Just a note, the MLS lists that REALTORS typically provide are not nearly as accurate nor do they include any prospect (pre-foreclosure properties) as many of the web services tracking foreclosures. Through personal experience, having access as a California agent to MLS data is extremely valuable but sites like www.foreclosureradar.com can provides even more information and listings.
Ohh Yeah, and I am in no way affiliated with www.foreclosureradar.com. I just find the site extremely useful.
I would also contact any local lender and ask about REO properties they have or for a recommendation of potential lenders that have properties they need to unload.
Yes, include anything you, your agent, or lawyer can think of in the initial contract. My lawyer provided a word .doc that I can alter to add or modify language. This is more to appear professional and avoid the inevitable “what does this say” that typically follows anything I hand write…
From my experience, its always best to have your contract ready and prepared before you meet with the seller. And it’s extremely important to include an exit clause in the contract. There are many resources online where example contracts can be found. I found a local attorney, had him draft a “generic” contract which i then modify for each deal. I think it is important to advise the seller of the wholesale assignment. Typically I let the seller know right off the bat my intentions. Its obviously important to chose your words carefully (explain that you are an investor, but you do not need to go into too much detail beyond that point).
I do this all the time. I have several real estate agents that I work with. I get the offer forms they use and fill them out myself. I will make offers across the board for any property that fits my criteria. I include an inspection clause of course. Once I fill them all out I give them to my agent and he submit the offers to the listing agent via fax or delivery.
These are all cash deals as this is the only way this method works. Get you cash lined up first so you do not have to have a contingency for financing. Also have the closing set very short. This seems to motivate some sellers.
Then you sit back and start to get counter offers of rejections of no response at all. If just depends.
I fill out a promissory note for the earnest money. The note is converted to cash upon acceptance.
Most agents will not let you do this but if you look around you will find one that will work with you.
I get email virtually every day from people who want to know where to find buyers for their wholesale deals. I see countless posts on here of people asking where to find buyers. So I figured I would put together most of the ideas that I have used or have seen used for finding buyers into a single post.
I am sure there are countless other places and ways to find buyers beyond what I am mentioning, so I will leave it up to other people to fill in the blanks that I have missed.
Keep in mind these are ways that I or my clients have actually used, so I know that they work because I have done it.
1. We Buy Houses Signs I call every single one of these signs that I see, I actually keep a note book full of numbers and info that I find out about these companies when I call.
I usually ask them whether they are still buying, what they are looking for, what percentage up FMV they are typically paying, and what areas of town they want to buy in.
While I have them on the phone I also ask them if they wholesale out any of their homes, if they do then I ask them to call me when they have something good. I tell them that if the deal is right I can close in less than 2 weeks with cash.(I can do this because I have other buyers already in place to buy their deals, sometimes these buyers could be other cash for your house buyers)
Here is a sample of a deal that I put together using this.
1. I called a we buy houses sign
2. Found out where they were looking
3. Put a home under contract for $52k in that area
4. Called them and let them know.
5. I signed a 6 month lease option with them for $64k
6. I closed the home.
7. The lease option started
8. He sold the home
9. We close this week, I make about $12,000 (I also made commission when I bought the house, because im a realtor)
10. He makes around $12k.
11. Were all happy.
2. Call realtors I call realtors and find out if they have any cash buyers that are looking to buy some wholesale deals. It varies on what I offer to pay them but typically I offer 10% to 20% of my profit, or a flat 2-3% fee, each time the buyer they have given me buys a home. It creates a win win, I get a buyer and they get paid whenever their buyer buys a home.
I offer the continuous pay because a realtors worst fear is that they give you a buyer and he buys from you, then when they have a good property to show their buyers they cant buy because they have already purchased from you.
If the realtors dont have cash buyers, I tell them that if they bump into any great deals, they should call me and if the deals good enough we can buy with cash and close in less than 2 weeks.( Often times you can use other realtors buyers to buy another realtors house and you can make money setting the two up)
An example of one of my clients deals that he ran this way.
