Posted by Jim T on February 22, 2004 at 21:29:21:
Thanks guys for all the info! Much appreciated and mentally noted.
A New Newbie’s Q & A - Posted by Jim Taterson
Posted by Jim Taterson on February 21, 2004 at 09:32:31:
…can I ask a couple of stupid questions? Please bear in mind that I have never bought or taken part of any purchasing of real estate in my entire life. I have read a couple of REI books and visit this site daily. I wish there was a seperate for-newbies forum where I’d feel more comfortable asking these and wouldn’t waste real investors’ time!
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Whenever title is transfered to another person, even if it is bought subject-to, it must ALWAYS be transfered at a closing at a title company, attorney etc? (in other words, there will be closing costs when real estate ownership is transfered)
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When do you set a closing date when you flip? What is the minimum, and doesn’t it really depend on the competency of your investor/buyer?
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Before you sign a contract and give a price, are you supposed to have the house repairs appraised by a contractor or appraiser (if rehabbing is needed) if you don’t know how to estimate repairs, and if you ultimately don’t sign the contract, aren’t you out the money you spent on having the repairs estimated?
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When you assign a contract to an investor/buyer, do you receive all of your money when you sign the assignment contract, or just a deposit and receive the rest when he closes? And if so, does he immediately deposit the rest of your fee in escrow, and who chooses the escrow company?
Re: A New Newbie’s Q & A - Posted by GL(ON)
Posted by GL(ON) on February 21, 2004 at 09:59:31:
These are all good questions. Usually we get questions that have been covered a million times but yours are a little unusual.
1)So far as I know there is no law that says you have to have a title company or lawyer. I have heard of people doing their own closings. All you have to do is write up the papers (deed, mortgage etc) get them signed, then take them to the courthouse and register them. This costs a fee. Around her it is $75.
Nobody does this because it’s not worth it. You want some guarantee that you aren’t making a mistake that will cause you untold grief in the future.Your title company, title insurance or lawyer guarantees to do the job right and pay for the damage if anything goes wrong.
2)You could set the closing for tomorrow if everyone was ready. In the case of a flip you could have the second closing 1` minute after the first. But to get everything ready usually takes longer than that. Lawyers like a month but can do it quicker if you insist.
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That’s a problem isn’t it? You could make a conditional offer then once you have the deal sewn up, get your appraisal.That way you are only paying for appraisals on property you are actually buying. Then if it turns out you made a major mistake you can renegotiate using the new found bad news as ammunition. If the seller won’t budge you will have to drop the contract and eat the appraisal fee. And count your blessings. Believe me, I have gotten stuck on bad deals in the past, that if I could have got out of them and only lost a $500 appraisal fee it would have been my lucky day.
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That’s one of those things that is subject to negotiation. Your question it too vague. But you should at least get a deposit. YOu can hold it, or some neutral party like your lawyer or title company.
You seem to be getting caught up in minute details here. I wouldn’t worry about them too much. These are the sort of thing that you learn as you go along, and there are experts out there to help you.
Re: A New Newbie’s Q & A - Posted by Jim Taterson
Posted by Jim Taterson on February 21, 2004 at 15:31:44:
Thanks GL for taking the time to answer my questions, I really do appreciate it. Yes, I agree that these are very small details that you learn as you go-however not knowing the answers really bothered me.
I guess #3 is a catch 22. The thing I was asking really is that if you have no idea on how to appraise repairs (like I wouldn’t know how much it’d cost to repaint an exterior, put vinyl floors down, etc), if there was a way you could have it appraised BEFORE you gave the seller a price.
Thanks!
Re: A New Newbie’s Q & A - Posted by Doug Pretorius
Posted by Doug Pretorius on February 22, 2004 at 12:47:33:
Here’s another way to avoid any of the problems that can arise from not knowing how to estimate repairs…don’t deal in properties that need them!
You can offer sellers of pretty houses everything they want (highest price, no commissions, no closing costs, monthly cash flow, no maintenance, no tenants) with a Cooperative Assignment. This is where you set up a Lease/Option for them, and collect an assignment fee (usually 2-3% of the purchase price) from the buyer.
Just about every book and course about Lease Options mentions this technique. And you can probably find all that you need to know by searching the archives under “cooperative assignment” and “L/O assignment”.
Re: A New Newbie’s Q & A - Posted by GL(ON)
Posted by GL(ON) on February 22, 2004 at 09:50:40:
You could have an inspection done and pay for it but that gets expensive if you look at a lot of houses.
Try this instead. Ask the seller what repairs the place needs and write down the answers. Ask what he figures it will cost to fix. Set that down too. 9 times out of 10 the answers will be bogus. It doesn’t matter.
You are going to make an offer based on what he told you. If you really want to get technical, you could take the piece of paper and write at the bottom, something like, Mr. Seller states that to his knowlege, 123 Maple St needs these repairs at a cost of XXX dollars, and have him sign it.
It doesn’t really matter because you are going to make a conditional offer. Conditional on what? Conditional on whatever you like. Termite inspection, arranging suitable financing, satisfactory inspection by licensed inspector or contractor, approval of your partner, approval of your wife (that’s a good one, if the wife says no dice everyone knows there is nothing you can do about it LOL).
All right. You make an offer and it is accepted. That’s a contract. But the contract has conditions attached. If you don’t sign off on the conditions the contract is null and void.
By the way… too many conditions, and too complicated conditions, look bad on a contract. Keep it down to the minimum. Really one condition is enough to get out of a contract if you want out.
Now you get your inspection done. Take the inspector’s report and get estimates on the damage. Go back to the seller and say “Gee there are a lot more problems than we thought” (Get that, WE thought LOL).
“It’s going to cost me a lot more money and time than we thought. So I guess I can’t go through with the deal. Too bad.”
Wait for him to say “What would it take to save this deal? What if I knocked $XXXXX bucks off the price?”
“Well Mr. Seller if you did that, and took back a second mortgage at 2% interest instead of a cash down payment, and no payments for a year, I would be able to afford to do all the repairs and get the place rented or sold. Would that be OK?”.
Well would it? At this point the seller can taste the money, he has a deal to save, and he doesn’t want to get beat out of it. So, you negotiate on your terms or you tear up the contract and walk.
At worst you might lose your time and inspection fee. But like I said, if the place turns out to be a real Stephen King Special, paying a couple hundred dollars to get out of the deal would be the best and cheapest investment you could possibly make.
Re: A New Newbie’s Q & A - Posted by Brent_IL
Posted by Brent_IL on February 21, 2004 at 17:16:13:
Most sellers expect to show the house before an offer is made. Take an experienced contractor, i.e., the one who will be doing the job, with you when you walk through the house. He?ll give you a useable estimate.
Re: A New Newbie’s Q & A - Posted by Dave P.
Posted by Dave P. on February 24, 2004 at 12:52:57:
Doug,
I have checked the archives for cooperative assignment, to no avail. Where can I learn more? Any recommended reading?
Dave
A Stephen King special… - Posted by Ironlung
Posted by Ironlung on February 25, 2004 at 11:06:01:
…might be worth looking into. If you could buy the Overlook Hotel (from “The Shining”) at 60% of FMV, wouldn’t you go for it?
Of course, if it was the ramshacked, twisted up house from “Pet Sematary”, you probably wouldn’t be able to get any rehab guys to go in there anyway, so go figure.
Later,
Ironlung