The Expert Podcast

In this tight real estate market, there's actually a very good strategy for buyers to find a deal on a house, even when there's bidding wars on other similar houses. And this is a strategy called leftover properties. There are many houses for sale that should be sold immediately for a high price, but they're being overlooked by buyers for one of a few reasons that really are not deal breakers. There's something that is an error on the part of a seller or a realtor. We're going to take a look at how you can find these hidden secrets in the leftover property category.

Give you a couple examples of homes we've seen recently that fit this category. We looked at a property just last week that was listed in the MLS as off-grid. And off-grid normally means it's not connected to electrical or plumbing or water. And the property was very rural. It was out in the middle of nowhere, it was on 14 acres, and it was kind of a dilapidated house. Had an old barn next to it, and it mentioned even in the listing it said off-grid and it said that the well connection is under repair.

So those are two things that would lead a potential buyer to think this is a house that's not connected to utilities, doesn't have electricity. But in looking at the photos, you could see that there were electrical devices in the house. There were outlets, there were lights, there was even an air conditioner unit. So there was many things about the property that were of interest. So I emailed a realtor that we deal with in the area and asked them, well what is the source of electricity? Is it on solar, is it on wind, is it a generator?

And so the realtor contacted the listing broker and said, no it's got electricity. Well, the reason it had said off-grid was to use kind of a marketing phrase that indicated that the house was rural, it was away from neighbors. It wasn't really off the grid, it was just remote. Here's a house that had been on the market for a hundred and something days in an area where houses are selling in, you know, 24 hours. House was priced well. Condition of the house was a little bit less than ideal, and we'll talk about that momentarily, but it was not off-grid. How many buyers do you think avoided that listing because it said off-grid? That's what you want to look for.

Second example of a property is one which has a physical condition which is turning off buyers. Many years ago, I was looking at properties—this happened to be in Florida. It was a neighborhood where the houses were almost identical. It was one of those subdivisions where houses had been built in the '90s, almost identical to one another, a few minor differences. And at the time, these houses were selling for in the 170–180 range. These houses are now almost 500 grand.

And I looked at a couple of them—165, 172, 185—and there was a house that was for sale for 129. Couldn't figure it out. I looked at it, nothing wrong with it on the pictures. I went to view the house, and I realized what the problem was. The carpet in this house was shag carpet from the '80s. It had not been replaced in probably 20 years. People had pets and dogs and it was caked with grime, almost, where it was matted down. And the edges of the walls had kind of like grime and splattered grease and things on the wall.

The house looked terrible. There was an outdated kitchen and some other outdated appliances, but the houses that were 160, 170, 180 all had outdated appliances. What they didn't have, though, was this grimy floor. Buyers could not imagine even stepping foot into this house. In reality, the fix was a few grand for carpet and some paint on the walls. It was what a lot of people refer to as curb appeal. People probably had looked at this house and decided against it because of this one feature that kind of looked like it was a deal breaker. Kind of made the whole house—everything about the house—was defined by this carpet and this floor.

And having seen that this house was on the market back in this era—it was in the 2000 era—for 160, 180 days, offered less and ended up with a house for about 120 that needed $3,000 worth of carpet and paint and was the same value as the 170 house. Here's another example of what's called a leftover house.

There are many listings that have errors in the listings. For example, some listings will list a number of bedrooms incorrectly. So if you're looking for a three-bedroom and you have your filters on your search—three bedrooms or more—if a house comes up with two bedrooms, it won't show. There are some houses that people put zero bathrooms. Well, a house can't have no bathrooms; it has to have a bathroom to be legal. But sometimes people will type it in wrong. Sometimes people type in the square footage incorrectly. Instead of putting in 1,400 square feet, they'll put in 140 square feet. There’s typos.

So look for properties that have one or more of these errors. How do you find them? Well, the first thing is take all your filters off of your listings. Even if you're not looking for a condo or a townhouse, include that in your search. Because sometimes a single-family house is improperly listed as a townhouse or multifamily. Make sure that you're not eliminating properties that are typed in error by the realtor.

