Would you invest in over-priced area? - Posted by Rob Coats

Posted by mike on April 26, 2001 at 20:01:42:

What is the best way for finding notes and mortages to discount?

Would you invest in over-priced area? - Posted by Rob Coats

Posted by Rob Coats on April 26, 2001 at 11:31:08:

My area is being over-run by silicon valley millionares offering higher-than-asking-prices for vacation homes!
Prices have doubled in last 2 years! RE Agents - 450 of them scrambling to sell last 85 listings! This is crazy!

Would you recommend investing somewhere that is not in a “Buying Frenzy”?

I just can’t imaging finding any “motivated sellers” here when over pricing and “Sold in days” is the norm…

Re: Would you invest in over-priced area? - Posted by No, I feel your pain

Posted by No, I feel your pain on April 26, 2001 at 21:28:02:


Re: Would you invest in over-priced area? - Posted by JPiper

Posted by JPiper on April 26, 2001 at 21:13:51:

One thing to keep in the back of your mind…what is overpriced today can be even more overpriced tomorrow.

But in the case of Silicon Valley and related areas? I doubt it. Scores of these tech companies are down 70-90% from their peaks. Layoffs amongst tech companies are increasing. The easy stock market profits that bought these houses at ever increasing prices are gone.

Given that…I wouldn’t dream of buying anything in a tech related area. You have only to wait. Wait until the late payments drag through the system, the bank decides to foreclose, and the notice of default is filed.

Your market is about to change…it’s only a question of time. When it does there will be many more deals…you’ll just have to know how to work them. And of course, there will be many fewer buyers.


Re: Would you invest in over-priced area? - Posted by LisaK

Posted by LisaK on April 26, 2001 at 16:11:33:

Are there vacant houses with out of state owners who don’t really know the market value? They could be thinking they are making a killing from an offer you give them when in fact it is way below market.

Re: Would you invest in over-priced area? - Posted by RussWhitneyConsultant0914

Posted by RussWhitneyConsultant0914 on April 26, 2001 at 12:44:55:

Hi Rob,

In an area of rapidly appreciating capital values it is often difficult to find undervalued property and motivated sellers. It’s time to shift gears in your approach.

Consider the discount mortgage business. Many sellers in highly appreciated markets will have taken back a second mortgage when they sold the property. These notes are prime candidates for brokerage.

You might also consider the pre-foreclosure market. The recent decline in the stock markets has left many formerly wealthy people in less than wealthy condition.

I’ve recently seen articles in the news about boom to bust property markets in many areas of the U.S. You may find evidence of this coming into your market now or soon. Remember that real estate, for the most part, is cyclical by nature. Boom to bust stories are legion. Part of your career learning curve is to be able to recognize the symptoms and react accordingly.

This has been a very generic post but maybe it will help you get started. Good Luck.

Russ Whitney Real Estate Consulting Dept.
Whitney Education Group, Inc.

Re: Would you invest in over-priced area? - Posted by Ronald * Starr

Posted by Ronald * Starr on April 26, 2001 at 16:59:37:

Rob Coats--------

I agree with both earlier posts. Taking off on LisaK’s remark:

If out of area owners do not know the current market value of their properties, you might get them to sign a contract to sell to you at a price that would make a good profit for you. Unfortunately, when markets get hot, often the real estate agents send mass mailings to property owners bragging about what good prices they are getting their sellers. This could educate the potential sellers. But the cost to solicit the out-of-area owners is very low compared to the potential rewards.

A personal experience: some years back, I and a friend bought a vacant 9.5 acre property at the tax sale in Lassen County, CA–price about $8K as I recall. That is a desert area, with the county seat of Susanville being pretty isolated. In that way sounds like where you are. We waited close to a year before lising with a broker, due to the impossibility of getting title insurance until more than a year after tax deed recordation. The market was slow. No sale after a year at about $18K list price. We didn’t renew the listing. Paid our taxes like good citizens. A while later a real estate agent solicited us by mail to sell the property to a couple she was representing for about $17K, as I recall, with very little down payment. Since this was close to our expired listing price, we were about to jump on the deal.

However, the agent had not provided us with any comps to show that this was a reasonable sales price. I called a broker in the area and he told me he thought the property could sell for about $28K to $35K! Whoa. Naturally, we did not sell to the couple. We were about to list the property at about $36K, when the listing agent said another agent had a possible buyer. Sold the place for about $32K, less commission with a good downpayment. Buyer split it into two parcels, building houses on them, we got our carry-back loan paid off in less than a year, as I recall. There had been a new prison built at Susanville and the added employment drove up demand for houses and building lots.

Not all owners will think to check market value before signing a contract. Give it a shot.

Also, commercial property values tend to rise when residential property values rise, but with a lag. You might consider investing in commercial properties or commercial lots. Or even getting some options. WARNING: options are not for every investor, check things out carefully before spending your money.

Good InvestingRon Starr******