1. I called my client about a great HUD deal
2. He liked the deal and put the home under contract for $115k (I made a $4800 commission on the home when it closed so I was happy)
3. We had 60 days to close the HUD home so he started calling realtors
4. He found a realtor with a cash buyer that was willing to pay $122,000
5. We assigned the contract (this is a secret)
6. We went to closing and his buyer brought $122,000 cashiers check.
7. My buyer left with a check for $7,000 ( he used none of his own money, and I found him the house so he was happy)
8. I left with my $4800 commission
9. The realtor who brought the buyer took no commission but got a commitment from his buyer that he would list the home with him when he sold it.
3. Newspaper ads I dont personally use this one, I have clients who have had great success with it though. They simply place a small classified ad that reads “Looking for buyers to purchase homes at 50-70% of true value”
I have picked up endless buyers with this ad though “Free List of 45 foreclosed/distressed homes” call or visit www.$$$.com. The reason that I have had so much success with this ad is because anyone thinking of buying real estate would much rather get a free list of 45 then have to call each individual ad. You can have a local realtor put together a list of properties for you and email them to you if you cant find your own. Then take the list that they send you and email it out to people that respond to your ad. Keep in mind you dont really care about the list that you send, you care about getting the name, phone number, and buying qualifications of responding buyers.
A real life example.
1. I placed my free list ad
2. I got about 30 responses for the month
3. Found one buyer who has paid me over $75,000 in commisions over the next 3 years on deals I brought him.
These were realtor commissions, but if you can find a buyer who is taking the kind of action he was you could seriously line your pockets wholesaling to him.
4. HUD homes this is my own technique that I started using to get buyers just for my realtor purposes. Watch for a great deal on a HUD home or any great deal for that matter, then park outside for a few hours and talk to the people going to check out the home. Most of the areas investors will find there way to the property and you can give them your card and be sure to get there info. Tell them that you run into alot of deals and ask them if they would like you to give them a call when you run into something decent.
A personal example.
1. I went to look at a good HUD home that I was going to buy myself.
2. The neighbor came over and wanted to see the home while I was there.
3. I showed him the home and he ended up buying it from me.
4. I ended up making $2500 in commission on it.
If I were not a realtor, I would have simply talked to him and found out what he was willing to pay, then wrote up a wholesale contract, then put the home under contract with HUD, then played the spread.
This was my most recent deal, but I have picked up endless buyers for other homes while parked outside of HUD homes. I call it hunting for buyers. Its kind of like deer hunting with a bait pile. The home is the bait pile and the buyers are all coming to eat.
4. Talk to your current buyers buyer typically know other buyers, ask your buyers if they know of anyone else who is buying (let them know you will only call the referal if they are passing on the property). You also might offer to pay your buyer for a referall fee if one of there people end up buying a house from you. This technique also works great if you have a buyer that only wants to buy in a certain area, then you can call their referall if you have a home outside that area.
Personal example.
1. One of my buyers had too many homes and could not buy.
2. I asked him if he knew anyone else who might be interested.
3. He gave me the number to a cousin who was an even bigger investor
4. I ended up selling 3 homes to his cousin this year, and paid him a referal for each one.
5. Local REI meetings If you have a local investor club join it, if you dont then start one. It kind of speaks for itself that this is where many great buyers will be. Just be sure you know a fair bit about what you are doing before talking to very many people about potential deals. The last thing you want to do is burn alot of bridges by showing your new found buyers a bunch of crap.
6. Birddogs for buyers Outside of having bird dogs look for homes for you, you can also have them look for buyers for you. Give them your cards and have them hand them out to people they might meet that are looking to get into real estate investing.
