# Million Dollar question



## real_money (Feb 16, 2010)

How do I find a property that is way undervalued? My problem is that I do not trust people (real estate agents) that have a finical motive when giving me advice or trying to sell me something. I am not convinced that they have my best interest at heart. But how else do I find this kind of investment opportunity? 

I do not mind buying through an agent, I just don't trust them.


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## DavidJD (Sep 27, 2009)

You are right - your best interests are not theirs.

As a former realtor I would get calls from time to time from people who were not really looking but if it was a really good deal then maybe I would be interested...I tossed their contact info right away. I recall asking one such person I asked if what they were interested in was a really messy divorce that needed an instant sale or someother situation where the seller was under financial stress and needed to sell? "Exactly!" As if! Why would I call YOU? 

A realtor would buy it themselves (or a relation, excellent client) long before it hit the market and likely for a more fair price - Realtors are regulated and want to avoid any perception of taking advantage of people. Why would I call some jerk?

THe irony is that realtors come across good deals all the time. Think about it. More often than not buyers don't understand that and lose out. People call a realtor when the want to sell or determine the value of their home. If I have a buyer who is looking for that type of home, I'll suggest a 24hr exclusive listing to see if my buyer likes it, if not no big deal, if they do, the buyer gets an exclusive opportunity to acquire a home. If you have a good relationship with a realtor and listen to them, you could find yourself with a great opportunity. Too often the information people rely on is retold anecdotes about how their girlfriend's uncle's neighbour's house sold for $XX under list because _____ and that is how you expect your deal to go through. 

I have fired many buyers in the past and based on your post, I suspect we would have 'agreed not to work together' as well. Also remember you are not paying for the realtor's fee, the vendor is, so that is who the realtor is working for. If you want to reduce your chances of a good deal, don't use a realtor.


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## real_money (Feb 16, 2010)

*Wow, I am on a role* . This is my second post and I have already insulted someone.  

I can not believe that you have "fired many buyers." That is too funny 

I also know that when you find the best deals, and you either buy them yourself or let your friends know. 

I just think that I am entitled to that same information. I want to know how to get this information.

Listen, you need to brighten up and just be happy.

Sorry once again this post was not intended to insult anyone.


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## Cal (Jun 17, 2009)

If you want to know if the listed house is selling you could find more, and perhaps unbiased info by knocking on the neighbours door. 

Or you could only look for POS properties, unfortunately they normally go as is.

So there is definite risk involved.

Do as much homework you can on the RE market in the area that you are looking.


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## DavidJD (Sep 27, 2009)

No worries - good luck.

Some people don't trust doctors and seem satisfied with the remedies they find on their own.


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## stinsont (May 29, 2009)

DavidJD said:


> Also remember you are not paying for the realtor's fee, the vendor is, so that is who the realtor is working for. If you want to reduce your chances of a good deal, don't use a realtor.


Ummm...I would suggest that the buyer is paying the realtor fees. Otherwise the property would be 5% (or what ever the commission is) less than what the seller would normally be asking.


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## OhGreatGuru (May 24, 2009)

real_money said:


> How do I find a property that is way undervalued? .... But how else do I find this kind of investment opportunity?
> 
> I do not mind buying through an agent, I just don't trust them.


You might as well ask, "how do I find a company whose stock is way undervalued, without consulting a financial advisor"; or "how do I find antiques that are way undervalued without consulting appraisers and auction houses". If any of us knew of an easy way, do you think we would be spending our time on this forum instead of relaxing on a nice beach on our private island in the Caribbean? 

Either you become your own expert in what you want to buy or give up your dreams of quick, easy money.


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## OhGreatGuru (May 24, 2009)

I'm feeling unusually generous/snotty this evening, so here's a simple 3-step program for you:

1. Become a Certifed Real Estate Appraiser, so you can determine the proper market value of property:
www.oaaic.on.ca/ 

2. Become a Certifed Home Inspector so you can evaluate the physical condition of property and detect hidden defects.
www.oahi.com/

3. Become a licensed real estate agent so you will learn everything you need to know about searching out and buying real property.
http://www.orea.com/

PS: you might want to study Estimating Construction Costs too, so you can estimate the cost of renovating the undervalued gems you are looking for.


