Are you a first time home buyer wondering how to find deals in today’s housing market? Where do you start? Can you actually get a deal in the 2023 housing market? Where do you find the deals that aren’t on the market (the mls)? What comes with buyer deals off market? In this episode, we discuss the topic of real estate opportunities to help you become The Educated HomeBuyer.

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Connect with me 👇 Jeb Smith (huntington beach Realtor/orange county real estate) DRE 01407449 Coldwell Banker Realty ➡I N S T A G R A M ➳ https://www.instagram.com/jebsmith ➡Y O U T U B E ➳https://www.youtube.com/c/JebSmith

Connect with me 👇 Josh Lewis (Huntington Beach Certified Mortgage Expert) DRE 01209148 Buywise Mortgage M:714-916-5727 E: josh@buywisemortgage.com ➡I N S T A G R A M ➳ https://www.instagram.com/borrowsmartjosh ➡Y O U T U B E ➳https://www.youtube.com/c/buywiseborrowsmart

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👕 – Merch – https://jebsmith.myspreadshop.com/

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For Show Notes, See Below 👇

[00:00:00] Jeb Smith, Huntington Beach California Realtor: Housing affordability continues to be a big problem for many first time home buyers out there because many are priced out of the market because of rising rates, house prices not dropping nearly as much as many out there would have liked coming out of what we just saw over the last couple of years and having conversations with buyers all the time, Josh, people keep asking the question of when are home’s gonna become more affordable? 

[00:00:23] In fact, we addressed that a couple episodes ago and we talked about housing affordability. But usually when somebody’s asking that question, Josh, what they’re really asking is, how do I get a deal on a property? How do I get a property? For less than it’s currently listed.

[00:00:38] So if home prices aren’t going to change dramatically… right? if house prices aren’t going to crash and they’re just going to move sideways for the next couple of years, like you and I think is going to happen with regards to appreciation. You’re not gonna see a big swing up or a big swing down.

[00:00:52] You’re just gonna kind of see some moderate to little growth in, most markets out there. So how do homes become more affordable? If wages aren’t going to change substantially, if interest rates aren’t going to change substantially, house prices stay where they are. How are we able to get a deal in this market?

[00:01:09] we talked about this last season in an episode when we talked about how to find some deals in the market but today we’re gonna take it a little bit further, Josh, and talk not only about the deals in today’s market, where are those deals? Are there deals really? but more importantly, how do you find deals off market, right? 

[00:01:25] You and I, we’re trying to work on an off market deal, but we’ll talk about how that came about, how I came across that deal because it never went to the MLS, why it didn’t go to the MLS, and then just break it down for people out there that are looking for opportunities in this market. How do you create opportunities? That’s really the question. 

[00:01:43] Josh Lewis, California Mortgage Broker: I like it. And that example of that property that you just came across and are representing the seller is a really good example to give people some insight of what that looks like and what a seller that does not want to put their home on the MLS looks like. 

[00:01:55] So, Jeb, let’s first start with listed homes and how you might be able to get a deal with a home that is listed for sale in the multiple listing service. So when we start that conversation, what I like to remind people of is the efficient market hypothesis, efficient market theory. And that basically says that all information has been assimilated by the market and prices of anything reflect that. Now different markets are efficient to different degrees.

[00:02:20] So when I look at this, what is market efficiency? Market efficiency refers to the degree to which market prices reflect all available relevant information. If markets are efficient, then all information is already incorporated into prices. And so there’s no way to beat the market. So what are we talking about today?

[00:02:35] How can you beat the market? How can you buy something for less than what the market would value it? So when we start with the MLS, Jeb, homes listed in the MLS are the most efficient that we can find. You know, 25 years ago, 30 years ago, the multiple listing service published books once a month where you had to go to the realtor’s office and thumb through those books and hope that that information was still in date of the homes that are listed. 

[00:03:00] Jeb Smith, Huntington Beach California Realtor: Call me crazy, but that doesn’t sound efficient. 

[00:03:02] Josh Lewis, California Mortgage Broker: It doesn’t sound efficient. It doesn’t sound fun. Now, today, Jeb, you list a home at eight o’clock in the morning, how long until it’s pinging everyone in Redfin and Zillow that there’s a new listing that meets their criteria?

[00:03:14] Jeb Smith, Huntington Beach California Realtor: 15 minutes. I mean, and not only pinging Redfin and Zillow, but it’s in China. It’s across the globe at that. 

[00:03:22] Josh Lewis, California Mortgage Broker: So that’s pretty efficient, right? 

[00:03:24] Jeb Smith, Huntington Beach California Realtor: Yeah, very efficient. 

[00:03:25] Josh Lewis, California Mortgage Broker: Within a few hours of you talking to a seller and listing a home, putting it in the computer, everyone who might be interested in buying that home has a very simple method of becoming aware of it. Now, are there still inefficiencies in that market?

[00:03:37] I think this is actually a good example. Would you say that, rookie realtor, not super bright, takes a listing and goes there first time with no guidance, no help from a senior agent in their office, and puts that data into the MLS with a terrible description, awful pictures, has incorrect information in there. Would that lead to an inefficiency? Could that home sell for less because it’s not presented. 

