Buyers in today’s housing market are getting the sense that we are at the bottom of the Real Estate sludge and there is nothing but good deals when making an offer on an REO or Short Sale property. Although there are a lot of houses that are currently below market values, buyers should not get caught up in yet another Real Estate frenzy and buy a home just because it is currently undervalued. The way buyers purchased home in the past were largely due to speculation and many buyers made money due to fast appreciation rates.

Today, buyers are purchasing homes that are currently under market value. The problem that could come up in the future is how much more the housing prices will continue to drop.
A home purchase of 250K and a current market value of 300K sounds great. But as home values continue to decline in 2010, there is a 50K buffer before your home purchase begins losing it’s equity. So how do you deal with this?

Buying a home in today’s housing market should use the same fundamentals used to purchase any high valued investment. Look at the area your are buying in to understand the likelihood of appreciation. For example, purchasing a home in an area where 90% of the community could not afford a home if it were not for stated income loan programs and most of the community are renters. If there are no underlying factors such as high ranking schools or new development plans for the community, you could figure the appreciation rates for an area described above to be a bit slow, but a good investment for rental property.

Also, for any properties in distress, be sure to have it properly inspected for any underlying damages. It is common for homeowners to destroy or defer maintenance to a property they could not afford to pay the mortgage.

The point to be made here is that when purchasing any property in today’s housing market, make sure that you are buying as a long term investment and that your analysis is more than just speculative. Getting a low price doesn’t always mean getting the best deal. Purchase using true real estate fundamentals. Look at how much you would have to spend on the property to get it up to market value. Be realistic with how much rent the house can demand. Make sure you have the best financing terms in place that fits your investment needs. For example, if the rent can cover the mortgage payment on a 15 year fixed mortgage, you may want to consider this to pay off the home faster, but you should also consider going for a 30 year fixed mortgage with lower monthly payments and stash a little aside for future maintenance.

If you are looking to purhcase a property via a short sale, here are some things to consider.

Challenges of Purchasing a Short Sale

* Long wait to get approval from the bank
* Sellers have no negotiating control
* Financing must be done quickly if approval is given
* If there are multiple offers, usually the highest offer is submitted. Having the best financing terms may not help much (i.e. all cash offer)

Value of a Short Sale Property

* Ability to purchase below current market price
* Option to purchase the home before becoming an REO, in which it may not become a listed property
* Short Sale transactions typically would have less competition than if it were an REO Transaction

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WHB Solutions is Real Estate Services Organization that helps educate hundreds of Real Estate Agents and Investors better understand how to monetize short sale opportunities in today’s ailing housing market.

If you would like more information on WHB Solutions Short Sale Education Products or Services, visit us at www.whbsolutions.com.

Disclaimer: WHB Solutions is a Real Estate Services Organization. WHB Solutions does not engage in Realtor, Mortgage Broker, Attorney, Tax Advisory, or other professional advice. If you need advice in these areas, please make an appointment with a licensed professional.