ivy-covered stone accepts for only $279,900. This home has a tax assessed value of $322,900, and those who know Myers Park know that it is not uncommon for homes to sell for twice the listing price of this property. So what is the catch? This home is listed as a 2 Bedroom with a den that could be used as a third bedroom (it has its own closet). But that really isn't such an enormous catch when you pull up comparable 2-bedroom sales in this Myers Park subdivision. The average of SOLD 2BR comps over the last year was $514,333, with a low sold price of $485,000 and a high of $540,000. This property even features an updated kitchen with ceramic tile flooring and granite countertops, an enclosed heated and air conditioned sunroom and hardwood floors.
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(2)Full Brick Renovated Matthews 2-Story in Quiet Sardis Forest community:
Listing Price: $194,900.00. Renovations done to this full brick 2-story traditional Matthews home include new windows, new tankless hot water heater, new stainless steel appliances and granite in the huge kitchen and updated baths. The home features heavy use of crown molding, a stone fireplace and all wood and tile floors. There is also an expansive deck and storage building and a privacy fence. This tranquil community features a pool, playground and tennis courts. The motivated sellers are offering $2,000 toward the buyer's closing costs.
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(3)Huge 5 Bedroom Full Brick Indian Trail Home Built in 2005:
Reduced Listing Price: $255,000.00. This huge 5/2.5 Indian Trail home is nearly new (built in 2005) and is filled with upgrades, including granite and 42" cabinets, an island and bar seating in the large kitchen, beautiful hardwood floors throughout the main level, tile in all the baths, and a fenced yard with a covered pergola. The community features a pool, tennis courts, clubhouse, recreation area, walking trails and a fish pond. It is assigned to the Sun Valley schools and because it is located in Union County, taxes are lower than Mecklenburg. Tax assessed value: $270,330.
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Of course, one of the main reasons I take the time to publish this blog is to offer to go to work finding you a great deal on your next home or investment. It’s what I do best, and I love what I do. As I have said in every edition of my blog, “solid analysis identifies great opportunities.” I would be more than happy to answer any questions or read any comments you might have. Take advantage of all the tools and resources available on my website, including the ability to SEARCH THOUSANDS OF HOMES FREE: http://edorer.wilkinsonandassociates.com . Or please feel free to contact me.
The next edition of CHARLOTTE REAL ESTATE BEST BUYS, with new information, observations and “best buys” should be published on or before November 1, 2011. Thanks for your interest.
ERIC J. DORER, B.S., J.D.
NC/SC Broker/Realtor
Wilkinson & Associates Real Estate
NAR Certified Short Sales and Foreclosures Resource (SFR)
(980)875-0950
e-mail: ejdorer@gmail.com
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