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## Dr_V (Oct 27, 2009)

My understanding is that, when it comes to identifying houses which are trading at cheap prices, realtors in Canada have historically had an unfair advantage compared to the rest of the population insofar as:

(1) they can view homes in advance of when the rest of the public can access them on MLS; and,

(2) they can see historical prices for what homes have sold at, and can therefore craft better propositions.

These two pieces of data are quite sufficient to give anyone a major advantage. (Hopefully, with the competition bureau on top of things, this information will be cheaper & easier for normal people to access, and it will enable normal Canadians to more easily spot under- & over-priced homes on their own. You'll probably note that I'm very much in support of searching for & buying homes without the "help" of a realtor.)

That said, to really get a good feeling for what constitutes under- and over-pricedness, you'll likely need to have a pretty good "feel" for things like location, fit & finish, quality of construction, and so on. There's both a quantitative and qualitative side to this.


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## ghostryder (Apr 5, 2009)

Dr_V said:


> My understanding is that, when it comes to identifying houses which are trading at cheap prices, realtors in Canada have historically had an unfair advantage compared to the rest of the population insofar as:
> 
> (1) they can view homes in advance of when the rest of the public can access them on MLS; and,
> 
> (2) they can see historical prices for what homes have sold at, and can therefore craft better propositions.



3. They list a property for sale, then get a numbered corp from outside the province (which they own) to make a lowball offer. The seller's agent then convinces the seller that that is the best offer, the corp buys the property and then turns around and sells it for way more than the original asking price. Voila! the agent gets his commission and his corp turns a profit.


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## HaroldCrump (Jun 10, 2009)

The type of scenario you describe requires insider knowledge.
One needs to be a RE lawyer, broker, RE agent, etc. in order to come across these types of "deals".
It is not the same as finding undervalued stocks, for example, which can be done almost entirely by sitting in your living room with a computer and Internet connection.
If these are the types of things you are after, then OGG's suggestions are totally valid - become a RE agent, appraiser, broker, etc.
Begin networking with others in the same field and you will come across such things.


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## Berubeland (Sep 6, 2009)

@ DavidJD - Realtor's suck and in Canada are generally overpaid for filling out a simple legal form. The offer of purchase and sale is then looked over by a lawyer. So really you guys are being paid 5% of 90% of all real estate transactions in Canada for being glorified taxi drivers.

And kudos for you for being honest about the crooked buying that you guys do all the time.

@ Dr V you are entirely correct about your statement. The changes that the Competition Board are proposing are not even close to being enough to allow people to have the proper information to make an informed decision on buying a property. The MLS database should be sold to a separate company and anyone should be able to look up this information as long as they want to pay for it. 

Ok real money... this is how you do it. 

First of all the first thing you have to do is scrape some dough together and be ready to move quickly when the deal does show up. 

Second study the online MLS in the area you want to buy in to give you a rough idea of prices. There you will occasionally see deals go by but whenever you see them and call they are invariably already sold but are just hanging around to get people to call. But still a good idea to get a feel for what houses are going for. 

Third get a digital copy of an offer of purchase and sale (you will see how simple it is) in case you get a private sale. 

Fourth be patient as hell. Tell everyone you know you are looking for a deal and are ready to buy... for the right price. 

Here are some buying strategies...

1- look for stinky dirty disgusting houses - Cleaning and painting are cheap as hell but put off a lot of buyers

2 - Look for houses that can be expanded - Double brick houses can support an additional story or two bedroom houses that can easily have an additional bedroom added. 

3 - Look around the area you want to buy in, look for abandoned houses, long grass, snow not removed, boarded up windows etc. Go to your local city hall and find the address and send a letter asking them if they can call you might want to buy their house. Or put a note in the mailbox eventually they may call.

4 - Look for large lots with a house on one side you could sever the lot and sell that. 

5- Put an ad on Craigslist or Kijiji stating what you want people may just want to get out of their house and you can buy it. 