7. Brochure Boxes Just like realtors use brochure boxes you can use them to. If you have a property to move leave a brochure box that talks minimally about the property that it is left at, always be sure to leave out pertitant info like price, sqft, or bed/baths. If you give all the info away then people will never call you about the property. Focus the brochure mainly on other potential deals in the area or say that you are looking for buyers for properties at 50-70% FMV.
8. Out of towner and landlords Many people sell themselves short when they are dialing for dollars. Typically people call or mail out of town owners and other landlords to see if they want to sell. The funny part is if they dont want to sell then there is a chance that they want to buy, so ask them if they arent selling, then would they like to buy some more, or if your mailing then include buying info on your mailer as well.
I gotta go now, the wifes ready for shopping, I will add to the post with some of my other ways but this should be a start. Hopefully the big dogs can come in and fill in the blanks.
You will likely come across dozens of properties in foreclosure with little or no equity, that is, the seller owes at close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a “short pay†or “short sale.â€
Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department.†More than likely, each lender you deal with will have a separate name for this department, so be patient when calling. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins.
From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process – attorney fee’s, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Your job as the investor is to convince the lender that it will fare better by accepting less money now.
The lender will want some information about the property, the borrower and the deal he has made with you. Specifically, the lender wants to know what the property is worth. The lender will generally hire a local real estate broker or appraiser to evaluate the property (called a broker’s price opinion or “BPOâ€). You can also submit your own appraisal or comparable sales information. In addition you will want to offer as much specific negative information about the property as possible. Also, include some relevant information about the neighborhood and the local economy if things are bad (copies of newspaper articles with “bad news†may help). A contract’s bid for repair estimates should also be submitted, which, of course, should be the highest bid you can obtain!
The lender will also ask for financial information about the borrower. Sort of a backwards loan application, the borrower must prove that he is broke and unable to afford the payments. The borrower must show that he has no other source of income or assets to repay the loan. This process may involve as much, if not more paperwork than an original mortgage application! The borrower should submit a “hardship letterâ€, which is basically a sob story about how much financial trouble the borrower is in. This may require a little literary creativity, and some help on your part. Don’t lie, just paint a picture that doesn’t look good.
Finally, the lender generally wants to see a written contract between you and the seller. The lender wants to make sure the seller isn’t walking away with any cash from the deal. Generally, the contract must be written so that the buyer pays all costs associated with the transaction, so that the “net cash†to the seller is the exact amount of the short pay to the lender. A preliminary HUD-1 settlement statement is often requested, which can be difficult, since many title and escrow companies simple won’t prepare one in advance of closing. You can prepare your own HUD-1, and simply write “preliminary†on the top.
Don’t be surprised if your short sale bid is rejected. Lenders aren’t emotionally attached to their properties, so they aren’t as likely to give you “steal.†Many short sales fall through if the BPO comes in too high, which is often the case. You can’t pull the wool over a lender’s eyes – if the property isn’t is need of serious repair, it is unlikely you can convince the lender the property is worth a whole lot less than the appraised value.
Real estate experts agree that the old properties have a lot of potential to give a profitable deal to the investors. Many investors are generally tempted to invest in ready to sell properties or those that are visually appealing. However, old properties that do not require major structural repairs can fetch a handsome price after refurbishment. Minor alterations can significantly boost your property value.
While selecting a particular fixer-upper, you should be able to estimate the rehabbing costs involved in the project in order to enhance its saleability to convert it into a profitable venture. Listed below are some of the major costs that should be taken into account to estimate the rehabbing costs of your fixer uppers:
Acquisition Costs
These include purchase price, any outstanding taxes and origination fees. Most new buyers are surprised with the amount they spend on their fixer-upper in addition to its actual purchase price. It is advisable to ask for a ‘good faith estimate’ while financing your project through a lender.
Good faith estimates provide a clear idea about the costs incurred in purchasing a property. You can also shop around and compare estimates offered by different lenders. Beware of lenders who hide fees from borrowers and reveal it at the last moment before closing the sale.
