In the wintertime, it’s almost like a pause button’s been hit on the real estate market in cold-weather areas. If you’re an active investor, I’m sure you see how quickly the retail market cools off alongside the weather.
Now, while this may not affect warm-weather areas as much, everyone still has the holidays to deal with. People are more worried about getting their home ready and impressing their family.
Also, most companies make hiring and firing decisions after the new year. So, no one’s going anywhere, folks!
I’m in Cleveland, Ohio. And like a lot of other cold-weather markets, between Thanksgiving and Christmas is a dead time—at least on the retail side of things.
Investors are always active. But retail buyers write less 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 dip.
My second flip I ever 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 sellers 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 a seller will take is usually much less. And there’s no better time to be lowballing fixer-uppers than the holidays.
Since there are so many sellers in my market, the supply and demand curve is skewed toward buyers picking up deals. Unfortunately, on the “flip side,” the inclement weather makes things more difficult for investors. The snow will cover up concrete cracks, patched roofs, bad siding jobs, drainage issues, and awful landscaping.
That’s exactly what happened to me. This house had a wet basement and a slew of other problems, plus there was a solid foot of snow on the ground! I took considerable risk, even though I got a good deal.
When I drove onto the driveway, I could barely tell how wide it was because of the curb in the property line. I couldn’t tell if the driveway was cracked or even where the property line was. I told the listing agent, “Listen, if you want me to buy this property, I’m taking the risk that the concrete is cracked and has to be completely redone, the city is going to make me redo the garage pad, and the driveway curb is too tight for me to fit a small car.”
When the snow melted in the springtime and I was halfway 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 of the matter is snow covers up latent defects that hinder rehabbers from uncovering certain issues. That puts us at more risk, and thus we have the right to offer less money than we would when we’re prone to less risk in the springtime.
We are the ones who might have a wet basement when the snow melts. If everything is freezing cold outside, we might have no idea that moisture comes into the basement when it’s warm out. We have no idea how wide the driveway is or how bad the roof looks. It’s just something we have to account for in our budget, whether you know it’s a given or it might have to be done.
Related: 4 Home Improvement Jobs You Should ALWAYS Hire Out
Here is some tangible advice to get better deals under contract this winter, in order to have them fixed up in time for spring.
The answer is always more. I hate to even use the term lowball, but if you see something intriguing sitting on the market for 120 days, you have every right to ignore list price and hit them with something that makes sense for you. The more offers you send out, the more interesting conversations you’ll have with sellers and listing agents.
Hey, maybe you didn’t know that house was a probate property, and the siblings are arguing over getting money quickly. You won’t know that until you call or even make an offer.
Related: 6 Effective Tips to Ensure Your Offer Gets Accepted
“Hey, I appreciate your situation, but I have to deal with possible freezing pipes, shut off utilities, roof leaks, concrete work, garage framing, wet basements.”
Communicate anything that shows you’ve done your due diligence, you’re taking calculated risk, and you know what you’re talking about. Stand firm in your offers, and let them know you’re flexible.
You already saw the deal, you ran contractors through, and you built a tight budget. Make it seem more comprehensive even if you just walked the property for 10 minutes. If the seller understands you’ve at least done your due diligence, they’ll at least respect your offer, even if they don’t like it.
There’s nothing that causes a screeching halt in the market like a snowstorm. If people literally can’t drive, how can you expect showings to happen?
If you get hit with a foot of snow, wait until the roads clear, and spend an entire day viewing vacant properties. This helps if you already have five to six lined up in the same general area. And it especially makes life easier if you have access to the MLS, and you can get access codes at your convenience.
Sometimes a random offer out of nowhere during “arctic chill” times will hit people by surprise.
Humans almost always reduce price out of emotion. Sellers reduce price because they need money, and they need money because of life events like divorce or medical issues.
On Realtor.com or Zillow, simply filter by “new” or “recently updated.” This filters price reductions to the top, along with new listings. You never know the seller’s situation, which might give you a leg up on other interested parties… which leads me to my next point.
Related: 27 Ways to Find Real Estate Deals
While they might not divulge everything, listing agents like to talk. If it get’s the deal done, sometimes agents even tell interested buyers more than the seller would want them to.
I usually say, “Can you tell me a little bit about the seller? What’s their situation?” Then, be quiet and let the agent talk.
Simply asking why they are selling won’t prime the agent to get into conversation mode. Be nice, crack some jokes, build some rapport, and let them know you’re legit!
If you’re worried about the driveway, the roof, or anything covered up by snow, do your due diligence. Ask if you can shovel the driveway, get some recent pictures of the roof, documentation from when work was done, etc.
Make sure you follow up on anything in the property disclosure form that might indicate basement moisture or something that will cost you a lot of money. And always take a lot of pictures to refer back to.
Now get out there, get yourself a deal under contract, and drive safe!
Do you have any other tips to add with regard to purchasing property in the winter?
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.