Here are some rules that I personally follow.  They might not be correct, but they have defintely steered me in the right direction on more than one occasion.

1.  If a house comes onto MLS and is priced aggressively(it is priced well below Full Market Value) you should jump on it with a full price offer.  Over the years when I have seen a new REO listing that is a great deal I don’t hesitate in making a full price offer.  Yes, I would love to get another few thousands off list price but when a deal is a deal don’t hesitate.  I remember one house in particular that was priced very low.  I am a night owl and it didn’t pop onto MLS until about 3:00 AM.  I just happened to be scanning that area and saw this huge price discrepancy.  I instantly wrote up a full price offer with zero contingencies.  At 8:00 I drove over to the house to inspect it.  This was a winner at the list price.  I went directly home and faxed over the offer.  The bank accepted it even though an additional 12 offers came in to the agent after mine.  Just to tell you how good of a deal this was I turned down an offer 50k higher than what I paid in as-is condition.  Once again if it is a smoking deal act right away.

2.  Don’t expect the bank to take 50% less than what they are asking for a house.  I hear stories all the time about the guy making 50 offers a week.  He is truly wasting everyone’s time by doing this.  I make on average maybe 2 offers a month.  Most of my offers are within striking distance of the asking price.  For example.  Let’s say the bank is asking 100k and it has been on the market for 100 days.  The bank is much more flexible in their price now.  If it was a fresh listing you might be able to get the house for 90-95k.  Since it has rested on the market for so long the banks regulations start to loosen a bit.  You might be able to get this house for 75-80k now that it has sat for so long.

When you make an offer your goal is to be in the range that the bank will even consider accepting or countering.  My goal is always to make an offer that allows the bank to at least counter my offer.  I know that if I can start a negotiation I can usually get the I want for the amount I would like to pay.

3.  As mentioned before days on the market is a huge factor in the bank deciding if they will be more aggresive in taking a lower offer.  I use this always in my decision on how I should bid on a house.  If a house is new to the market I will not even consider making an offer 20% off asking price.  I know it is just going to be a waste of time.  Now 10% would probably be an acceptable discount.

4.  So you make an offer and the bank counters at full price.  Should you just give up or try again?  I know a ton of people think when the bank does this they should just walk away as the bank cares nothing about negotiating.  When this happens I always go back with about a 1-3k increase in my offer.  This almost always starts the ball rolling in the direction I want it to.

5.  Never offer the full amount you are willing to pay.  Offer a few thousand dollars lower than what you want to pay for the house.  This will allow you to increase your offer during negotiations and show the buyer that you are very interested in the property and willing to come up in price.  You will often get the house for less than you want to pay by doing this.

6.  Keep out all the contingencies.  Real investors are either paying cash for the house or dropping all contingencies.  I remove all contingencies and offer a huge earnest money deposit.  My current EMD is about 10k and I think it really makes the bank happy seeing you are willing to deposit so much up front cash.  They know when they see this that you are a serious buyer and not going to mess around.  If you are a big baller and have the cash don’t hesitate to offer to put the entire purchase price in the form of an earnest money deposit.  So if you offer them 50k also put the 50k as a EMD.  Banks love seeing this kind of thing and you will often get a huge reduction in price by doing this.

7.  If you have the cash you will get a better deal when dealing with REO’s.  Banks love to see cash offers.  It just makes their lives a 100 times easier.  I have lost out on deals when I offered them a financing contract and the cash buyer offered them less money and was going to pay cash.  I have seen the bank accept $1500 less cash offer than I was willing to pay.  They love cash offers.  The bank will gladly accept a little less cash knowing they will have much less work to do and less risk of the house going back on the market if the financing falls through.

The managers of REO bank owned houses think without emotion.  They can easily remove all emotions since it isn’t their money.  This puts them in a great negotiating standpoint.  If they mess up a negotiation who cares.  They can just sit and sit and have the house on the market a year without any regard.  Keep that in mind the next time you make an offer on a bank owned property.  More than likely the manager of the REO has a certain guideline he must follow when negotiating.  He always knows the % amount he can lower the property and must stay within that range.  Sure he wants to get as much as possible but he will also settle at the bottom of that range.  The manager wants to do the thing that is easiest for him, which is usually not the thing that will yield the bank the greatest return.

Here is my take.

There is only one downside that I can think of.  It is the fact that you have to disclose to the other party of the deal that you have your real estate license.  The though process of the people against having your license say that you might lose out on a deal because the seller thinks you are screwing them since you are more knowledgeable.  While this could on a rare occasion happen I really doubt it does.  Maybe 1% of the time.

There are many upsides to having your real estate license if you want to invest in real estate.  The first one being that you will have access to MLS.  This alone is IMO worth thousands of dollars a year.  I find 90% of my deals on MLS.

Another advantage of having your real estate license is you earn a commission if you purchase a house that is listed on MLS.  I would guess I have made between 50k-100k because I have my real estate license and have represented myself.  Think about how much money that is for a minute.  Do you really want to miss out on that much money?

Then on the sell side you can list your house on MLS and only have to pay the buyer’s agent commission to the agent who brings you a buyer.  Tack on another 100k or so in savings now.

As if that wasn’t enough another advantage is being able to run your own comps.  It is a great feeling when you can research all this information yourself and not have to rely on anyone Else’s GUESS as to the After Repaired Value of a house.  You being the key holder to this information is priceless.

