newbies and pre-foreclosures - Posted by michaela-ATL

Posted by -Jimbo- on January 10, 2003 at 08:30:29:


I applaud your start in RE (even if it was a couple years ago).
Many people do not get it off the ground or out of the
“planning” phase.
I suggest that you keep your job for credit purposes, but maybe
you can make plenty more with rehabs not to worry.
I’m thinking about doing rehabs soon too. I like to fix things.

Great success to you!

-Jimbo- “When you win, nothing hurts.” Joe Namath

newbies and pre-foreclosures - Posted by michaela-ATL

Posted by michaela-ATL on January 08, 2003 at 08:11:07:

Just want to voice my opinion on a subject. I know i will get some grief from some, but so be it.

I see a lot of posts from newbies, saying, they want to start off with going after pre-foreclosures. I don’t think that’s a good idea.

First of all, the pre-foreclosures start getting listed about 3-3 1/2 weeks before the auction. That means, there is not enough time for any kind of average mortgage, right?

Also, it takes some experience to ‘wing it’ with a pre-foreclosure. Can you expertly walk through a house and gauge it’s repair estimate, without having to pull in an inspector? Sure, you can put in a 7-day inspection clause, but would that be fair? There’s a responsibility to the seller to stop the house from going to the steps. This is not a standard sale, where, if the deal falls through, the seller can just sell it to someone else.

What, if you don’t, yet, have a long list of buyers, that you can wholesale to? You can’t just start marketing this house and put an ad in the paper or say’oh, i’ll wait until the next reia meeting’.

By the time the seller calls you back it may be 1 or 2 weeks before auction time. Not enough time for someone to wholesale the house, if the whole marketing machine is not, yet, in place.

Yes, you can ‘cover your butt’ any which way, but would it be really fair to have the seller lose their house, because the buyer is new and has not, yet, gotten the experience it takes?

Just my thoughts


Re: newbies and pre-foreclosures - Posted by Sean

Posted by Sean on January 09, 2003 at 10:00:16:

Starting out in Pre-Foreclosures?!?!

I would definately not recommend this, especially for a complete novice. There are way too many ways to get burned!! Liens, banks, taxes, etc etc… its tough enough to negotiate with 1 person, let alone arrange a sale with 2 competing interests involved (seller and bank). Is there good money in it? Yes, but I personally would say try some things that are a bit less risky out of the gate.

Personally I like to mitigate risk as much as possible, and maximize my chances for success. My personal experience has been distressed/rehabs in particular (REO/Foreclosed) properties. (After the bank has taken them back) I have found them to be far easier to deal with and far less risky.

If you have good/decent credit, and buy right, there is very good money to be made here. With the help of Hard Money Lenders you can purchase and rehab with little of your own cash, and pull out nice cash in 3 months when you refi (we are talking

OK,OK,OK… - Posted by - Jimbo -

Posted by - Jimbo - on January 09, 2003 at 08:50:10:

I submit…I agree with everyone here! NEWBIES shouldn’t be getting into pre-foreclosures, just not a good idea. I heasitate myself, I’m not a newbie, but I continue to learn like one (now isn’t that something).

ATTENTION TO ALL NEWBIES!!! Start with flips and build up some $$$ then go do one pre-fore if it works, great (continue to do flips). And if you need a PA go check out ‘fair enough’ a couple lines down from this one: h t t p : / / w w w . t o t a l r e a l e s t a t e s o l u t i o n s . c o m / h o m e . c f m There’s a generic PA there…just cut and pasted from a website that has them for free…was only there for 20 seconds so I don’t know if its the best one or not, probablly not, but that’s for you to decide…and please no one complain about my writing (typing) skills. I just don’t think I could take the embarassment.

If you clicked in just to read the friendly quote I USUALLY leave, tough hambuger lettuce. I am already behind schedule this morning and need to get some work done…oh wait. I havn’t actually lost any time yet…I’m an investor, I get it all back at the momement its spent. (but I’m still not going to leave one)

Ta Ta, dodos.

  • JIMBO -

Re: newbies and pre-foreclosures - Posted by Heather -Tx

Posted by Heather -Tx on January 08, 2003 at 19:40:58:

Well I will answer from experience I guess on this one :slight_smile:

We closed our first deal this week, and it was a sub2 preforeclosure. YEAH 2 for the price of one!!!

Having said that, we have studied REI on and off for years literally and STILL partnered this deal with a very experienced investor.
Had we tried this on our own, with all the studying and readin we have done, we would have probably (Not really much PROBABLY TO it! LOL)screwed it up big time :slight_smile:
Placing properties in trusts, dealing with the preforeclosure and hunting down hubbie to sign papers while his wife was trying to disappear… ohhhh the fun and joy!
Having the seller decide she can’t take it anymore and leave town, and finish the closing long distance…
Trying to find a title company that understood what we were trying to do and not saying we this was a scam (I called over 20 thx!)
Oh and since this WAS Over Christmas and New Years, our “Oh we can close in ten days~” Needless to say didn’t happen, took almost 3 weeks.