[00:04:02] Jeb Smith, Huntington Beach California Realtor: Yeah, and I’ll even one up you, you have agents that are 15, 20 years in the business still doing the exact same thing, using crappy photos, crappy descriptions, leaving things out of the MLS and not doing it on purpose, but creating inefficiencies in those particular listings.

[00:04:20] Josh Lewis, California Mortgage Broker: So it’s an important concept that, can you find deals in the MLS? Yes. Like I can say, when the market was at its low point, 2009, 2010, there were very few buyers and lots of homes available. And lots of these were listed by banks who would give the listings to the lowest bidder. “Oh, you’ll sell this for us for a half percent. Cool. Have it.”

[00:04:39] We were looking for the listings that said it’s the wrong school district, said anything wrong about , a property that would not get other people’s interest. So you can have differences in efficiency, even in the MLS, but for the most part, once it hits the MLS, motivated buyers know everything they can about it.

[00:04:58] So, Jeb, we’ve been talking a lot since the market’s kind of shifted mid last year. Three different layers of the market. Beautiful trophy homes that are HGTV Ready, that are in the best school districts that have ocean views. Those homes are still selling with multiple offers and oftentimes at a premium.

[00:05:19] No inefficiency there. Lots of people want them, the agents that specialize them do a pretty good job of marketing and presenting them. Now we go middle of the bell curve. When we say your average home, it’s not gross. It’s not beat up. It’s just average. Can you get a deal there on those homes? 

[00:05:35] There again, we’ve talked on the show, on the live show this week you went through the numbers. We have a lack of inventory, so even those homes are still getting interest. So in terms of the MLS, for me personally, the only thing that I’m seeing in terms of ability to get a deal is going where the other buyers aren’t, which is to the distressed properties, which can mean any number of things.

[00:05:58] It’s in terrible condition, we’re gonna go through what a stigmatized home is. Any number of things that could decrease market desirability where you can hopefully overcome them so that someday when you go to sell the home, it won’t also be sold at a discount for you, right? 

[00:06:13] Jeb Smith, Huntington Beach California Realtor: Yeah. And it’s also important to note a deal for one person is not a deal for another person. A deal to you, for example, might be I need to get it 10% , under market value for that to be a deal. What I’m considering a deal. 

[00:06:27] Other people are like, “Hey, if I don’t have to overbid on this property, if I don’t have to compete against 10 other people. And that’s a deal, right? Because I’ve been through that market and that isn’t efficient. I didn’t like it. I don’t want to have to do that again. And therefore, if I can just get my offer accepted a little bit under the asking price, then I feel like I’m getting a deal.” 

[00:06:46] So we know that deals mean different things to different people. And  I’ll be honest, a lot of this has to do with how the property’s presented to start with, right? when we’re talking MLS, how the property’s presented to start with, how it’s priced to start with, because we know agents can overprice properties and being in this business for 20 years, I know how buyers think. When a property sits on the market they think one of two things, either the property is overpriced or there’s something wrong with it.

[00:07:13] And neither of those things have to be true in order for that to be accurate, if you will. It could be the property was in escrow, fell out of escrow. Now it’s back on the market and that’s why it’s sitting. There can often be things that happen of why things aren’t necessarily how they’re perceived from a buyer’s perspective.

[00:07:30] Josh Lewis, California Mortgage Broker: Let’s talk about the example, not your specific listing, but when we were trying to arrive at, what could I resell it for, if we made it perfect. We looked at a listing one street over. Beautiful. From the pictures at least. We didn’t actually go inside cuz the house was already sold. But it looked like a very nice flip. They did everything that is desirable to buyers in the current market. And you look at it, it sold for $849,000. 

[00:07:53] There was an another flip two blocks over that sold within a month of that and it sold for $893,000. Same bed and bath. Same square footage, not nearly as nice as the other one. It was also nice renovated, but the one was literally done textbook perfect high-end flip. The one was pretty darn average and it sold for $893,000. 

[00:08:13] Kind of what you’re talking about. Your feeling was one came on low and got bid up and the one that sold for less came on at $900,000. and sat there for three months when the market was going down. And the only thing we can surmise is the seller panicked and said we’re not getting any offers. And when one finally came in, took a much lower offer. 

[00:08:32] So that is absolutely true in terms of where things get priced. You had the numbers on the live show a month or two back. If it’s priced properly, they sell in the current market within 2 to 3% of list price within 30 days.

[00:08:47] And it was a much longer timeframe. It was like 60 to 90 days at a 7 to 10% discount when they were overpriced by even 5%. So it can be a strategy. I have a client right now that he sent me over the listing and said, “Hey, we’re gonna go look at this on Saturday. What do my numbers look like?” And I look at it, I go, “That’s crazy. That price looks right.”

[00:09:08] It’s been on the market for six months, and we dig into it. And there was a problem with one of the sellers, and no one could really see the property. So the price is right for the last six months, no one could get into it. But again, we’re looking at it going, “well, if it’s been on the market for six months, you don’t have to pay that much.” but when you look at all the comps, the comps tell you that is exactly what that home is worth. So there’s a lot that goes into it. 

