KBear said:
Like to see the data on homes selling for 60% to 75% of market value. I doubt there would be any. The system for selling homes in the gta is too open and competitive. Also if the home was undervalued by that much, the real estate agent would buy it and flip it, and the home would never see the open market. Shit does happen, but it would be the very rare exception.
Oh how off-base you are.
First - I agree there is a "system" for selling homes in the GTA that is open and competitive. However, the system takes a long time to get anything done and is expensive - find an agent, figure-out a price, list the home, have open houses, clean the home, do a fresh coat of paint, fix the roof, buy a stainless steel fridge, have more open houses, get an offer with lots of conditions, reject the offer, get another offer, spend two days going over it, pay your real estate agent 5% commission and then move-out. Oh, and then you've got legal fees, moving fees, land transfer fees, bridge financing and of course finding another home which takes just as long, etc...
Second, a real estate agent will not just buy it (and most homes like this don't make it to a real estate agent, see below). I work with a few of them who give me offers all the time - I usually get one a week, and I'm just starting as an investor!! They don't buy the house because they don't have the money or credit to do so - many agents don't make a lot of money, and it is very challenging for commissioned sales people to get funding for a second house. Instead, what they prefer to do is build-up a network of investors like me, and when a house comes their way like this, they'll call me before putting it on the open market and give me a chance to buy it - so I do get offers like this from agents outside of the open market. An agent may not want to pay a mortgage on a house for three months, and do renovations to it themselves. If they build an investor network that consists of a dozen people like me, they can sell us houses and make much more in quick commissions than buying the house themselves and doing the work on it.
Now, most sellers are willing to play this game because they've got the time, and money to get into the system. Here's another scenario...
You've lost your job, your spouse suddenly gets an injury at work, you can no longer pay your credit cards, and that family vacation plus your new living room set means your cards are maxed, banks start calling and harassing you, it's the dead of winter and your furnace goes - cost to replace is $4,000, calls from debt collectors increase, the loan you expect to get from your family falls through, credit won't be extended or a home equity line of credit won't come through because you're both unemployed, bank calls and says they're going to foreclose and the Sheriff will be on his way in a week, and once that happens you'll be bankrupt.
Now - how fast are you gong to want to get out of your home, and are you willing to part with it at a rate that will get you out of there to avoid bankruptcy and being evicted by the Sheriff? Are you going to hire a real estate agent and wait two or three months to go into the competitive system, or are you going to consider speaking to an investor who will buy your home for 60% to 75%, give you the money you need to pay off your debts now, take a home off your hands that takes a lot of money to operate (not to mention repairing that $4,000 furnace to get basic heat in the home during February) and start life over again?
Did you know that once a home-owner has a signed offer of purchase and sale, the Sheriff must wait at least 30 days before stepping on to the property again? Say the investor offers to pay legal fees and moving expenses - which is a good thing because you wouldn't know where you'd get the money to pay those anyhow given that you're in debt up to your ass anyhow. Say the investor says there's no need to improve the house, or replace the furnace in the dead of winter - just move out - take what you want, leave what you want. Would you be interested in speaking to someone who could get you out tomorrow if you were that desperate and living in a freezing cold house that you couldn't even repair?
I could give you other scenarios - spouse dies, you inherit a house that costs $2,000 a month just to maintain and have no interest in owning another property, your listing has expired because your agent is ineffective and you need to move, etc...
Now, go on Kijiji and look at all the ads for people who say that they will buy houses now in any condition. Look under the real estate section and then either selling houses or real estate services. That's where desperate people turn, assuming that they still have internet access at home and their cable has not been shut off. Otherwise, they'll use a friend's computer or an internet cafe with their last two dollars in their pocket for an hour's worth of time.
Finally, from an investor's point of view, there aren't tens of thousands of these opportunities waiting to be cherry-picked out of the sky. There are however, a fair bit if you know where to look for them, and all it takes is just one to go through.