Repair Costs
Repair costs are almost unavoidable when it comes to purchase of old properties and are an important section of rehabbing costs. Repair costs typically include painting costs, flooring, landscaping, and roof repairs and all such costs required to make the house appealing and restore its functional value.
A good contractor would be able to guide you and give you a rough estimate of the impending repair costs.
Hidden Costs
Inspecting a house is crucial before finalizing it. It gives you an opportunity to look out for any major defects you had failed to see earlier. You can appoint an experienced inspector to do the job. It saves you from other costs that you had least expected. Professional inspection of your fixer-uppers along with structural inspection can cost you about two hundred dollars. Many people incur huge losses, as they fail to conduct title search.
A property with an incomplete set of documents can cost you a great deal. Property documents should include important documents such as a certificate of occupancy to avoid going through the ordeal of obtaining a copy of it. If you are planning to live in the house, you will require a homeowner’s Insurance policy or else a landlord’s policy if you are planning to lease it. Generally, you are required to obtain title insurance while purchasing a property.
In almost all real estate purchases, you will need to obtain title insurance to help protect you against title claims. Your attorney can help you choose the proper coverage.
9 posts found
calfm writes, Jan 26, 2008: (9 posts)
(Topic: Beginners or Bird Dog / Foreclosure Lists? Where to get them, Banks? Online sites??)
NikkiHolmes,
Just a note, the MLS lists that REALTORS typically provide are not nearly as accurate nor do they include any prospect (pre-foreclosure properties) as many of the web services tracking foreclosures. Through personal experience, having access as a California agent to MLS data is extremely valuable but sites like www.foreclosureradar.com can provides even more information and listings.
Ohh Yeah, and I am in no way affiliated with www.foreclosureradar.com. I just find the site extremely useful.
calfm writes, Nov 7, 2007: (9 posts)
(Topic: Beginners or Bird Dog / Foreclosure Lists? Where to get them, Banks? Online sites??)
If you were in california I’d recommend www.foreclosureradar.com
Outside california, I only know of the national sites:
www.propertyshark.com
www.realtytrac.com
www.foreclosure.com
I would also contact any local lender and ask about REO properties they have or for a recommendation of potential lenders that have properties they need to unload.
calfm writes, Oct 12, 2007: (9 posts)
(Topic: Introductions / Florida)
read as much as you can! if you come across a problem, most likely someone else has struggled with the same issue and overcome it
calfm writes, Jul 11, 2007: (9 posts)
(Topic: Wholesaling / Getting Started in Real Estate Investing. Try Wholesaling.)
tdav14,
Yes, include anything you, your agent, or lawyer can think of in the initial contract. My lawyer provided a word .doc that I can alter to add or modify language. This is more to appear professional and avoid the inevitable “what does this say” that typically follows anything I hand write…
Hope this helps.
calfm writes, Jun 25, 2007: (9 posts)
(Topic: Wholesaling / Getting Started in Real Estate Investing. Try Wholesaling.)
tdav14,
From my experience, its always best to have your contract ready and prepared before you meet with the seller. And it’s extremely important to include an exit clause in the contract. There are many resources online where example contracts can be found. I found a local attorney, had him draft a “generic” contract which i then modify for each deal. I think it is important to advise the seller of the wholesale assignment. Typically I let the seller know right off the bat my intentions. Its obviously important to chose your words carefully (explain that you are an investor, but you do not need to go into too much detail beyond that point).
Hope this helps.
calfm writes, Jun 12, 2007: (9 posts)
(Topic: Wholesaling / Properties On MLS)
I do this all the time. I have several real estate agents that I work with. I get the offer forms they use and fill them out myself. I will make offers across the board for any property that fits my criteria. I include an inspection clause of course. Once I fill them all out I give them to my agent and he submit the offers to the listing agent via fax or delivery.
These are all cash deals as this is the only way this method works. Get you cash lined up first so you do not have to have a contingency for financing. Also have the closing set very short. This seems to motivate some sellers.