[00:09:30] Jeb Smith, Huntington Beach California Realtor: And one of the things we’re gonna talk about here in a moment with properties that are on the MLS, and we’ve talked about this before, is properties that sit on the market, people tend to think there’s something wrong with it. That’s the reason that it hasn’t sold. 

[00:09:41] In our office meeting yesterday, we were talking about the pickup in the market. You know, the market after the first of the year, interest rates have come down. The market’s picking back up and properties that have been sitting 60, 90 days, which looks like a very long time compared to where we were a year ago when we were selling homes in 20 days, 10 days, whatever the number was. 

[00:10:02] So when a home sits on the market now for longer than 30 days, people think, oh my God, that thing is overpriced, there’s something wrong with it. And we’re just getting back to the norms of days on market. You know it’s not normal to sell a house on a weekend, right? It does typically take a little bit of time. 

[00:10:15] But with that said, some of these homes have been set in 60, 90 days. Well, guess what happened? Rates came down, these properties got gobbled up. So the problems that had no activity for a number of weeks, all of a sudden now have multiple offers on ’em, and people are going, “Why did that happen?”

[00:10:31] Well, a lot had to do with just pricing becoming a little bit more affordable with that drop in rates. But the key here and that people need to understand is that the market that we’re in at the moment, unfortunately, still has a very, very low supply of homes. I talked about it yesterday when we did the live show. Inventory here in Orange County where we are, Southern California is actually less today than when we started the year which is not normal. 

[00:10:55] So we’ve got inventory going the other direction. So when you’re out there in the market and you’re trying to get a deal on a property that is on the MLS, You need an oversupply of homes, you need less buyer demand so that sellers are more willing to negotiate. Sellers don’t have to negotiate when they have no other competition.

[00:11:15] When there’s no other homes in my tract and I’m the only home there. I know I have something if I have a desirable tract. Even if my homes may be a little bit overpriced, even if my house is a little bit outdated, I have something that people want, therefore I don’t have to come down to your terms. And that’s something that people need to understand even in the environment that we’re in at the moment.

[00:11:37] Yes, we’ve seen an increase of supply year over year. Yes, we’ve seen interest rates go up, but supply is still the biggest factor that is keeping values high. And we’re gonna talk about a couple of things that you can look for on the MLS, but the real opportunities are for the properties that are off market, the homes that aren’t on the market.

[00:11:56] And I think that’s really where we’re gonna be able to guide people in a way that we haven’t really talked about in the past. But let’s talk about you know, somebody’s looking at homes that are on the MLS. What should they be looking for in this market? 

[00:12:08] Josh Lewis, California Mortgage Broker: I would say look at time on the market, but then dig in to say, why? Why? Does it look like they priced it too high? Do all the comps say this should be a $500,000 house and they listed at $575,000? That can tell you that if the seller will get realistic that you have something there. 

[00:12:25] The other things we’re looking at, was it presented poorly? Does it have a terrible description? Does it say that it’s a one bathroom house and you know that that tract, that model has two bathrooms. Lots of people won’t look at a one bathroom house. Are there errors in that listing that are keeping people from looking at it? Are the pictures terrible? Does it list the wrong school district? 

[00:12:47] We talk about school districts a lot. That’s really important to parents. Can I get my kids into the right school in this area that we would be willing to live in? So I would be looking for problems with things that have been on the market for an extended period of time. And you are not gonna reach out to the listing agent directly, but having your agent talk to the listing agent. 

[00:13:06] Tell us a little bit about that, Jeb. If someone calls and asks you, you’ve had something on the market for 90 days and someone starts just picking your brain, trying to get some information, what can and should you divulge and what could a buyer or their agent glean from that conversation?

[00:13:21] Jeb Smith, Huntington Beach California Realtor: You know, I’m smart enough not to give out too much information that would lead to a lower price, just because I understand how negotiation works and a lot of agents do but I try not to divulge anything that’s going to lead a buyer to think that there’s an opportunity for a much lower price.

[00:13:38] I might convey what the sellers conveyed to me and try to keep it, what’s the right word? Try to keep us on the same page with regards to we wanting to sell the property, but not willing to give it away. But an agent can divulge really, I mean, ethically probably not as much as many agents do, you know?

[00:13:54] I mean, let’s work backwards. If I were an agent, if I were a buyer’s agent and I was trying to get information, I think that’s probably the better way to approach this. What would I be asking the agent on the other end? I would try to find out why. Why is the seller selling the house? Right? 

[00:14:07] Are they moving? Is there a divorce situation? A lot of times people will divulge that information. That’s not something I’ll divulge because I understand that that puts my client in a position where you now know that there’s a divorce situation, they probably have to sell this property. Therefore there’s additional motivation. 

[00:14:25] While I won’t divulge that, a lot of agents out there will. They’ll talk about family situations. They’ll talk about information that will lead you to believe that these people are in a position where they have to sell the property. Oftentimes you’ll see agents put something in the agent remarks, motivated seller, seller motivated, whatever that tells you, “Hey, listen, this person needs to sell this property for one reason or another.” 

[00:14:50] You might have somebody say, ” Hey, you know, the property was left to the family, family needs to get rid of it for this reason or whatever.” Right. So you’re getting the motivation of why they’re doing what they’re doing. And that’s really what you as a buyer’s agent want to hear when you’re trying to negotiate a deal on a property. From the agent’s perspective, you should be holding that a little bit tighter to the chest and not giving out too much information, cuz otherwise you’re doing a disservice to your client.

