So let’s embark on a quest to find the bargain home. What we want is a house that we can purchase for at least ten percent below fair market value, as estimated by a licensed appraiser. And to make it harder, we don’t want just a few. In fact, we want to find broad categories where it is likely that bargains will exist.

In the thirty years that I have been a real estate owner and investor, I have seen literally thousands of homes. And based on my experience, the first place you should start looking for bargain properties is the classified advertisements.

The classified ad section of the local paper has been described as one large disorganized cry for help. It is literally a listing of thousands of individuals who have a need or a desire to sell their house.

Their willingness to sell that piece of real estate for a bargain price may be related to their motivation to sell quickly. Or it may be related to their lack of knowledge as to the real fair market value of the house involved. Either way, this offering can result in a bargain real estate purchase for the savvy buyer, and there are three specific classifications where you should be looking at on a consistent basis:

1. The "For Sale By Owner" advertisements are exactly what they say. This is a collection of individual owners who have decided to take matters into their own hands and market their homes directly to buyers by advertising in the newspaper.

Compared to the cost of a real estate commission, the price of an ad is almost not worth mentioning, and the ad may very well result in numerous prospective buyers who will want to learn more about the house.

It should be noted that many sellers prefer to not deal with real estate professionals. Some may have had a less than satisfactory experience with an agent in the past. Others may have been told to stay away from agents for fear of bad advice. Whatever the reason, it is not surprising to come across a seller who simply refuses to talk to agents at any level.

Couple that fear with a lack of up-to-date knowledge regarding the local real estate market, and you have a condition allowing for the possibility of a home being offered at an incorrect price. If that price is too high, the market will correct it by presenting no offers. But if that price is simply too low, the market will snap it up in a second, removing it from the market and restoring balance to the concept of market value.

Of all the sources for real estate bargains, uninformed sellers who prefer to "go it alone" account for the largest share. All it takes is for a neighborhood to experience a rapid price appreciation, and many owners may have an unrealistically low idea of their home’s true value.

And the first person to offer full price is the likely beneficiary of this lack of knowledge. So the logical course of action is to watch the classifieds on a daily basis and hope for a "For Sale By Owner" that is priced well below market. While this may not occur every day, it does happen with enough frequency to make it worthwhile as a weekly activity for the serious bargain hunter. I recommend the Sunday edition specifically due to its popularity, but every day sees new additions to the classifieds, so a daily vigil would be worthwhile.

There are two additional areas of the classified ads that warrant your attention.

2. The "For Rent" ads in the same newspaper may lead you to an owner who actually would prefer to sell, but doesn’t think anyone would want his home.

Watch for rental ads which linger week after week, indicating that the seller is unable to find a suitable renter. It is a sad fact that many landlords come by their rental houses unhappily, either as a result of divorce, death, or inability to sell as they move to another location.

If you can locate an owner of a problem house who lives in a far away location, you have found a recipe for rental nightmare. The owner doesn’t want to face the problem, especially if he is now living in another city, and might prefer to sell at a reduced price just to be finished with his troubles.

3. Also, look for any classified ad in the real estate section which offers any form of "Lease-Option" or "lease to purchase" opportunity. This can be a bargain for both buyer and seller.

In a typical lease-option, the seller rents to a buyer, and gives the buyer the option to purchase the house at an agreed-upon price, perhaps one to two years into the future.

This benefits the seller in that he gets a tenant who intends to purchase the house, and will theoretically take better care of the property in the meantime. Also, the seller avoids a typical real estate commission, saving himself as much as seven percent of the overall purchase price.

If you can negotiate a favorable price today on a home in a rapidly appreciating neighborhood, your eventual purchase may turn out to be a true bargain in the world of real estate.

Next week: More sources of Bargain Homes