Posted by Phong Le on November 08, 2002 at 13:01:52:
Thanks for the warning. I guess the best way for you right now is to either find a different buyer or persuade the current buyer to choose a different lender. Tell him that it shouldn’t cost him a thing to switch lenders. There’s document he has to sign with the original lender so that he won’t have to absorb the fees.
My First Deal! Yahoo!!! - Posted by Phong Le
Posted by Phong Le on November 07, 2002 at 13:36:37:
Hi all,
I finally signed the sales agreement with the seller yesterday.
House is situated on a very nice lot in a relatively nice area. Purchase Price is 112,500. It’s a 2br/1.5 bath house. Needs around 7 to 9k to fix. Comps for houses of similar sizes but in less advantageous lots were around 165,000 to 180,000. I have confidence that I could sell for at least 170,000 after fixing it. I’m buying using the conventional method putting 5% as down payment.
How I got the deal? I sent a total of 30 letters to houses around my neighborhood. Got 4 calls. 3 were bad. The other one was this one. The seller initially didn’t want to sell for that price due to being misguided by his friend, who was not an RE agent. After about two months? worth of calling, he finally agreed on 111,000 with me paying an additional 1,500 toward seller?s closing costs.
I know there are a lot of people out there wanting to get started but afraid of failure. My suggestion is to give it a try especially if you have really good credits and some money for down payment. Just drive around the neighborhood looking for ugly/abandoned properties, get the addresses then do some research to get the owners? information. After that, send the letters to all these addresses. Make it a goal to send at least 15 letters per week for at least 2 months. I was lucky because I sent only twice and was able to get one deal.
Make sure you know the area well and know how to do comps. Knowing the prices of houses is crucial because it will significantly reduce your chance of making big mistakes. Knowing the prices would also give you the confidence to negotiate. Don?t ever negotiate unless you have a good idea on the price of the subject property.
Be sure to have a good option contract or sales agreement that you can use to secure the house once agreement has been reached. If the seller doesn?t want to sign anything due to complexity of the contract, I don?t know whether this would help or not but you can bring a tape recorder and record the ?verbal agreement? between you and the seller. You must get approval from the seller of course. I believe this can help you should there exist a need to sue for damage. This certainly doesn?t hurt.
After that, contact a local escrow company to have them set up the whole closing procedure. This includes preparing a new sales agreement using what you provided. If you want to flip the property for a few thousand bucks (I wouldn?t do it myself unless I?m getting a lot of money out of the flip), don?t contact one of those professional builders or rehabbers. Try and get to know people who came from other countries who can?t get these kinds of deals due to communication issues who are willing to work hard to earn a little bit of money or equity and flip it to them. You?ll certainly get a lot more out of your deals. For instance, I can reasonably expect to flip my above property for around $10,000 or more in profit. I don?t want to do this because this is my first deal and I want to make sure I learn as much as I could from this experience by going through the whole rehabbing process. It?s crazy but I want to know the accuracy of my estimations.
I think this method should work for a lot of people. I came to the US around 13 years ago when I was 12. My English is not that great so if I can do it, I think many of you can, too. Oh yeah, this process doesn?t require a lot of time so don?t quit your job. I wish you all the best.
Re: My First Deal! Yahoo!!! - Posted by mike
Posted by mike on November 07, 2002 at 18:47:29:
Congratulations on your persistence and ingenuity - both admirable. You should go a long way in anything you try.
That’s a good tip about the tape recorder although I believe (someone correct me) real estate is at least one area where verbal agreements are non-binding. I don’t know to what extent but I’m fairly certain a verbal purchase agreement is unenforceable.
Why did the seller give you a 30-40% discount? I’d be interested to see the outcome so post again (i.e., actual fix-up costs, any unknown liens, title problems, etc.)…
Mike
Re: My First Deal! Yahoo!!! - Posted by tyler
Posted by tyler on November 07, 2002 at 14:06:57:
Congrats!
Re: My First Deal! Yahoo!!! - Posted by Phong Le
Posted by Phong Le on November 07, 2002 at 19:25:00:
A verbal agreement may not be enforceable but if you have a tape recording, it’s much easier to “remind” the seller about the agreement he entered as sellers tend to forget the small yet important details such as the prices and who pays what. It’s easier to give the tape to the escrow officer so that he could get all the necessary info to draft up the sales agreement.
I think the reason I got a good discount was because of being persistent and reasonable. The seller listed the property in its current condition for a very high price. I think he got a lot of offers but they were all very low (lowball offers). I was able to offer higher because I live only 3 blocks away from him so I know more about my neighborhood. That’s why I can’t emphasize enough about working in your neighborhood. The house is also a mess so the seller (who is nearing is retirement age) is really sick of it and just want to get out of it and start something else.
I will let you know about the status of this transaction. By the way, if you apply for conventional loans and intend to buy and sell your property quickly, be sure to make it clear to your loan officer that you don’t want to pay any closing costs except for the prepay items. You’ll get a higher rate but you’ll be able to save thousands in closing costs.
Re: My First Deal! Yahoo!!! - Posted by JCR
Posted by JCR on November 07, 2002 at 20:34:58:
Congrats!!
You have posted great information, I like the part about the closing costs.
I am in the process of selling my first rehab deal as well and wanted to give you a heads-up on the problem I am experiencing.
My buyer has his own mortgage broker (although, my own broker would not have foreseen this problem either). The bank is giving the buyer a difficult time funding this loan because I have owned the property for only 2 months. The dreaded SEASONING issue…
Look around for a mortgage broker that deals specifically with investors and will help you avoid this.
Best of luck,
JCR
Cant you… - Posted by js-Indianapolis
Posted by js-Indianapolis on November 12, 2002 at 06:59:39:
show that you’ve made significant improvements, added value, and get around the seasoning issue with the lender?
I’ve never done a rehab, but am told by everyone that it is not an issue if you can show that you’ve added value to justify the added price. No?