6 - Be aware and OK with the fact that you are looking for a needle in a haystack. The needle is there.... you just need to keep looking. People do this it is not impossible. 

For a deal I also recommend looking in areas that are undervalued. For instance now in the GTA Oshawa is very undervalued. It is the only city including cities farther from Toronto where you can get a house under 100K. Why is this? No good reason I can figure out but it will even out eventually. Look in areas that are beside areas that are gentrifying.


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## real_money (Feb 16, 2010)

I have toyed with getting my real estate licence. I do not mind the six month course. Feel free to correct me if I am wrong. The only think I did not like about it is that you need to work under someone (like Remax) and it cost 10K or so a year just to have that privilege. If I was not intending to sell houses it would not be worth it to me.

What are your thoughts?



Berubeland – Thank you. That is this type of information I am looking for. I have been looking for houses that look dirty but are structurally sound. Can you find these houses in good areas? I do not mind paying a little more so that I do not need to deal with certain types of people. I know that does not mean that the middle class will not try and screw with me.

I will do everything you have suggested.

Did you know that a real estate agent spend on average 13 hours trying to sell your house? 5% of 300K = 15K. which means they make $1153.85 an hour.  nice.


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## Berubeland (Sep 6, 2009)

I too have toyed with getting my real estate license just to get access to the information in a timely manner. It really irritates me that I see the deals after they are sold on the MLS public website. 

I just saw a townhouse in Brampton sell for 70K under what the other properties in the same complex are going for. 

In Oshawa I turn over a townhouse for around $5000 and that includes a new kitchen. 

When you look at the MLS look for anomalies like that and once I saw a detached house listed for the same price as attached houses in the same area. That one had two existing apartments but because of the layout we were able to add a kitchen and make an additional bachelor apartment. So the lady who bought that one made 70K when she sold it two years later plus she collected $24,000 per year in clear profit per year.


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## Berubeland (Sep 6, 2009)

Another hint about rental houses...

To get the best tenants you must be prepared to give good value because that is what the tenants who know how to manage their money want. 

You are best off to be right on the higher end of the bell curve for home rentals. In Toronto houses rent from about 1200 to 1900. 1200 gets you a old crappy place that you do not want your dog to live in. 1900 gets you a place close to the subway in a decent area in very good condition. That is what most of those tenants are looking for. So basically a house that rents for $1600-$1700 is affordable for most decent tenants and will rent fairly easily within a month or so. If you go higher even if the place is worth it your place sits around for months. If you get into the low range your tenants really suck. If you get into an area where your higher rent place is very much in demand it usually doesn't make sense to rent it financially. $2500 per month for 600,000 K place. 

Area doesn't matter as much to most people who are renting. They will not a sizable premium for the area. Not in relation to how much more the house will cost you. 

Single family dwellings rent the best to the best people. Basement apartments are very troublesome because of the low price you get a lot of questionable people. That's all you need is people downstairs smoking pot in your basement apartment stinking up your house and the nice upstairs people complain every time. There is nothing you can do either because pot is quasi-legal now.


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## OptsyEagle (Nov 29, 2009)

real_money said:


> Did you know that a real estate agent spend on average 13 hours trying to sell your house? 5% of 300K = 15K. which means they make $1153.85 an hour.  nice.


I have nothing good or bad to say about real estate agents, buts please, lets do some proper math. First of all, a buying agent usually takes about 1/2 of this. Secondly, real estate agents don't get the pleasure of spending every working hour selling someone's house. I am sure they spend considerable time talking to people who interview them and then give their business to someone else. They spend time, meeting with networking professionals, running down other leads, putting ads in periodicals to drive customer traffic to them. On top of that they have license fees and desk fees and I am sure a slew of other fees. Although you may not want to pay for this, it is a cost of them doing business and it will get passed on to you, whether you like it or not.

My main point is that at the end of many real estate agents, 50 hour weeks, I doubt they can add up sales commissions of 50 x $1,153.85. I would bet over half of them won't make $40,000 this entire year.

In the end it is a simple question. Is it worth 5% of the value of your house to use their services? Yes or no. Calculating how much money they make and if they deserve it, is not relevant.


