How I bought a foreclosed house

We wrote an offer the next day. I thought the house might sell at full price, but even if that seemed fair, it was more than I could afford. I felt low-balling wouldn't work, so I came up with an amount I could afford that was close enough to the list price to at least draw a counteroffer. Speed, I hoped, would offset any reluctance from the seller to take a lower price.

I offered what I thought was a bit below the seller's break-even point, about 11% less than the asking price. The seller quickly replied, asking us to come up to a price 9% less than the listed amount, and to agree to take the house as is. It was a deal.

Rebound

While in escrow, I got more news about the two houses we'd lost. The red-door house fell out of escrow, then was bought by a flipper. After a remodel and staging, it has been back on the market for more than a month, priced 32% above what the flipper paid.

The second house also saw its deal go awry. The couple from London got caught up in the global financial meltdown in September and October, and the deal fell through.

Their agent asked whether I was still interested, but I had already committed to the third property.

I'm happy with my new house, whether it drops in value or not. But my buying experience, and seeing the outcome with the two other houses, only reinforced my view of the real estate market. When people are saying the market is full of ways to get rich quick, they are probably full of something else.

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peter.hong@latimes.com

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Strategies for buyers

Foreclosed properties are piling up faster than they can be sold, but that doesn't mean buyers can snap up a great house with little effort. Quality properties in good locations now draw multiple offers when priced right. Here are some tips for extracting gems from the rubble.

Know when to lowball

If a home you want has been on the market for several weeks, it is probably overpriced, says Sean O'Toole, chief executive of ForeclosureRadar, an online seller of default data. Banks may be willing to accept a lowball offer on such properties to get them off their books, especially at the end of a quarter. The end of December is an especially good time for buyers, says O'Toole, who has bought and sold more than 150 foreclosed houses.

Be ready to compete