[00:15:14] But that’s really what you’re trying to figure out is how, why does this person have to sell? In addition, have you had any offers? If you have what were they? Why didn’t you accept them? Were you in escrow? Why did it fall out of escrow? Is there something going on with the property? Where do you think we need to be on price? 

[00:15:35] All of these things, I’m trying to ask, right? Because I’m trying to get as much information as possible, and you’d be surprised what agents will tell you on the other side of a transaction, especially if you go into an open house, they’re there by themselves. You just start chatting a little bit. 

[00:15:49] Especially as a buyer, you can find out a lot of information from chatting with people because people, when they have their guard down, they’re willing to divulge a little bit more information. Sometimes you might even be able to catch the seller outside of the property. You’re driving by seller’s outside. You stop and start talking to ’em. ‘Oh, your house is for sale. Why are you selling? Oh, that’s really bad? Me and my wife are going through a divorce or whatever. We wanna move outta state. The house is about to be done. We need to sell the house.” Whatever the reason is. 

[00:16:16] So, without going on and on about this, the agent, your buyer’s agent should be doing a lot of the legwork for you, but you as a buyer can try to do some of this on your own. Walk around the neighborhood, potentially talk to the neighbors. You see somebody outside, ‘oh, your neighbor’s house is for sale. You know why they’re selling, are they going somewhere? Just some things to help put you in a better position if you’re looking to maybe make a lower offer.

[00:16:39] Josh Lewis, California Mortgage Broker: I would just like to underline what you said in, in red there. The seller or their neighbors are far more likely…. most professional agents know what not to divulge to weaken the seller’s position in negotiations, but sellers paradoxically will often just open the kimono and tell you way more than they ever should and their neighbors absolutely will. 

[00:17:01] I would also point out, Jeb, I’ve had the opposite situation where someone shows up and the person’s coming home from work or bringing their groceries in, they’re like, “oh, hey, my agent’s not with me, can I just see your house?” And they irritate a seller and the seller’s like, “Hey, if you see someone looking like this, showing up, wanting to see my house, I am not selling my house to them for various reasons.”

[00:17:21] I’m sure you’ve had the same thing. I’ve had a situation where someone just says, “Hey, no, my, my seller is not going to sell to your buyer, cuz they remember ’em from the open house or they drove by and were a nuisance in any number of things.”

[00:17:33] Jeb Smith, Huntington Beach California Realtor: Absolutely. I mean, again you wanting to get a deal, you’ve gotta be able to present your best foot forward and a lot of times, like you said, you can get it from the seller, you can get it from the neighbors. It’s really easy these days to find out information about people. Um, you know, Facebook, I get somebody contacting me, what’s the first thing I do? Google ’em.

[00:17:51] Okay. Do we have any friends in common? Okay, we do. Who do we know? Blah, blah, blah. Okay. “Hey, so-and-so. I saw that you’re friends with this person on Facebook. Can you gimme any information?” I’m trying to get as much information as possible, especially when, when we were in competitive market situations and I was trying to get my offer accepted it’s like, “who do I know that knows this person that can put me in a better position to get my clients offer accepted cuz we’re competing against whatever?

[00:18:16] But you can do it in any market, you just need to know that seller motivation. And that’s what we talked about. So seller motivation is number one. You know when properties have been sitting on the market, that’s another sign.

[00:18:27] Again, it doesn’t mean that they have to sell, doesn’t mean they have to take a lower offer, but it’s an opportunity for a conversation because chances are, if they have a good agent, their agent is already in their ear saying, “listen, we’re probably overpriced. We need to do a price improvement, we need to get more competitive in the market.”

[00:18:48] And so when an agent or a buyer comes in with an offer that’s less, then that the agent’s probably not surprised because that’s probably what the agent has been thinking the whole time. And it helps the agent, quite frankly. If I’m that agent, it helps me sell my story to the seller. Like, “listen, you know, this offer is less, but we’ve been talking about lowering the price. this seems to be more in line with where we were going to adjust the price to start with.” 

[00:19:14] It opens a conversation. So don’t ever be afraid to submit an offer less than the asking price, but you also need a reason as to why you’re doing that. If everything in the neighborhood is selling super fast and this home just comes on the market and you just feel like it’s overpriced because it’s too much for you, that’s not a good reason to submit a lower priced offer. That just means maybe that’s not the right home.

[00:19:37] But when you have something sitting that gives you an opportunity to maybe come in with that lower price offer. And it’s more likely to happen on homes that have been sitting a little bit longer, like Josh mentioned earlier, homes that need a little bit of work. Those homes that aren’t turnkey, the homes that require some cash once you get into the transaction outside of your down payment.

[00:19:56] The ones where you know you’re gonna have to go in and paint and do the flooring. Maybe it doesn’t need a full remodel, it just needs some love and other buyers aren’t willing to consider it because you know they want the perfect house when they go in.

[00:20:08] Maybe they don’t have the additional cash to do some of these things. If you have that cash, it puts you in a better opportunity to make a little bit more of an aggressive offer. And I think that’s what most people are talking about when they’re talking about getting a deal. 

