I’ve certainly learned alot more on this deal than I’ve shared, but, I don’t want to inundate people with pages of information. That wasn’t my intent of the post. I was more curious to see what kind of traps and pitfalls people have run into so people, like myself, can try to avoid them.
I’m sure Mr. Kaiser could teach me a heck of alot more about this deal that I’m not seeing at this point, but, as far as your comments go, my suggestion to you would be to try and keep your posts to positive, constructive comments. Your comment to me hasn’t taught me anything (‘Listen up this time?’). What is that? From my perspective, reputations and previous posts have alot to do with this board and I’m sure other people who are just starting out are keeping an eye out, like me, for who to listen to and who not to. I don’t think I need to tell you what side you’re on.
I’m a newbie and I was just curious to hear some of everybody’s biggest R.E.I. blunders. It might help other newbies to hear your stories!!
I’ve already got one. I tried to purchase a HUD property and thought the I had a mortgage contingency in the contract. When looking for financing, I realized that it was going to be difficult and expensive because the condo complex wasn’t ‘warrantable’ (high investor ratio). I spoke to a broker and he told me he would be able to give me a denial letter for the program I was looking for. Come to find out, HUD will not return a deposit to an investor for any reason. If it was an owner-occupied property, that would be a different story. It was a $500 mistake!! I backed out because I didn’t want to dump 8,000 into a $32,000 condo and tie my money up for a year or two in a L/O. Not a ton of money but certainly not a cheap education. Especially, when funds are limited to begin with.
A smaller deposit$ works just as well! - Posted by SusanL.–FL
Posted by SusanL.–FL on July 19, 2001 at 15:28:29:
I usually shoot for $100.00 down. I’ve read of others on this board who put down even less!
I remember one hot-shot neighbor of mine (who liked to come across as “experienced” in real estate transactions) said he put down $5,000 on a recent deal. Things didn’t go well; the deal nearly fell through, and he NEARLY lost his deposit.
I remember right after he headed out my front door and was out of ‘hearing range’ I shouted (at Kenny): “$5,000!!! WHOT’S TH’ MATTER WITH HIM ANYWAY!!!” Oh well, different strokes for different folks.
I also make a notation in the contract that the down payment is to be deposited ONLY upon acceptance. Otherwise, you might have to wait awhile to get your check back.
$500? Not a lot of money, unless it’s all the money you’ve got in the world.
My feeling is that it’s only a mistake if you didn’t learn anything from it. So tell us, what did you learn? If you say “HUD won’t refund to investors,” you really didn’t learn much.
Curious . . . what did you learn? I can think of half a dozen things to come away with on this one.
Susan,
While I also try to place up as little earnest money as possible, HUD has different rules that govern what you must submit with your offer.
I forget the exact criteria, but it is something like $500 for a certain price range, and $1000 for a larger price range.
$100 will NOT get a bid in with HUD.
On other deals however, I rarely put $100 up, usually a LOT less, and most times, nothing at all.
Of course I also rarely do deals that involve agents and brokers.
To me, if a seller is truly motivated, then they’ll take my offer based on what it is, not any amount I put up to cement it.
I knew this would come back to bite me!! But, that’s O.K… Basically, I’ve learned not to go after HUD properties because they normally don’t give you the profit that other deals would give you (not to mention that HUD treats investors differently than owner-occupants). You’re not dealing with a seller that’s very emotional about their property. They’re just looking to hit a number and they’re not going to move from that for a while. Also, to not trust the R.E. agent about the important aspects of the deal (somethings are more important than others).
Those are the big ones. You said you thought of a half a dozen. Would you like to share … ?
Posted by SusanL.–FL on July 20, 2001 at 07:49:38:
…that they had certain SPECS$ to meet. [I did put a bid in on a HUD property MANY years ago—but couldnt’ recall the specifics$ of it.] Thanx for the info.
[My memory STILL hasn’t snapped back yet. A couple e-mails ago (don’t know if you received them), I mentioned that I had caught a flu or virus (or SOMETHING) and had been down and out for weeks (going into months)! Also mentioned that with it went my ‘memory banks’. No kiddin’!!! My memory was suddenly just shot to
h_ _ _. Talk about SUDDEN senility B I G T I M E.
Went from MAJOR multi-tasking to BARELY being able to get through one. Really thought my job was on the line there for awhile.
I think you should adjust what you’ve learned about HUD…adjust it to say that you learned to 1)put your financing contingency in your contract 2)go over your contract thoroughly before you sign it and 3)if you’re going to actually get financing for a property, have your financing lined up BEFORE steps 1 & 2. and 4) just as you said don’t ever trust your real estate agent or anyone about the IMPORTANT aspects of your deal…always find out the pertinent information YOURSELF, don’t take anyone’s word for it!
Don’t let losing $500 on this deal stop you from buying HUD properties in the future. You can find some pretty decent bargains with those HUD properties!
You missed some valuable lessons, here. Good thing this only cost you $ 500, so far, but if you don’t start paying better attention to the lessons, it will cost you more…
I think Mr. K is gonna give you another chance and teach you a few lessons, real soon. Listen up, this time!
For HUD it is $500 for properties priced $49,999 or less, and $1,000 for properties priced $50,000 or more. Them’s the rules, and like Tim said, no negotiations allowed.
I’m not saying you can’t make money on HUD properties. I’m just saying that the properties that are drastically below FMV are few and far between unless you want to dump a ton of money into fixing them up. Also, according to HUD, even if you have a mortgage contingency in your contract, it doesn’t matter. You will forfeit your deposit, period (unless they’re lying to me over the phone). As far as getting financing before the deal, that’s definately something I’m going to do in the future. This setback won’t stop me from actively pursing real estate investing. Just a minor detour.
Furthermore, thanks for the CONSTRUCTIVE criticism. That’s one of the reason’s I read this board quite often. MOST people offer good advice and direction to someone like myself who’s just starting out. I hope to return the favor someday to someone else just starting out.