Then you sit back and start to get counter offers of rejections of no response at all. If just depends.
I fill out a promissory note for the earnest money. The note is converted to cash upon acceptance.
Most agents will not let you do this but if you look around you will find one that will work with you.
I get enough deals this way to keep me busy.
Good Luck.
calfm writes, Jun 12, 2007: (9 posts)
(Topic: Wholesaling / Finding Buyers Lesson)
I get email virtually every day from people who want to know where to find buyers for their wholesale deals. I see countless posts on here of people asking where to find buyers. So I figured I would put together most of the ideas that I have used or have seen used for finding buyers into a single post.
I am sure there are countless other places and ways to find buyers beyond what I am mentioning, so I will leave it up to other people to fill in the blanks that I have missed.
Keep in mind these are ways that I or my clients have actually used, so I know that they work because I have done it.
1. We Buy Houses Signs I call every single one of these signs that I see, I actually keep a note book full of numbers and info that I find out about these companies when I call.
I usually ask them whether they are still buying, what they are looking for, what percentage up FMV they are typically paying, and what areas of town they want to buy in.
While I have them on the phone I also ask them if they wholesale out any of their homes, if they do then I ask them to call me when they have something good. I tell them that if the deal is right I can close in less than 2 weeks with cash.(I can do this because I have other buyers already in place to buy their deals, sometimes these buyers could be other cash for your house buyers)
Here is a sample of a deal that I put together using this.
1. I called a we buy houses sign 2. Found out where they were looking 3. Put a home under contract for $52k in that area 4. Called them and let them know. 5. I signed a 6 month lease option with them for $64k 6. I closed the home. 7. The lease option started 8. He sold the home 9. We close this week, I make about $12,000 (I also made commission when I bought the house, because im a realtor) 10. He makes around $12k. 11. Were all happy.
2. Call realtors I call realtors and find out if they have any cash buyers that are looking to buy some wholesale deals. It varies on what I offer to pay them but typically I offer 10% to 20% of my profit, or a flat 2-3% fee, each time the buyer they have given me buys a home. It creates a win win, I get a buyer and they get paid whenever their buyer buys a home.
I offer the continuous pay because a realtors worst fear is that they give you a buyer and he buys from you, then when they have a good property to show their buyers they cant buy because they have already purchased from you.
If the realtors dont have cash buyers, I tell them that if they bump into any great deals, they should call me and if the deals good enough we can buy with cash and close in less than 2 weeks.( Often times you can use other realtors buyers to buy another realtors house and you can make money setting the two up)
An example of one of my clients deals that he ran this way.
1. I called my client about a great HUD deal 2. He liked the deal and put the home under contract for $115k (I made a $4800 commission on the home when it closed so I was happy) 3. We had 60 days to close the HUD home so he started calling realtors 4. He found a realtor with a cash buyer that was willing to pay $122,000 5. We assigned the contract (this is a secret) 6. We went to closing and his buyer brought $122,000 cashiers check. 7. My buyer left with a check for $7,000 ( he used none of his own money, and I found him the house so he was happy) 8. I left with my $4800 commission 9. The realtor who brought the buyer took no commission but got a commitment from his buyer that he would list the home with him when he sold it.
3. Newspaper ads I dont personally use this one, I have clients who have had great success with it though. They simply place a small classified ad that reads “Looking for buyers to purchase homes at 50-70% of true value”
I have picked up endless buyers with this ad though “Free List of 45 foreclosed/distressed homes” call or visit www.$$$.com. The reason that I have had so much success with this ad is because anyone thinking of buying real estate would much rather get a free list of 45 then have to call each individual ad. You can have a local realtor put together a list of properties for you and email them to you if you cant find your own. Then take the list that they send you and email it out to people that respond to your ad. Keep in mind you dont really care about the list that you send, you care about getting the name, phone number, and buying qualifications of responding buyers.
