Foreclosures and short sales should not be looked as a comp, but in a foreclosure driven market they will determin the selling area values. That is why when a lender requests a BPO they always say they do not want other REO properties used as comps. In part because they don’t want to face the reality that they are going to lose money when the property does get sold. For some odd reason the lenders think their properties are worth just as much as a non-foreclosures including all the damage and neglect that comes with a foreclosure. With this in turn it also hurts the sellers of non-foreclosure properties by driving down the values. Non-foreclosure propeties end up sitting on the market a lot longer and buyers are looking at the cheaper homes which happen to be the foreclosures. Most buyers now can get an FHA 203k loan that well get them into the house and have the additional money to do any repairs and still come out cheaper than if they bought the non-foreclsure home. It is my opinion that a foreclosure should not be used as a comp, but they do affect area values in a foreclosure driven area. Several BPO requesting lenders are now allowing REOs as comps as long as one comp in the listing and selling is not a foreclosure.
Well if you are trying to do a short sale, you better have a signed “Release of Information” from the homeowners or loss mitigation won’t even talk to you. Next you better have some sort of CMA or BPO to show what the value is. You want pictures to be able to fax or email to loss mitigation with your Short Sale packet. Of course take the worst pictures of the property. When you talk with the loss mitigation dept. find out what they require. Most have a Short Sale packet they use and will fax or email it to you. And get names and phone numbers of everyone you talk with. Make sure you can show them how you intend to finance the purchase. Most will not accept a pre-qual letter from some lender. You must be able to show them that you have the funds or the funding available. Once you have sent over your packet with the offer, be prepaired to make many phone calls. Daily. You almost never talk to the same person. And the person you are suppose to talk with is never there so you just get voice mail many times. Whatever your offer is for the property, make it a low offer and back it up with the CMA or BPO and pictures. They will request a BPO from a realtor. You need to be prepaired to stand behind your value of the property compaired to the realtors BPO. Many of the realtors don’t know how to do a good BPO or are in some way pressured or influenced to give higher values to a property. It is a long proccess, but if you are patient and persistant it will pay off.
First of all, if you are rehabbing the property you are not wholeselling. I take a property and do nothing to it and sell it to a rehabber. I always put a property under contract first for X amount of dollars, find my buyer next if I don’t have one already, and then contact my private money guy who also does the double ended closing for me. The seller gets their money for what we agreed on, the buyer gets a house or commercial property at a discount, my private lender gets some quick cash for financing my deal for 24 hours and the escrow work, and I make a few bucks.
The other way is to do an “assignment of contract”. Assignments are ok, but you don’t make as much money with them because the buyers always try to talk you down on the assignment amount you want.
To advertise your property you should list it anywhere you can. Sign up with several online real estate investment groups. List it for sale on Craigslist, Recycler, PennySaver, etc. If your agent is smart he will have no problem relisting it back on the MLS. But remember his commission cuts into your profits if you choose to list it with them or any agent. Get a website to list your properties and blast it out to everyone and every real estate agent.
You must do your “Do Your Due Diligence” when looking to take over any property. Use your title reps to get you pre-lim and title search reports and search for liens with the State, County, IRS, city, and anyplace else you can think of. I was in the proccess of taking over a house only to find out at the last moment that the owner had a lien on the house from the city for an animal comtrol issue. Needless to say the issue was resolved. On another house, which was an REO, the city had a code enforcement lien on the property. I had to take care of that with a letter to the city before they would release the lien and we could close escrow. I had to promiss I would clean up the place and take care of the landscaping within 60 days. The key to any deal is to do your due diligence. If you find any skeletons in the closet, look at if the problems can be resolved easily, how it will affect your end profit, and then decide to either complete the deal or walk away.
Well, I’m an agent and currently working to get my brokers license, but I am an investor. I have been since a year after I started in real estate. Been in the business now for 8 years. I currently own 15 properties. But yes I know of very few agents and even brokers who invest. I don’t know why. Must be a fear factor or lack of knowledge. I’ve come across many agents who should not be in the business.
5 posts found
wolsen3129 writes, Jun 19, 2008: (5 posts)
(Topic: Foreclosures and Pre-Foreclosures / Are "Foreclosues" Considered True Comparables?)