[00:20:22] Josh Lewis, California Mortgage Broker: So Jeb, for the most part, we’re 20 minutes into this, we talked about what an efficient market is, how the MLS for the most part is efficient. But if that’s the pond you’re fishing in, how can you find a deal in the MLS? Unless you have some more nuggets there you wanna share, let’s transition to where you can find big deals, which is not buying in the multiple listing service and there’s 150 different ways to do it. 

[00:20:45] We’re gonna cover some of the biggest and the best. What I would say, Jeb, the difference, what I was saying before we came on, if I want to buy a new home, I don’t think I’m gonna get a deal on it because for me to be motivated to move, I’m going to move within Huntington Beach, very unlikely to move outside of Huntington Beach.

[00:21:03] There’s about two neighborhoods, maybe three, that I would be willing to move into and there’s a very specific type of home I want in there. So when those come on the market, they’re all in really good school districts. If someone puts it in the MLS, it’s going to sell. And most of the people that live in those neighborhoods, they know what they got.

[00:21:19] So you’re not gonna walk up and knock on the door and say, Hey, have you ever thought about selling? Maybe I’ll give you 500,000 for it. They’re gonna know what it is. Mm-hmm. . So for me, in terms of searching for deals, it’s easier if I’m gonna buy an investment property where I’m not tied to a certain area where I can cast a wider net.

[00:21:34] So what I would say, if you’re a buyer, first time buyer and you’re looking for somewhere to live, the wider your criteria is, the more likely the strategies that we’re going to talk about here are to work. When you get really nichey, really specific about the single school district, a single neighborhood, a single builder, a single model of home in a single tract, it gets much harder to get a deal.

[00:21:56] Jeb Smith, Huntington Beach California Realtor: But on the flip side of that, Josh, what I’ll say is if you’re one of those people and you’re calling me as an agent and you don’t wanna necessarily live and say, Huntington Beach, fountain Valley, Costa Mesa. Like those aren’t your three cities. You’re like, “Hey, I’m willing to live anywhere in Orange County that I can find a house that meets my criteria.”

[00:22:14] Me as an agent, I’m gonna say I’m not your agent. Like I need you to be more specific on what it is you want, where you want to be, because it’s too wide of a net for most agents to want to work with, right? I want you more specific because we might go out to Fullerton and you get out there and you’re like, “Nope, don’t wanna be out here. This is too far from my work, this is too far from whatever. Don’t like the house.” Whatever the reason is. 

[00:22:38] I’d rather you know where you want to be and try to find those opportunities Now, like Josh said, You’re gonna be somewhat limited, especially in a market with low supply. So I think personally finding where you want to be and working backwards is the better way to try to generate some properties that are off market.

[00:22:55] But again, that’s not necessarily always going to equal quote unquote opportunity in your eyes because if you get out to markets where homes aren’t selling quite as quickly as say, orange County and you say, ” I’m willing to go out to Riverside” or wherever. Yeah, you might be able to find a better opportunity out there, but is that really where you want to be if you live in Orange County and your life is in Orange County and your in-laws and your job and everything is in Orange County?

[00:23:22] So I think figuring out where you wanna be, working backwards and then seeing if you can create something in that bubble. And the first way is working with agents that know those markets, right? So if you come to Huntington Beach and you want to be in a specific neighborhood, chances are if there’s no inventory in there, there’s no deals in there. You could start looking around, say, okay, what agents have sold properties in here?

[00:23:46] How many have they sold? And reach out to those agents directly and say, Hey, do you know of any off-market properties? If anything comes to the market, can you keep me in mind? Do you know anybody thinking of selling? I will tell you, there’s a lot of off market transactions that happen in Orange County, in Huntington Beach, in surrounding markets all day long. 

[00:24:04] You’ve just gotta know how to find them. And that’s really what we’re talking about here. It’s finding the agents that come across these deals and them trying to put it together without it ever going to the market because, you know, when it goes to the market, it breeds competition, it brings higher offers, it brings a whole different look to that property.

[00:24:23] So you’re trying to get ’em off market. So you’re finding agents that do business in those areas and trying to drum up some business. Now that can be one of two things, Josh. It can mean a house that’s fully remodeled, that’s picture perfect and the seller is strong on their price. But it also can mean the grandma who’s lived in the property for 50 plus years, the home needs a ton of work and she just needs, x amount out of this deal to be able to make the next move in her life. And yeah, she wants top dollar, but she doesn’t need, to price it super high and get multiple offers in order to make it a deal for her.

[00:24:57] In some cases, they just wanna sell it to a nice family with kids like they raised their kids in that home. So, the first way is to find agents. But second, third, fourth ways Josh, what are we talking about? 

[00:25:07] Josh Lewis, California Mortgage Broker: We’re really talking about do it yourself. More than half of people say, I’m out. I don’t know anything about this. I don’t negotiate. I don’t sell for a living. I am not comfortable doing this, so I need an agent. So either in the MLS or asking an agent who specializes in an area like Jeb said.

[00:25:23] But now we cross the threshold of you thinking like an investor. Most investors in the current market, a highly valued market with low supply. Most investors are not buying out of the multiple listing service or through an agent. They’re going directly to sellers. 

