Not all areas are flooded with homes that have recently sold in short sales or by banks. If your area has many of these types of sales, you have a problem. How can you be competitive? In this situation pricing is the biggest concern. The value of your home is then directly connected to the sale and listings of the bank-owned homes and the short sales of the immediate area. How can you compete when the home you’re are trying to sell has equity now, but was bought when the prices were inflated.

Pricing is your greatest tool when combating Short Sales and Foreclosures:

Finding the perfect price for a home surrounded by foreclosures and short sales takes science, emotions, and cold hard facts. You should look at the property from the buyers point of view, as well as the seller’s. You and the buyer need to agree even if you know your home has a higher value. If the buyer doesn’t agree with you, they won’t buy.

You should keep in mind the following three things. How much more is your home worth than the price it needs to sell for right now? How can you make the an appraiser value your home higher. Why should a buyer want your home over a distressed home sale?

Appraisers won’t give allowances for upgrades that you’ve done. You may want to price a home lower, so that even if it needs upgrades, the price is still lower than other options. An almost sure sale will happen if the home has a higher value, even with the repairs. A buyer will not pay more for any home than what they can get a distress home for plus improvements. That is their highest purchase price.

Deciding on your perfect selling price:

You must compare apples to apples, because comparing apples to oranges will not work. Carefully consider all the homes that have sold in a time frame of about three months that are in the general area of your property. The homes that sell should also be in comparable neighborhoods. Location is always a factor. Also, the obvious distinction between size of homes like comparing a one story dwelling to a two story or a duplex is not oranges to oranges. The age of the home will make a difference as well. A good sale price might result in a bidding war.

Making money with a “fix and flip” property is a great way to make money in real estate. But this is more than just planting flowers and repairing drywall. How you do the numbers is what this is about.

People often buy and sell a fixer-upper without a definite plan. Buying a house, fixing it up, then adding about $10,000 or $20,000 onto their costs is what they would do. At this price, they will then put the house up for sale.

Did you ever buy a house according to what the seller has into it? It’s unlikely of course. To determine the value, you should look at similar houses. If what you have is $110,000 into a fix and flip project and similar homes are selling for $105,000, then how much will you get? You may have noticed that it has nothing to do with what you have spent.

The Fix And Flip Formula

Determine the after-repair value of the house you’re looking at. You can look at what similar houses have actually sold for and not ask prices or you can get an appraiser’s help. The price that it is likely to sell for will be your starting point.

Closing fees, loan fees, document prep, homeowner’s insurance, title policy, repair costs, interest on loans, property taxes, sales commission, fees, title policy, etc. are some of the costs you need to calculate. What you want are the projected costs of all four categories namely buying, improving, carrying, and selling. Subtract all costs from the expected sales price.

You can also subtract a profit that makes it worth the effort. You now have the highest price you can pay. Walking away is your option if ever you can’t get it for this price or less. Of course, to give yourself negotiating room, you will offer thousands less.

Fix and Flip – an Example

You’ve found a fixer-upper, and determined you can get $98,000 for it when it’s done. $2,000 will be the buying costs. The repair estimates can equal to about $8,000. About $2,5000 is the amount of the carrying costs. Other closing costs as well as sales commission will be around $8,000. You figure in $1,500 for the “unexpected.” You want a $10,000 profit for your effort.

You have $66,000 when you subtract all of that from your expected sales price. That’s the most you’ll pay if you want a safe real estate investment. Offer $61,000, and walk away if you and the seller can’t settle on something under $66,000.

What you do is that you always start with the eventual sales price and work your way back. This is the right way to safely do a fix and flip.

There are literally thousands of homes for sale listings online which anyone can fall in love at first sight. But beware, a home that looks charming from the outside might have some serious problems inside. Beauty is only skin deep so, here are the warning signs that you have to look out when having a detailed home inspection of a house you wanted to buy.

1. Faulty Electric Wiring – Amateur or do-it-yourself kind of wiring is the most common cause of wiring problems that can result to fires in the future . Dimming lights, hot outlets, blown fuses, no ground fault circuit interrupters in wet locations, tripped or overloaded circuit breakers, ungrounded receptacles, or a home wired before the 1950s are just a few of the signs that you should consider buying another home.

2. Porous grout and cracks – Check that there is no water damage in a home you are interested in buying. Make sure that not even as small as one sixteenth of an inch crack can be seen so as to avoid thousands of damage later if not discovered.

3. Defective Plumbing System – Toilets that don’t flush or drains that chug is one of the signs of a defective plumbing system. If the plumbing system is inadequately vented, you should be asking your Real Estate agent about it.

4. Flawed Heating and Cooling Systems – Make sure that a gas company has checked the gas-fired furnaces. See if it does not emit deadly carbon monoxide to make sure it is safe before you buy or move-in. If it isn’t, the gas company might require the seller for a replacement or just lock it out if considered unsafe.

5. Damaged Roof – In new construction litigation, 80% involves roofing problems. If the roof is damage, check the attic as well to find out if there are roof leaks, pest infestation, faulty electrical wiring, inadequate insulation, and so on.

6. Foundation problems – Make sure that the foundation is not damp or the exterior walls are not too close to the flower beds. As the most important part of the house, You don’t want to spend the rest of your saved money on repairing a home you thought was just right.

When purchasing foreclosures or Short Sales in DC, buyers ought to be especially careful. Wise advice is to make real estate offers contingent on home inspections, and to hire a professional home inspector.