Come winter time, it has hit the real estate market in cold weather areas almost like a pause button. If you’re an active investor, I’m sure you’ve noticed how quickly the retail markets cool off along with the weather.
Now, while this may not affect hot weather areas as much, everyone still has the holidays to deal with. People are more concerned about preparing their home and impressing their family.
Also, most companies take hiring and firing decisions after the new year. So, nobody’s going anywhere, folks!
Why real estate investors can find lucrative deals during the winter
I’m in Cleveland, Ohio. And like many other cold-weather markets, there’s a dead time between Thanksgiving and Christmas—at least on the retail side of things.
Investors are always active. But retail buyers tend to write lower offers during the holidays. So, if you’re interested in doing your first flip or buying your first rental, let’s take advantage of this cyclical downtrend.
My second flip I bought was listed for $110,000. Then $100,000. With a foot of snow on the ground and a wet basement, I offered $48,000. Three weeks later, the seller crawled back to me and agreed to $50,000.
This happens all the time in real estate. List price is just a marketing metric, while the actual number charged by the seller is usually much lower. And there’s no better time than the holidays to splurge on the fixer-upper.
Since there are a lot of sellers in my market, the supply and demand curve is tilted towards deals being taken by buyers. Unfortunately, on the “flip side” inclement weather makes things more difficult for investors. Snow will cover concrete cracks, pitched roofs, bad siding work, drainage issues, and terrible landscaping.
That’s exactly what happened to me. This house had a wet basement and many other problems, plus there was a solid foot of snow on the ground! I took a lot of risk even though I got a good deal.
When I walked onto the driveway, I could barely tell how wide it was because of the curb at the property line. I couldn’t tell where the driveway was broken or where the property line was. I told the listing agent, “Listen, if you want me to buy this property, I’m going to take the risk that the concrete is cracked and have to be completely redone, the city is going to let me redo the garage pad.” Has been, and the driveway curb is too tight for me to fit a small car.
When the snow melted in the spring and I was half done with the project, I was right. I could barely get my Honda Civic into the driveway. And I had to fix a lot of sagging concrete.
The fact that the snow covers up the cryptic defects is what prevents rehabilitators from uncovering some of the issues. This makes us more risk averse, and thus we have the right to offer less money when we are less risk averse in the spring.
We are the ones who may have a wet basement when the snow melts. If everything is very cold outside, we may not notice that moisture gets into the basement when it’s hot outside. We have no idea how wide the driveway is or how bad the roof looks. This is something we have to account for in our budget, whether you know it’s a given or may have to do it.
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How to score great winter real estate deals
Here’s some solid advice for getting better deals under contract this winter, so that they can be fixed in time for spring.
1. Send more offers.
The answer is always MORE. I also hate to use the word lowball, but if you see something intriguing that’s been sitting on the market for 120 days, you have every right to ignore the list price and trade them for something that makes sense to you. Is. The more offers you send, the more interesting conversations you’ll have with sellers and listing agents.
Hey, maybe you didn’t know the house was a probate property, and the siblings are fighting over getting the quick money. You won’t know until you call or make an offer.
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2. Tell sellers why your offer is low.
“Hey, I appreciate your position, but I have to deal with potentially freezing pipes, shutting off utilities, roof leaks, concrete work, garage framing, wet basement.”
Communicate anything that shows you’ve done your due diligence, you’re taking calculated risks, and you know what you’re talking about. Be firm on your offers, and let them know you are flexible.
3. Communicate that you are not trying to offend with your offer.
You’ve already vetted deals, you’ve run down contractors, and you’ve worked out a tight budget. Make it more comprehensive, even if you’ve only driven the property for 10 minutes. If the seller understands that you have at least done your due diligence, they will at least honor your offer, even if they don’t like it.
4. Wait until a winter storm to start looking at properties.
There is nothing that causes a screeching halt in the market quite like a snowstorm. If people can’t actually drive, how can you expect performance?
If you get hit with a foot of snow, wait until the roads are clear, and spend the rest of the day looking at vacant properties. It helps if you already have five to six lined up in the same general area. And it makes life easier especially if you have access to the MLS, and you can get access codes at your convenience.
Sometimes a random offer from out of nowhere during “Arctic Chill” time will take people by surprise.
5. Pay attention to the recent reduction in prices.
Humans almost always reduce the price due to emotion. Sellers lower the price because they need the money, and they need money because of life events such as divorce or medical issues.
On Realtor.com or Zillow, just filter by “newer” or “recently updated.” It filters out new listings as well as price reductions all the way up. You never know the status of the seller, which may give you a leg up on other interested parties… which leads me to my next point.
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6. Ask the listing agent for some references on the seller’s condition.
While they can’t tell everything, listing agents love to talk. If the deal goes through, sometimes agents tell interested buyers more than the seller intended.
I usually say, “Can you tell me something about the seller? How are they?” Then, stay calm and let the agent do the talking.
Simply asking why they are making the sale will not prompt the agent to get into conversational mode. Be nice, crack some jokes, build some rapport, and let them know you’re legit!
7. Do your due diligence.
If you’re concerned about a driveway, roof, or anything covered in snow, do your due diligence. Ask if you can shovel the driveway, get some recent photos of the roof, documents from when the work was done, etc.
Make sure you follow up on anything in the property’s disclosure form that may indicate basement dampness or something that will cost you a lot of money. And always take lots of pictures to refer back to.
Now get out there, bargain yourself under contract, and drive safe!
Do you have any other tips to add regarding buying property in winter?
comment below!
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