[00:25:37] So how do we get directly to a seller? You have to cast a net and you have to make offers, and you have to be fairly flexible because it’s unlikely that if we pick one square block and talk to every homeowner, that you’ll find one that will sell and then has the home that you would be willing to buy.

[00:25:54] So first, if you have a school district, you want to be in, start knocking doors. If you say, “Hey, I want a single story home in the Marine View School District”, you can walk that neighborhood and skip the ones with the second floor and knock the doors on the other ones. 

[00:26:09] Does it happen often? No, but it does happen. And sometimes, the person that you talk to may not be the one to sell, but they say, “no, we are not, but the neighbors over there, they just retired and they’re moving to Arizona. Maybe you should talk to them.” So it comes down to your comfort level and either knocking doors, which again, in the seventies, door to door sales was pretty common. We had much lower labor force participation among housewives so there was usually someone home. 

[00:26:36] Now, usually both parents, anyone in the household is working so harder to get someone at home. You may wanna do that on the weekends. You may write a letter. So, Jeb, any homeowner has probably seen one of these letters.

[00:26:49] My eyes typically roll because it’s usually, mm-hmm. a realtor fishing for listings. But I’ve also got ones from people saying, I’m looking to buy in your area. And typically, because I know the companies that sell and pitch these products, I can tell that it’s an investor or when it is an investor.

[00:27:04] What advice would you have for someone who is an actual real buyer, who has a narrow neighborhood and they are fishing for off-market properties because they haven’t been able to get anything at a number that they like. What should that letter look like? How would you approach a seller? 

[00:27:19] Jeb Smith, Huntington Beach California Realtor: It should be authentic. It should be transparent. It should give personal details, name, kids, all of that information. Be different than every other letter that they’re receiving. Really good example… Brent, mutual friend of ours, 10 years ago at this point, sent a letter out in Corona Del Mar, really high priced neighborhood here in Orange County, and didn’t get a response until the mother ended up passing away, kids going through the house, cleaning up, they find this letter. 

[00:27:48] They call Brent and they’d say, Hey listen, we’re actually going to sell this property. He goes out, takes a look at it. I’m not sure how the negotiation ended up working out, but he ended up buying this property. Awesome property, huge lot, ocean view. I mean, a really rad property. It needed a lot of work, but he ended up getting a really good deal on this property, being able to fix it up, kept the property for a couple years, ended up selling it and, like a 3 million plus deal when this thing closed.

[00:28:12] But it all came from that initial letter and that letter set for a number of years. Another example, me and my wife in the community we’re living in at the moment, we want a bigger floorplan. There’s only about five houses in our neighborhood that we would consider because of location, because of sun. Just a number of things. We’re very picky with regards to that. 

[00:28:30] And so guess what? We have letters out to these neighbors. One of the neighbors actually talked to us and said, Hey, listen, we’re not going anywhere anytime soon. Probably gonna die here. Now they are old…

[00:28:43] Josh Lewis, California Mortgage Broker: But when we die, you’re my guy! 

[00:28:44] Jeb Smith, Huntington Beach California Realtor: No, but basically like, if we decided to do anything, we’ll give you guys a call. Now that might be next week, it might be two years from now and it might not ever work out, but that started a conversation that we would’ve never had otherwise without sending that letter. So letters can work to your advantage, but you have to be like, our letter was very personal, our names…. And they happened to know who we were, but our kids, their ages, why we wanted to be… what we loved about their house, loved about the location.

[00:29:14] Just really giving up a lot of information to make them feel good about it. And also to let them know that, hey, listen, we value where you live. We want to live where you live, and we want that opportunity if you decide to do it. Um, just kind of give us a first shot. We’re not necessarily looking for a deal, but here’s the thing, while we’re not looking for a deal, chances are we’d end up with a little bit of a deal on that property because it wouldn’t go to the open market, and that open market would create more competition, bringing that value up. 

[00:29:43] Josh Lewis, California Mortgage Broker: Jeb, one last thing that I would add to that, cuz having got, you know, in 20 years in our house, 20 years this year we’ve got three or four of those letters because I have a single story home with a three car garage in a highly desirable school district.

[00:29:56] So there are legitimately people that would like to have our house. For the most part, the letters I get are not from those people. And it, you can clearly tell that it’s an investor. So if you are a first time buyer, tell ’em you’re a first time buyer. I don’t own a home. Or if you are saying, we own over in this tract, which someone knows is a starter home tract and you would like to move up into this tract, let them know that.

[00:30:18] Anything you can to let them know you are truly going to owner occupy. This isn’t an investment. A lot of people get turned off by investors reaching out to them. They feel like it’s a sharp trying to take advantage of them. So just consider that. Now, we’ve talked about the MLS.

[00:30:32] We’ve talked about going directly to people who might be selling homes. Jeb, let’s go through some other things. We talked about mailing directly to owners. In most areas, probates get published. So you can go to the courthouse, find probates, find out if there’s real estate listed, you can reach out directly to those people. That’s a specific type of mailing. 

[00:30:53] You can network. And when I say network, you talked about networking with realtors, you can network with multiple realtors. You can let them know I’m not absolutely signing a buyer’s agreement with one. You know this area, this person seems to know this area. You all know the same areas, but you have a different network of clientele.

