When shopping for real estate, my heart soars when I see a dirty kitchen or smell a grungy carpet. Such houses normally sell at a discount, and it usually doesn't take much to spruce them up.

I also like FSBO properties.  As I'll explain in the Buyers' Agents chapter, it's easy to buy them without going through a buyers' agent and many sellers are willing to drop the sales price by 2-3% if they're spared the expense of paying that commission.  That comes to a $10,000-15,000 savings on a $500,000 house.  

You can get a commission rebate on non-FSBO properties in many states if you do some of the legwork yourself.   But be careful.   The simple act of visiting an open house or model home could jeopardize your ability to get a rebate worth thousands of dollars.  See my buyers' website, CapturetheCommission.com to learn more.

Where to get information about properties for sale

I recommend that you don't visit a real estate office until you've done some research on your own.  A buyer's agent will likely get your name and phone number, give you a map and a printout of available properties in your price range, and offer to show them to you.  But as I explain in the Buyers' Agents chapter, accepting help can cost you thousands of dollars.  I recommend that you first check out some alternative sources of information:

  • Realtor.com
  • Homepages.com 
  • FSBO websites
  • Regional Multiple Listing Service (MLS) sytems.  These often provide more information than Realtor.com.  See my resources section for a directory of MLS websites that the public can search, listed by state.  Some real estate agents offer online access to the local MLS database, but you have to register to access this information.  If you register, expect to get a lot of phone calls.
Since real estate agents are in the business of selling information, they're understandably reluctant to give it away for free.  Fortunately, you can uncover a lot of information yourself by doing research on the Internet and by visiting open houses. 
  • Classified ads in the newspaper.
  • Online classified ad services, like Craigslist.org, backpage.com, livedeal.com, base.google.com, and propsmart.com.
  • Breakfast meetings for real estate agents.  Many local realtor associations arrange weekly breakfast meetings during which agents present their new listings.  They're open to the public, but hardly anyone outside of the real estate business seems to know about them.  Expect to pay $5 or so for coffee and sweet rolls, and then go sit in a quiet corner where you won't attract too much attention.  
  • Drive around.  You can sometimes find FSBO houses just by driving through neighborhoods.  A lot of homes also have open houses on Sunday afternoons--you can often find them just by looking for signs.
  • Craigslist.org.  This is an online classified ad service.
The National Association of Realtors (NAR), which controls Realtor.com, won't allow listings to reveal a FSBO seller's identity to the public.  There's a reason for this.  Knowledgeable buyers who know a property's being sold FSBO will simply cut realtors out of the transaction.  Realtors stand to lose (and buyers to gain) thousands of dollars if they succeed.   

Visiting open houses or model homes

You run a big risk when you visit open houses or model homes that aren't FSBO:  the agent on duty could argue that he or she "showed" you the house and is therefore entitled to all or part of the buyer's agent's commission.  See my website www.CapturetheCommission.com to learn more.

FSBO open houses are usually safe to visit, but sometimes FSBO sellers make the mistake of allowing agents to host their open houses.  If this is the case, leave the open house immediately and call the seller later to schedule a personal showing.  

Watch out for downward-spiraling neighborhoods

As foreclosures have increased, many of the homes on the market in certain states are being sold by banks.  Called "bank-owned" or "REO" (real estate owned), these properties are often priced to sell quickly.

But be careful.  When lenders sell repossessed homes at fire-sale prices, it tends to push down property values.  As a result, more homeowners in that area can become "upside-down" on their loans, and owe more than their properties are worth.  That makes it harder for them to refinance their loans if circumstances change and they can't make their payments.  So more of them can get pushed into foreclosure, which leads to more bank-owned properties in that area, which leads to still lower property values and still more foreclosures. 

You don't want to buy in an area that's in that kind of downward spiral.  Before buying, go to a website like Foreclosures.com to see if there are lots of REO or pre-foreclosures in your target zip code.  If there are, it may be best to wait until prices stabilize before buying.

Good questions to ask sellers

  • Ask if anything's wrong with the house.
  • If the home is in an area prone to natural disasters, ask the seller for a C.L.U.E. (Comprehensive Loss Underwriting Exchange) report for the house.  This lists all insurance claims that have been made on the house for the past five years.  
  • Ask if there are any problems with neighbors.
  • Ask what upgrades or remodeling the sellers have done since they purchased the home.  You'll be able to use that information later to tweak any online appraisals you get of the property (through, say, Zillow or Ditech). 
  • Ask to see utility bills for the past year.

Additional research

  • Sperling's Best Places is a good source of information about crime rates, schools, weather, and so forth.
  • Find out how long the property's been on the market.  If it's an old listing, you may be able to get a good deal.  One way to find this out is to look up the property on a local MLS directory (see my resources section for a list of these), which often gives the date the property was first listed.   Alternatively, you could ask the agent or seller, or look at the MLS listing number on Realtor.com and see how it compares with the numbers of more recent listings.  Be wary, though, since agents sometimes relist properties in order to make them look fresher.
  • Talk to neighbors. 
  • GreatSchools.net ranks school districts in different areas.  
  • In California, visit the Megan's Law website to see if any registered sex offenders live nearby
  • If you're buying land, go to the county planner and discuss zoning restrictions on the parcel. 
  • Call an insurance company to verify that the home is insurable.  
  • If the home is governed by a homeowners association (HOA), ask about monthly fees and CC&Rs.  If you're buying a condo or cooperative unit, ask to see the association's legal and financial documents. 
  • Walkscore.com scores the "walkability" of a neighborhood by seeing how close homes are to stores, restaurants, and public transit.
  • Download parcel maps and other deed information from websites.  In many western states, you can find a treasure trove of information at netronline.com for $3 each.   
Before making an offer on a house, I like to stroll through the neighborhood.  I invariably find one or two neighbors outside doing gardening or unloading groceries.  They almost always give me useful information.

Next topic:  Buyers' agents

ŠLori Alden, 2008.  All rights reserved.