A real life example. 1. I placed my free list ad 2. I got about 30 responses for the month 3. Found one buyer who has paid me over $75,000 in commisions over the next 3 years on deals I brought him.
These were realtor commissions, but if you can find a buyer who is taking the kind of action he was you could seriously line your pockets wholesaling to him.
4. HUD homes this is my own technique that I started using to get buyers just for my realtor purposes. Watch for a great deal on a HUD home or any great deal for that matter, then park outside for a few hours and talk to the people going to check out the home. Most of the areas investors will find there way to the property and you can give them your card and be sure to get there info. Tell them that you run into alot of deals and ask them if they would like you to give them a call when you run into something decent.
A personal example.
1. I went to look at a good HUD home that I was going to buy myself. 2. The neighbor came over and wanted to see the home while I was there. 3. I showed him the home and he ended up buying it from me. 4. I ended up making $2500 in commission on it.
If I were not a realtor, I would have simply talked to him and found out what he was willing to pay, then wrote up a wholesale contract, then put the home under contract with HUD, then played the spread.
This was my most recent deal, but I have picked up endless buyers for other homes while parked outside of HUD homes. I call it hunting for buyers. Its kind of like deer hunting with a bait pile. The home is the bait pile and the buyers are all coming to eat.
4. Talk to your current buyers buyer typically know other buyers, ask your buyers if they know of anyone else who is buying (let them know you will only call the referal if they are passing on the property). You also might offer to pay your buyer for a referall fee if one of there people end up buying a house from you. This technique also works great if you have a buyer that only wants to buy in a certain area, then you can call their referall if you have a home outside that area.
Personal example.
1. One of my buyers had too many homes and could not buy. 2. I asked him if he knew anyone else who might be interested. 3. He gave me the number to a cousin who was an even bigger investor 4. I ended up selling 3 homes to his cousin this year, and paid him a referal for each one.
5. Local REI meetings If you have a local investor club join it, if you dont then start one. It kind of speaks for itself that this is where many great buyers will be. Just be sure you know a fair bit about what you are doing before talking to very many people about potential deals. The last thing you want to do is burn alot of bridges by showing your new found buyers a bunch of crap.
6. Birddogs for buyers Outside of having bird dogs look for homes for you, you can also have them look for buyers for you. Give them your cards and have them hand them out to people they might meet that are looking to get into real estate investing.
7. Brochure Boxes Just like realtors use brochure boxes you can use them to. If you have a property to move leave a brochure box that talks minimally about the property that it is left at, always be sure to leave out pertitant info like price, sqft, or bed/baths. If you give all the info away then people will never call you about the property. Focus the brochure mainly on other potential deals in the area or say that you are looking for buyers for properties at 50-70% FMV.
8. Out of towner and landlords Many people sell themselves short when they are dialing for dollars. Typically people call or mail out of town owners and other landlords to see if they want to sell. The funny part is if they dont want to sell then there is a chance that they want to buy, so ask them if they arent selling, then would they like to buy some more, or if your mailing then include buying info on your mailer as well.
I gotta go now, the wifes ready for shopping, I will add to the post with some of my other ways but this should be a start. Hopefully the big dogs can come in and fill in the blanks.
calfm writes, May 22, 2007: (9 posts)
(Topic: Other Stuff! / The Basics of “Short–Salesâ€)
You will likely come across dozens of properties in foreclosure with little or no equity, that is, the seller owes at close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a “short pay†or “short sale.â€
Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department.†More than likely, each lender you deal with will have a separate name for this department, so be patient when calling. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins.
From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process – attorney fee’s, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Your job as the investor is to convince the lender that it will fare better by accepting less money now.