[00:31:08] You can network with agents to do that. You can network with investors. Very easy in most areas to find investment clubs. Go to those clubs because oftentimes someone may buy a home. Let’s say, without mentioning numbers, if I bought the house that Jeb just sold at the number that I needed, I could have sold that directly to an end buyer who’s gonna fix it up themselves and live into it for probably $30-40,000 more and just move on.

[00:31:37] And they would be able to fix it up and still end up at a discount to where the market was at. But by not having agents involved, not having to do the rehab, not having to do carrying costs, I probably would be happy to move on with a $25-30,000 profit without four months worth of hard work and effort.

[00:31:53] So, that’s called wholesaling a deal. There are wholesalers where you can get on their lists and potentially things will come up. Jeb, I should have showed this to you, the tract across Springdale from mine. Hope View, it’s a very desirable tract. Single story home came on the market in there and it was probably a hundred thousand under market, so they would’ve happily sold to an end buyer that’s just being on a wholesaler’s list. So these aren’t all undesirable homes.

[00:32:17] So you can get on those lists by going to meetings. Find out who is wholesaling, not just flipping. Sometimes it can be a flip. You know, as a flipper, if you come to me and I have not listed the property and you say, “Hey, I’d like to buy it from you directly, what’s my number?” Well, cool. If I’m selling an $800,000 house, I got $40,000 of commissions in there, at least 30,000. There’s some wiggle room there.

[00:32:38] I would definitely say investment clubs are a good place. You’ll find a lot of people just like you that don’t know anything that want to get into investing, but probably 20% of the people there are serious investors that have inventory, that have products and that you can get stuff from.

[00:32:52] You know, Jeb, this sounds crazy to most people, but a lot of times investors are running online ads, whether it’s Facebook, wherever that is, asking for people wanting a cash offer.

[00:33:02] We’ve seen Open Door, Redfin’s outta the game, Zillow’s outta the game. Open Door’s like the last one left. So people are wanting cash offers. Now a lot of times. Go, go ahead Jeb. 

[00:33:14] Jeb Smith, Huntington Beach California Realtor: No, I mean we’ll buy houses, cash offers, right? If you know somebody that’s looking to sell a home here in Southern California, and they need a cash offer, Josh and I are buyers for those properties. And this isn’t a pitch, I just thought I would mention it. While we’re out there, there’s always people looking for these deals and we’re in that mix. So if you know somebody, keep us in mind. 

[00:33:32] Josh Lewis, California Mortgage Broker: So asking. If you don’t ask the answer’s always no. Facebook ads are relatively cheap. If you don’t want to do it yourself, there are companies that do this, you can buy leads from them. Now, if we’re trying to get a deal and we have limited amount of cash to buy our first home, that may not be the best route to go.

[00:33:48] For an investor, it’s a good route when you say, “Hey, if for $5,000 of marketing spend, I can make $50,000 of profit” you’re gonna bite on that. For a homeowner trying to get $30-50,000 discount, you probably don’t wanna risk spending three, four, $5,000 on leads. But there are companies that billboards, TV ads, Facebook ads, they’re running those ads to make cash offers to people and you can get first crack at them. 

[00:34:12] What I was gonna say is a lot of times those people will not sell at a big enough discount for it to make sense to an investor that has to buy, hold, rehab, and sell with selling costs. Like the house that Jeb had, we ran through the numbers. What he was trying to tell the person is, let me put this in the MLS, it’s not so bad that someone can’t get financing for it and an actual end buyer will pay way more for this. 

[00:34:34] Jeb Smith, Huntington Beach California Realtor: Actually I, I wanna talk about that deal, Josh. I don’t know where you want to go with that, but I actually, I’m gonna talk numbers. Let’s talk numbers on it and give people some real insight here. 

[00:34:42] So, I get a call from an agent outta state. There’s a gentleman that saw her listing in the Arizona market and wanted to buy it. He needed to sell his house here. She reached out to me, says, “Hey, listen, this guy’s got a house he wants to sell. He says that it needs a lot of work, probably needs an investor to buy it”, so on and so forth.

[00:35:00] So it takes me a couple days to get in touch with him and actually get into the property, finally see it, and I walk through and it needs a lot of work. He’s been there a very long time and it needs a lot of upgrading to bring it up to current standards for what people are looking for in most properties.

[00:35:14] Is it livable? A hundred percent. But it’s dated. So I tell him, “Hey, listen, here’s the deal. If this property were fully fixed up, completely remodeled, it’d probably sell around $850k, maybe as high as $900k based on the comps that we’re looking at here. In the current condition. You want to sell it off market.”

[00:35:31] I said, “here’s the problem with an off market sale. We have a smaller pool of buyers. We know that by putting it on the MLS, we’re gonna create demand. And ultimately demand drives price, right? So the more demand we have, the higher price we’re gonna have. When we have less demand, off market sale, we’re gonna have less people interested in this property.

[00:35:49] And quite frankly, the majority of people that are buying off market for the most part, are typically investors. Investors need to get the property at a price where they can fix it up and if they’re looking to flip it, there needs to be room in there to make that additional money.”