I’m sure if I sat here and really thought about it, I KNOW There were more roadblocks, but I’m really just trying to forget all that and look forward to the joys of rehabbing the property.

Honestly, we have grown and learned ALOT With this deal, we did decent. It isnt the best deal, and it isn’t a skinny… and I won’t consider it a success or write my first success post :stuck_out_tongue: until resold(And I have a check in my hand!!), except for the learning… that was invaluable. But we NEVER Would have made it this far without the help we have gotten from the more experienced. And I Don’t mean just posting on this board and asking questions and advice thru the deal, but having partner with us so he would be there thru the whole thing to help guide us.
You KNOW who you are… and MANY Thanks from both me and Eric!!

Re: This is my pet peeve - Posted by Stacy (AZ)

Posted by Stacy (AZ) on January 08, 2003 at 11:39:38:

I agree with you, and have been posting the same advice here over the years. Here’s a link to one of those posts.

Your advice is right on.

…wisdom from the wise… - Posted by - Jimbo -

Posted by - Jimbo - on January 08, 2003 at 08:49:24:

What a great post Michaela. Most newbies want to
start out ‘guns a blazin’ in RE - how many actually
get started at all? They waste their time learning,
asking questions, maybe even looking at property after
property acting like they know what they are
doing…they fool no one (except themselves).

I don’t do rehabs. I don’t do pre-forclosures
either…just yet. I’ve been doing CRE for 1.5 years

For all you NEWBIES in CRE Land…listen to Michaela,
he know what hes talking about.

  • Jimbo - “Remember: It is 10 times harder to command the ear than to catch the eye.” Duncan Maxwell Anderson

Re: …wisdom from the wise… - Posted by Eva_VA

Posted by Eva_VA on January 08, 2003 at 17:09:17:

Jimbo - sounds like you’re bashing newbies there. You say that they “waste their time learning,
asking questions, maybe even looking at property after
property acting like they know what they are
doing…they fool no one (except themselves)”. If newbies don’t do these things, how else are they to determine if RE investing is definitely for them and how else are they to “get their feet wet”? It has also been said time and time again to newbies to “just do it!” Along with that they are led to believe that basically all they need to do to start wheeling and dealing is to read the archives and to buy a couple of courses. With that type of encouragement, no wonder they start out “‘guns a blazin’ in RE”. I do think that newbies need to realize that there are consequences to everything and that they shouldn’t blindly leap into something without being knowledgable and knowing the advantages and disadvantages.

Jim - since you are fairly new yourself with 1.5 years experience, how did you “get your feet wet”?

By the way… I need to tie up a property ASAP and don’t have a purchase agreement. Can you fax me one? ;o)~~~

fair enough - Posted by - Jimbo -

Posted by - Jimbo - on January 09, 2003 at 08:36:45:

Eva its a pleasure…to help someone come to reality.
All I was saying is most people (newbies) never actually
do and when they get a small taste of it in their mouths,
that’s all they want and they run on and on like this sentence.

There’s a reason or two or a thousand to get into RE investing.
This website is devoted to those who want to learn in doing things the right way.
We need more of that out there. Most investors own one house.
Most investors have little comprehension about investing in RE.
They bash it every chance they get because they truely do not
understand what it has given them.

I wish that would change and I believe CREONLINE is trying to accomplish that goal (with many others).

If you are going to rent property form a corporation (LLC). Flipping
and rehabing gets one too (do I need to tell you which one?).
How long does it take for a unit/house to be rented?
How many months do you account for actual rent?
Is $100.00 net cash flow a month enough?
Corporations and land trusts…really!?
How do I replace a roof with $100.00 net cash flow/mo.?
Do I want to flip or hold or rehab?
How do I find out title info?
How professional should I be (I doubt this one really comes up in people’s own minds)?