The lender will want some information about the property, the borrower and the deal he has made with you. Specifically, the lender wants to know what the property is worth. The lender will generally hire a local real estate broker or appraiser to evaluate the property (called a broker’s price opinion or “BPOâ€). You can also submit your own appraisal or comparable sales information. In addition you will want to offer as much specific negative information about the property as possible. Also, include some relevant information about the neighborhood and the local economy if things are bad (copies of newspaper articles with “bad news†may help). A contract’s bid for repair estimates should also be submitted, which, of course, should be the highest bid you can obtain!
The lender will also ask for financial information about the borrower. Sort of a backwards loan application, the borrower must prove that he is broke and unable to afford the payments. The borrower must show that he has no other source of income or assets to repay the loan. This process may involve as much, if not more paperwork than an original mortgage application! The borrower should submit a “hardship letterâ€, which is basically a sob story about how much financial trouble the borrower is in. This may require a little literary creativity, and some help on your part. Don’t lie, just paint a picture that doesn’t look good.
Finally, the lender generally wants to see a written contract between you and the seller. The lender wants to make sure the seller isn’t walking away with any cash from the deal. Generally, the contract must be written so that the buyer pays all costs associated with the transaction, so that the “net cash†to the seller is the exact amount of the short pay to the lender. A preliminary HUD-1 settlement statement is often requested, which can be difficult, since many title and escrow companies simple won’t prepare one in advance of closing. You can prepare your own HUD-1, and simply write “preliminary†on the top.
Don’t be surprised if your short sale bid is rejected. Lenders aren’t emotionally attached to their properties, so they aren’t as likely to give you “steal.†Many short sales fall through if the BPO comes in too high, which is often the case. You can’t pull the wool over a lender’s eyes – if the property isn’t is need of serious repair, it is unlikely you can convince the lender the property is worth a whole lot less than the appraised value.
calfm writes, May 13, 2007: (9 posts)
(Topic: Rehabbing through Construction / How To Accurately Estimate Your Rehabbing Costs)
Real estate experts agree that the old properties have a lot of potential to give a profitable deal to the investors. Many investors are generally tempted to invest in ready to sell properties or those that are visually appealing. However, old properties that do not require major structural repairs can fetch a handsome price after refurbishment. Minor alterations can significantly boost your property value.
While selecting a particular fixer-upper, you should be able to estimate the rehabbing costs involved in the project in order to enhance its saleability to convert it into a profitable venture. Listed below are some of the major costs that should be taken into account to estimate the rehabbing costs of your fixer uppers:
Acquisition Costs
These include purchase price, any outstanding taxes and origination fees. Most new buyers are surprised with the amount they spend on their fixer-upper in addition to its actual purchase price. It is advisable to ask for a ‘good faith estimate’ while financing your project through a lender.
Good faith estimates provide a clear idea about the costs incurred in purchasing a property. You can also shop around and compare estimates offered by different lenders. Beware of lenders who hide fees from borrowers and reveal it at the last moment before closing the sale.
Repair Costs
Repair costs are almost unavoidable when it comes to purchase of old properties and are an important section of rehabbing costs. Repair costs typically include painting costs, flooring, landscaping, and roof repairs and all such costs required to make the house appealing and restore its functional value.
A good contractor would be able to guide you and give you a rough estimate of the impending repair costs.
Hidden Costs
Inspecting a house is crucial before finalizing it. It gives you an opportunity to look out for any major defects you had failed to see earlier. You can appoint an experienced inspector to do the job. It saves you from other costs that you had least expected. Professional inspection of your fixer-uppers along with structural inspection can cost you about two hundred dollars. Many people incur huge losses, as they fail to conduct title search.
A property with an incomplete set of documents can cost you a great deal. Property documents should include important documents such as a certificate of occupancy to avoid going through the ordeal of obtaining a copy of it. If you are planning to live in the house, you will require a homeowner’s Insurance policy or else a landlord’s policy if you are planning to lease it. Generally, you are required to obtain title insurance while purchasing a property.
In almost all real estate purchases, you will need to obtain title insurance to help protect you against title claims. Your attorney can help you choose the proper coverage.