[00:36:04] So we talked about numbers and I said, “Hey, listen, if you sold it today, you put it on the open market, chances are you’d get a number north of 700,000. Because what would happen is a buyer that maybe doesn’t have the cash now, or maybe does have the cash and is willing to put in some work, will buy it at a higher price than an investor will.” But then I also said, “Hey, listen, by keeping it off the market, you’re getting less money. Are you okay with that? You understand that?”

[00:36:31] Yes, he understood it, blah, blah, blah. So we didn’t put it on the MLS and I started feeding it out to different investors. Across that spectrum. I had people that wanted to buy this property anywhere between 60% of the ARV, so after repair value of the property, and we said $850k.

[00:36:48] So they wanted to buy it for 60% of that, upwards of 70, maybe 75% is where I got. Ended up selling the property to an investor that’s going to end up doing the work for $675k. That’s what they paid for it, which was quite a bit higher than anybody else was willing to pay. 

[00:37:04] But you know, that seller ended up taking, in my opinion, and I may be wrong, somewhere between 25 and probably $50,000 less for that property than they could have got. So I would consider that a deal, right? That’s a deal for the right person buying that property. Now, is that a deal for the person flipping it? Hard to say. Just because we don’t know what it’s going to end up selling for.

[00:37:27] Is it a deal for the person that wants to stay in the property, do the work themselves, or hire somebody to do the work and create that value add being in the property, Absolutely, right? You could spend what an investor’s gonna spend and have $50,000 of potential built-in equity in that property by buying it.

[00:37:44] Josh Lewis, California Mortgage Broker: Jeb, let’s fill in the gaps on that. You sold it for $675k? 

[00:37:47] Jeb Smith, Huntington Beach California Realtor: Yep. 

[00:37:47] Josh Lewis, California Mortgage Broker: You said you could get 50 more, and to underline that fact, that would be $725k. 

[00:37:52] Jeb Smith, Huntington Beach California Realtor: Yep. 

[00:37:52] Josh Lewis, California Mortgage Broker: If I were doing it, it would’ve been 80,000 to do it. And are there contractors that could do it cheaper? Yeah. You could probably get outta there for $60k. But say you went high end and went $80k, you’re in it for $805k.

[00:38:03] We think this house minimum is $825k and safely probably $845-850k. So when you look at that, as an end buyer, is that a deal? You have a remodeled dialed in home if you’re able to pull that deal off and he gets $50,000 more. So that’s the difference. Are you competing with investors? Yeah, but if you’re an end buyer, you will always be able to outbid an investor and still end up with a property, you know, 10, 12, 15% under market once you’re completely done with it. 

[00:38:34] I did a live a few weeks ago with a couple of VA folks that I work with, and it was a realtor and a lender, and their client did a VA rehabilitation loan. And by being able to go in and buy a distressed property like that and rehab it themselves, they ended up all in at $385k. They bought it for like $300k. They spent 85 grand. They were all in at $385k for what should be a $425-450k home. 

[00:38:57] So no matter where you are in the country, if you can do a 203k rehab loan, one of the Fannie Mae Homestyle renovation loans, a VA renovation loan, you can get to these properties and make them make sense.

[00:39:10] Jeb Smith, Huntington Beach California Realtor: And with that, I mean we could continue to dive down this, and I think we should probably do an additional episode, Josh, on talking about the idea of flipping a property. What it costs to invest in these properties, dollar-wise. How much you actually need to be able to buy one of these properties.

[00:39:23] Cuz if we don’t do that in a separate episode, we’re gonna be pushing this over an hour here with regards to how to make these deals work. But, you know, we’ve talked about everything from trying to find the deals online, what you need to look for in those deals to finding them offline.

[00:39:37] But I, I wanna leave you with that particular property that we just gave you an example on. That’s something that we’re working on right now. This isn’t something that happened two years ago in a crazy market. That’s right now. So that is happening as we speak. And I’m also aware of other properties that are going to be like that in different markets.

[00:39:54] And so what I’m getting at here is, agents are a really good source for you. If you’re somebody that’s got a little bit of cash to be able to buy a property and either live in it, you know, you’ve got enough for your down payment, maybe you don’t have enough to fix it up now and you’re okay living in properties that may need a little work.

[00:40:10] Or maybe you do have the cash and you’re just looking for some value add yourself in a neighborhood that you wanna be in. An agent could be a really good source for you depending on what market you’re in. If you’re here locally, you can find my contact information below. If you need an agent anywhere else in the country there’s also a link that’ll get you connected to one there. 

[00:40:25] But Josh, is there anything we’re leaving out here on opportunities in this market, how to find them? 

[00:40:30] Josh Lewis, California Mortgage Broker: Literally we could go for two hours on this. I know folks that are expert at this and can tell you literally a hundred ways to get discounted properties, but we’ve covered the big ones and hopefully just opened your eyes to the fact that there are ways to get deals and discounts. You’re gonna have to cast a wider net, probably open your search. 

[00:40:49] But I believe firmly that even in the current market, that is still tight with low inventory, if you are focused and dedicated, a 10 to 20% discount to retail values on the market is absolutely doable.

[00:41:02] All right. Well, there you go. So appreciate you joining us. Appreciate you listening. Continuing to support. Until next time, Adios.

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