There’s a ton more questions that need to be answered too - but the one I pose is: “Why would you need a PA?” You hsould have one or ten just sitting around, unless you are a newbie (and you’ve pointed out how much I love those people). Oh, and, fair enough, I would love to fax one to you…or I could just put it here:

Purchase and Sale Agreement

This agreement is made this _________day of _______________, 20

between Seller(s)_______________________________________ Social Security #______________________

and Buyer _________________________________________________________________________________

and or assignees. Seller agrees to sell and buyer agrees to buy the following described real property together with all improvements and fixtures and the personal property described below:

Street Address______________________________________________________________________________

Legal description: ___________________________________________________________________________

___________________________________________________________________ County ________________.

Personal property included: ____________________________________________________________________

Earnest Money Deposit

Cash To Seller At Closing

Existing Loans & Liens

New Loan To Seller At Closing

Purchase Price

The purchase price to be paid as follows:

  1. EARNEST MONEY to be deposited with licensed title company or attorney within 48 hours of acceptance by seller. The buyer will take title subject to the following loans on terms agreeable to the buyer:

A. Loan to _______________________________________ Balance $____________________________
Interest rate: _________ %, Monthly Payment $___________________ Loan Number _____________
Date last payment made____________________________ Loan current through _________________

B. Loan to ________________________________________ Balance $___________________________
Interest rate: _________ %, Monthly Payment $___________________ Loan Number _____________
Date last payment made____________________________ Loan current through _________________

Other liens: ________________________________________________________________________________

Any overstatement in the above loan and lien amounts will be added to note to seller. Any understatement will be deducted from balance due at close.

  1. THE BALANCE DUE SELLER in the amount of $ _______________ shall be paid as follows: ____________

_________________________________________________________ including interest at the rate of _______%.

  1. PRORATIONS, IMPOUNDS & SECURITY DEPOSITS: Loan interest, property taxes, insurance, and rents shall be prorated as of the date of closing. All security deposits shall be transferred to buyer at closing. All impound accounts for taxes and insurance are included in the purchase price and shall be transferred to buyer at closing. Any shortage in these accounts shall be charged to seller at closing.

Page 2 of 2 Purchase and Sale Agreement

  1. CONDITION OF HOUSE AND APPLIANCES: Seller warrants that the house and all mechanical systems and appliances will be in good working order at closing. Buyer will have access to property for inspection and the cost of any needed repairs will be paid by seller at closing. Appliances and other personal property will be transferred by bill of sale free of encumbrances at closing.

  2. CLOSING DATE AND TRANSFER OF TITLE: This transaction shall close on or before ____________, 20. Closing will be held at ____________________________ and Seller(s) agree to transfer marketable title free and clear of all encumbrances except those listed and pay any required state taxes or stamps required to record deed and mortgage. Seller agrees to furnish title insurance in the amount of the purchase price, showing no encumbrances or exceptions other than previously noted.

  3. DAMAGE TO PROPERTY: Seller shall maintain property in its current condition and keep it insured against all loss until closing in the event of destruction covered by insurance, buyer may elect to close and collect the insurance proceeds.

  4. DEFAULTS: If buyer defaults under this contract, any and all monies deposited by buyer(s) shall be retained by seller as full liquidated damages. If seller defaults, buyer may pursue all remedies allowed by law and seller agrees to be responsible for all costs incurred by buyer as a result of sellers default.

  5. SUCCESSORS AND ASSIGNEES: The terms and conditions of this contract shall bind all successors, heirs, administrators, trustees, executors and assignees of the respective parties.

  6. ACCESS ADVERTISING AND REPAIRS MADE BY BUYERS: Sellers agree that buyers may advertise property and have access during reasonable hours to show property to others. If the property is vacant and in need of repairs, buyers at their expense may make repairs and improvements, and any improvements made shall become the property of the seller should the buyer default,


The undersigned have read the above information, understand it and verify that it is correct.



BTW, I don’t use this one, but it should be just fine for what you need with it.

Good luck and happy investing!

  • Jimbo - “Success is where preparation and opportunity meet.” Bobby Unser

Re: fair enough - Posted by Eva_VA

Posted by Eva_VA on January 09, 2003 at 18:18:30:

Jimbo - thanks for your response. I have to admit that I am a newbie, however not completely wet behind the ears. I have had an interest in real estate for years, particularly in rental property. I currently own two properties which both cashflow nicely ($250 & $200). Before purchasing these stick built homes, I invested in 3 mobile homes that were situated in parks. After several years of renting these, it came to a point where they were no longer profitable. I sold those and decided my money was best invested in stick built homes.

I have made the decision to engage in what truly interests me (real estate) and give up the desk job that I’ve not enjoyed for 23 years. I have become a firm believer that one MUST enjoy what they get paid to do. Of course leaving that desk job will not occur overnight and that’s ok because I have a goal that will eventually provide fulfillment. Where does my interest lie? In rehabbing. Not only will rehabbing provide income but it will also provide satisfaction in turning something old and ugly into something shiny and new for someone to be proud to own.

As you can see, I am not the newbie who needs a quick fix because I have no money, whose credit is shot and who wants to believe they can become wealthy in a month. So I am here to stay for a long time to come.

Thanks for the contract, however I was only being facetious when I made that request. lol I would never seek a copy of a contract from anyone except a Virginia realtor or attorney.

To a prosperous new year! :o)