You might say, well, I could tell from the photos that it's a condo. Well maybe you can, but here's the thing: there are some examples where photos are sometimes uploaded improperly—of the wrong house. We've seen where a single-family house has been listed as a multi-family, and the picture is kind of hard to tell which one it is, and buyers won't look at it. It is going to take some extra work of spending a few minutes of time looking at more listings than maybe you intended to.

But in this market, is it worth spending an extra hour worth of scrutinizing listings versus missing out on a house that everybody else is missing out on? Now it eliminates your bidding war.

Another method you can use to find houses which are leftovers is to invest in an app that will give you some housing information. One of the ones we use is called LandGlide. And LandGlide is an app you put on your phone—and we're not paid by them, we don't have any relationship with them—we just use it all the time, where you can be driving around. It has a map on your phone, and you can look at all the properties, show who the owner is, the appraisal amount, assessor's amount, what it sold for, and you can use that along with listings on MLS to discover properties that maybe are multiple parcels.

One of the properties we purchased recently was a house and on a double lot. Well, at one point, the seller was trying to sell that other lot separately and sell the house by itself. But after it was overpriced for a long time, they eventually decided, well we just got to sell this house. And the fact that it was an extra lot had been forgotten. Because at that point, the seller just said, I'm just selling the whole thing together. Well, this extra lot with the combination priced properly now was an extra value.

In fact, the property was purchased, and the extra lot was split off and sold separately. And the value made the purchase of the home much cheaper because this extra lot was a separate legal parcel. And you can find that out by looking at land records, certainly, but these apps like LandGlide and those others make it much easier to see that visually.

What about properties that have no inspection allowed or waived inspection or waived appraisals? That scares off a lot of buyers—may scare you off—but here's the thing. There's a way that you can still do an inspection on a property even if the inspection period is waived. There's no rule that says on a showing you can't do a limited inspection.

For example, if you look at a house and you think you want to buy it or pursue it, but you're concerned about serious structural deficiencies, schedule a second showing. Maybe you put in an offer and you get an offer accepted. You can schedule a second showing, and at that showing bring along with you a general contractor. It doesn't even have to be a home inspector—a general contractor that can look at things quickly as part of a showing. Peek in the attic, look in the basement, look in the crawl space, check out the electrical.

Most of the things that would be deal breakers for you for an inspection—high dollar, high value repairs—a good general contractor can observe. Even if you pay them a few hundred bucks to spend an hour with you at a showing, as an interested party in the showing, they can see some of the things that would maybe be 90% of what would be discovered in an inspection. You know, if the roof is peeling, if there's water stains, if the attic has damage, if the crawl space has cracks in foundations—they can find a lot of things: arcing in outlets.

So you can do kind of a sneaky inspection by making it part of a showing. Just drag your feet on the show and make the showing take long and have the other person tag along as kind of like a third baseman taking a look at things that are important. And then make any conversations about that separate. Don't have them point things out while you're doing the showing, but have them just observe things, remember things, and then after you leave they can tell you about what they saw.

But that's a way that you can maybe locate a leftover property that other people aren't looking at because they just don't want to waive the inspection. You can sneak in an inspection if you present it as just a showing that you're looking at the house again or for the first time.

Remember, electronic listings like Zillow and some of the other Redfin-type sites can make it easier to find houses, but it can also make it easier to exclude houses if you have your filters set too high. Don't set your bedrooms, your square footage, your acreage, house type at all. Leave it wide open. And then go through the properties to see if there's one that got categorized incorrectly.

Even if you see a property that looks like it might not fit your needs because of maybe number of bedrooms or square footage, still look at it. You might find a way to make that work with an addition. Maybe there's a screen porch that could be made into a den.

Leftover properties are ones that most people just filter out because they're unsophisticated about what can be done with the property. They're only looking at what can't be done with a property, and it makes them avoid houses that could be perfectly good for their needs.