Foreclosures and short sales should not be looked as a comp, but in a foreclosure driven market they will determin the selling area values. That is why when a lender requests a BPO they always say they do not want other REO properties used as comps. In part because they don’t want to face the reality that they are going to lose money when the property does get sold. For some odd reason the lenders think their properties are worth just as much as a non-foreclosures including all the damage and neglect that comes with a foreclosure. With this in turn it also hurts the sellers of non-foreclosure properties by driving down the values. Non-foreclosure propeties end up sitting on the market a lot longer and buyers are looking at the cheaper homes which happen to be the foreclosures. Most buyers now can get an FHA 203k loan that well get them into the house and have the additional money to do any repairs and still come out cheaper than if they bought the non-foreclsure home. It is my opinion that a foreclosure should not be used as a comp, but they do affect area values in a foreclosure driven area. Several BPO requesting lenders are now allowing REOs as comps as long as one comp in the listing and selling is not a foreclosure.
wolsen3129 writes, Jun 19, 2008: (5 posts)
(Topic: Other Stuff! / Short Sale: How To Deal With A No-Equity Deal)
Well if you are trying to do a short sale, you better have a signed “Release of Information” from the homeowners or loss mitigation won’t even talk to you. Next you better have some sort of CMA or BPO to show what the value is. You want pictures to be able to fax or email to loss mitigation with your Short Sale packet. Of course take the worst pictures of the property. When you talk with the loss mitigation dept. find out what they require. Most have a Short Sale packet they use and will fax or email it to you. And get names and phone numbers of everyone you talk with. Make sure you can show them how you intend to finance the purchase. Most will not accept a pre-qual letter from some lender. You must be able to show them that you have the funds or the funding available. Once you have sent over your packet with the offer, be prepaired to make many phone calls. Daily. You almost never talk to the same person. And the person you are suppose to talk with is never there so you just get voice mail many times. Whatever your offer is for the property, make it a low offer and back it up with the CMA or BPO and pictures. They will request a BPO from a realtor. You need to be prepaired to stand behind your value of the property compaired to the realtors BPO. Many of the realtors don’t know how to do a good BPO or are in some way pressured or influenced to give higher values to a property. It is a long proccess, but if you are patient and persistant it will pay off.
wolsen3129 writes, Jun 19, 2008: (5 posts)
(Topic: Wholesaling / First Wholesaling Deal - Need Advice)
First of all, if you are rehabbing the property you are not wholeselling. I take a property and do nothing to it and sell it to a rehabber. I always put a property under contract first for X amount of dollars, find my buyer next if I don’t have one already, and then contact my private money guy who also does the double ended closing for me. The seller gets their money for what we agreed on, the buyer gets a house or commercial property at a discount, my private lender gets some quick cash for financing my deal for 24 hours and the escrow work, and I make a few bucks. The other way is to do an “assignment of contract”. Assignments are ok, but you don’t make as much money with them because the buyers always try to talk you down on the assignment amount you want. To advertise your property you should list it anywhere you can. Sign up with several online real estate investment groups. List it for sale on Craigslist, Recycler, PennySaver, etc. If your agent is smart he will have no problem relisting it back on the MLS. But remember his commission cuts into your profits if you choose to list it with them or any agent. Get a website to list your properties and blast it out to everyone and every real estate agent.
wolsen3129 writes, Jun 19, 2008: (5 posts)
(Topic: Wholesaling / When to Back Out of a Real Estate Investing Deal)
You must do your “Do Your Due Diligence” when looking to take over any property. Use your title reps to get you pre-lim and title search reports and search for liens with the State, County, IRS, city, and anyplace else you can think of. I was in the proccess of taking over a house only to find out at the last moment that the owner had a lien on the house from the city for an animal comtrol issue. Needless to say the issue was resolved. On another house, which was an REO, the city had a code enforcement lien on the property. I had to take care of that with a letter to the city before they would release the lien and we could close escrow. I had to promiss I would clean up the place and take care of the landscaping within 60 days. The key to any deal is to do your due diligence. If you find any skeletons in the closet, look at if the problems can be resolved easily, how it will affect your end profit, and then decide to either complete the deal or walk away.
wolsen3129 writes, Jun 19, 2008: (5 posts)
(Topic: Selling Talk / What Percentage of Agents are Investors?)
Well, I’m an agent and currently working to get my brokers license, but I am an investor. I have been since a year after I started in real estate. Been in the business now for 8 years. I currently own 15 properties. But yes I know of very few agents and even brokers who invest. I don’t know why. Must be a fear factor or lack of knowledge. I’ve come across many agents who should not be in the business.