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## DavidJD (Sep 27, 2009)

stinsont said:


> Ummm...I would suggest that the buyer is paying the realtor fees. Otherwise the property would be 5% (or what ever the commission is) less than what the seller would normally be asking.


Everyone is confused about this. yeah yeah the vendor cannot pay the realtor's fee unless the buyer buys the home with their money. So the buyer is also paying the vendor's mortgage payout fee, legal fees, land transfer fees...whatever.

The fiduciary obligation is between the vendor and broker...fee for service, the buyer is just protected by the regulations of the industry (disclosure, etc) so anyone can argue who actually pays - the important part is WHO is benefitting from the service.

The buyer has every right to buy a property where the vendor chooses not to engage the services of a Realtor. In every case that vendor considers their home worth an equal amount to a comparable property WITH brokerage fees included (value is the same - so I will keep the 5% fee from the value of my home). Naturally the purchaser considers that with the absence of a realtor (and any added value, real or unreal) - they should not pay the higher price (which should be comparable market includes realtor fees). So it goes...the vendor and the purchaser both trying to save the same 5%. 

No one can say what that property would have sold for WITH a realtor and thousands of realtors TRYING to sell it, rather than them all TRYING to AVOID selling it. Less exposure cannot improve the odds of a vendor getting top dollar. Also qualified buyers who are READY to buy usually have hooked up with a realtor, who gets paid if they purchase a home listed on the market. 

FSBOs or For Sale By Owner is the way to avoid real estate services and fees. In my experience when buyers purchased one of these FSBOs they would often call me with all kinds of problems - my garage is on my neighbours property, the vendor lied about this or that - what can I do?? That has nothing to do with a Realtor and Errors and Ommissions Insurance etc. Caveat emptor. There are tons of examples where if a Realtor had been involved the issue would have been avoided or there would be recourse afterwards. Often FSBOs are mareketed by the owner because no realtor wants to touch it. The vendor may be unreasonable about price or the home is a lemon. 

This thread sure points to the lack of understanding of the real estate industry.


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## Berubeland (Sep 6, 2009)

*This thread sure points to the lack of understanding of the real estate industry.*

Just because we don't all drink the kool-aid does not mean we don't understand.

*My garage is on the neighbour's property *- Isn't that the surveyor's job? 

*The vendor lied about this or that* - I guess the vendor wouldn't lie to the real estate agent because of your miraculous truth detecting powers. The real estate agent would never lie or misrepresent a property to sell it with thousands of $$$ at stake I guess. Those same miraculous powers would be very handy when the buyer's agent meets the potential buyer at the property for the first time. I guess it would give that agent insight into the seller's psyche even thought they have never met. 



*Often FSBOs are marketed by the owner because no realtor wants to touch it 
*
Yeah I've met a lot of realtors that will turn down a listing...and they would never over-price a property or sell a house that's a lemon. 

*In the end it is a simple question. Is it worth 5% of the value of your house to use their services? Yes or no. *

Let's put this kind of money in perspective. The average home in Toronto sold for $464,212 x 5% = $ 23210.60

The average family income is $75,000. So if you get a realtor to sell your home you will pay 31% of your entire families living wage for the year for their service. I'm not even getting into the difference taxation makes on this figure. 

Is that too expensive? I think you know what side i'm on. 

Oh and you know what the most irritating thing is about selling your house privately? All the realtors who call you.


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## DavidJD (Sep 27, 2009)

Berubeland said:


> @ DavidJD - Realtor's suck and in Canada are generally overpaid for filling out a simple legal form. The offer of purchase and sale is then looked over by a lawyer. So really you guys are being paid 5% of 90% of all real estate transactions in Canada for being glorified taxi drivers.
> 
> And kudos for you for being honest about the crooked buying that you guys do all the time.


This comment is rather insulting and adding your personal jab as if it were my actual statement is what I would call crooked.

What really concerns me is the rental industry is how irresponsible landlords and their property managers can be. How they always take advantage of tenants. How hard is it to deposit a cheque?


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