Another awesome advantage is you can go look at any listed property on MLS that you want to.  Imagine not having to wait until your agent is ready, you just go anytime you want. You can get into that REO bank owned house immediately.

As if there isn’t enough advantages already another that I like is I can make my own offers.  I don’t have to hassle with someone else presenting my hundred offers I decide to make this month.  I don’t have the annoyance of an agent taking their sweet time.  I can write the offers up immediately and get them to the listing agent.  I guarantee this has made me over 50k.

I think that is enough advantages to having your real estate license if you want to invest in real estate.  I could probably come up with another half dozen advantages but I think the point has been proven.

So what gave me the bright idea that this would be a good investment.  A few months ago my brother decided to sell his doublewide.  He had owned it for probably 4 years and for the last couple years it just sat there rotting away.  Finally he decided to just let the thing go before it rotted to the ground and at least get some of his money back.  This thing finally sold after a few months on the market.  All we did was put a sign out front and a random person would call every once in a while and it eventually sold.  Some guy with cash bought it and moved it onto his property.

So here I am without a rehab to work on and I am scouring through MLS trying to find my next deal.  I am scanning through property after property when all the sudden I come across a doublewide on about 2 acres.  The price looks very attractive and what I like best about it is I can easily pay cash for it and not be too concerned about tieing my money up.  I believe it was around 20k.  I start thinking all about this trailer and what my exit strategy would be if I purchased it.  I quickly come to the conclusion that I am going to buy a trailer, make the repairs and be into one for around 25k or so.  I am then going to sell this via owner financing for 50-60k.  I will hope for around a 5k down payment and finance the rest for 10 years at 10%.  I won’t break down the math for you but I will say it looks amazing on paper.

The next day I get up and I am ready to head out to this trailer to take a look at it.  The one down side to trailer investing is they all seem to be around 1 hour away from my house.  I don’t mind driving to get a good deal but I can tell this is going to be rather annoying if I am hunting these things down frequently.  I pull up the trailer on MLS and bam it is under contract.  WTF.  This sucks.  So there goes that idea right back to the back burner.

I really believe in this method and I like that I don’t have to tie up too much of my money.  I want to do a trailer deal.  I want to do one even at the expense of not making an amazing deal.  See with something like this no matter how much you research online you really get your education when you make a deal happen.  Everything you have learned up to this point pales in comparison to actually doing a deal.  So I head back to the MLS and start scanning away again at properties.  Ahh here we go here is 2 properties way the heck outta town.  Looks like I have another round trip ahead of me chasing some pie in the sky.  I get out to the first property.  This thing is in the middle of nowhere timbuktoo.  Most cars would have a hard time even making it down the road.  Pot holes all over the place I am wondering if my truck is even gonna make it.  Nothing like rolling down the street in an escalade on 22’s wondering if the next pothole is gonna blow a tire.  YeeeeHAW!.  So I pull up to this place.  I don’t even need to go inside as I know what to expect by the looks of the outside.  This place just needs to be torn down.  I have seen it all when it comes to single family houses.  I have done rehabs that your average person would freak out at.  I have made haunted houses into the best on the block.  This trailer takes the cake though.  I think you would be throwing good money after bad if you did anything other than just tear this P.O.S down.

I head out from this one and realize I am just out in the boondocks.  I am driving down country roads wondering if I am gonna be taken hostage by some country folk never to be seen again.  What if my car breaks down?  This is scary out here with these shanties for houses.  This next trailer is only 12 miles from this one but on these roads you might as well realize it is gonna take 45 minutes to make that trek.  UGH this was a mistake.  Stupid trailer business what am I thinking how do I want to buy one of these.  I finally get out to this trailer and it looks good.  I mean for a trailer it looks great.  Only needs a few minor repairs and this thing is ready to go.  I balk at the price though and figure it is just too far outside of town.  I don’t make an offer.

A couple weeks later I am looking through MLS and I come across another trailer.  Once again this thing is an hour away but it is near a lake that I have had my eye on for a while.  I desperately want a lake property and this is an excuss to go check out this lake.  I have never been to this lake and even though it is under developed currently I think it could be nice.  I head out there and just as I am getting there it is getting dark.  I have to decide do I go look at the lake or find the property.  I know the property doesn’t have utilities on so I must make a decision.  It turns out looking at the property wins.  I don’t get to see the lake.  This trailer I am looking for nowhere to be seen.  Out in the country google maps is not that precise.  It thinks this road is the next road over.  As it turns out the trailer is hidden behind another trailer and I miss it a couple times.  Finally after spending another hour driving in circles I finally find the place.  It is pitch black outside now.  Luckily I have brought a flashlight and take a jaunt around the property.  It is newer and appears to be in good condition.  Other than the annoying dog next door I want this trailer.  I think it would be an excellent initial investment into the world of doublewides.  It blows my brothers trailer away and I am gonna bid just under 13k for it.  Seems like an amazing deal to me.  I put my offer in and it turns out they won’t accept it.  They want 15k or no deal. I am just too scared of making a mistake so I back out.

Looking back I wish I would have went ahead and gone up to 15k.  The property only needed another 5k in work so I would have only had an outlay of 20k.  I feel like I could have sold it for 50k.  It doesn’t take a genious to look at that math and realize it was a great deal.  Just the learning experience…I want that learning experience.

I am pretty confident I will purchase a trailer within the next 3 months.  I just want to see how that business plays out and see what it is all about.  I don’t mind tieing up 20-25k to learn about it.