Foreclosure.com

freedealcalculator.com

Home Education Real Estate Tips

WEEK TWO TIP- Investors-when you are looking to wholesale properties, make sure you have funding set up of your own to purchase the property just in case the buyer backs out.  Buyers back out all the time, especially in cash transactions.  You can minimize the risk by taking a $5000 non-refundable deposit from the buyer but that doesn't mean your buyer won't ever back out.  Last thing you want is to leave your seller stranded and walk away from the deal completely because your buyer backed out and you have no access to your own funding. That's not good business practice, at least in our opinion.

WEEK ONE TIP- Always have a mortgage loan officer/banker on your team and anytime you recieve an offer on your property or a client's property;  make it a requirement to have your mortgage loan officer/banker qualify them.  You cannot obligate them to use them but you can have them be qualified so you and/or your client are sure that the buyer is indeed a good candidate.  Homeowners can lose many weeks by not following this rule and can also lose the opportunity of finding a qualified buyer.

For more money saving tips read below.....

How to Avoid Costly Mistakes When Investing in Real Estate

BEFORE PURCHASE:

  • Make sure you determine an accurate "as is" fair market value and also the ARV (After Repair Value).  Calculate your values at the bottom of the market and be very conservative.  The last thing you want is to miscalculate the FMV for the home and end up breaking even or losing money.  We recommend ordering an Interior BPO before purchasing the property to double check your FMV.

  • Check for any signs of a buried oil tank. Examples- new grass in a specific area, circular or rectangular cut in patio, patched area in driveway, release valve, etc.  We recommend always doing an oil tank sweep. It's so worth the $225 investment.  If an oil tank is found and it's in use you can do a soil test and vacuum test which runs about $750.  If the tests come back negative, then you can ask the seller to insure the tank with a copy of those results. Oil tank insurance runs around $200-$250 per year.  If the tank is not in use, then don't spend the money testing it.  Put a clause in your contract that the homeowner must remove the oil tank and that your offer is contingent upon the negative results of oil contamination in the soil.  Contact a professional oil tank company for the removal of the tank and make sure that proper permits are issued for the removal. The town inspector should come out the same day as the removal to insure that if it is indeed contaminated that the Department of EPA is notified.  Keep in mind that removal job prices vary if the tank is in use, abondoned, or has been sand filled.  The difference is that the oil tank removal company charges extra for the disposal of oil and sand which is very costly.  Refer to video at the bottom of this screen for a live example.

  • Always order a Certificate of Occupancy Inspection by the municipality and go personally to see if any violations or permits are open.  If anything is in violation or any open permits are found, make sure to know exactly what needs to be done to get a final C.O.  If you're buying the home in "as is" condition and the buyer is responsible for the C.O., use this to your advantage when negotiating.  (Send the seller a copy of all the violations and what needs to be repaired before even moving in or renting the property).  Worst case scenario, the town will allow you to close with a temporary C.O. and you address all the things on the list after closing.

  • Order a home inspection by a licensed inspector before purchasing a property. This will avoid any surprises when doing work and at re-sale.  Only do this if the home is already Under Contract because you don't want to spend the money.  It not only reduces your risk but it also gives you leverage when negotiating.  You will get more than just your money back by doing a home inspection.  Look at it as an investment and it's always a good return on your money.

  • Call or go to the Building Department and verify that the number of units and zoning match up.  If it is zoned commercial or mixed use, keep in mind that financing for these properties is a lot tougher and your pool of buyers is reduced to buyers with 20% down or more.  You should also ask if there are any major plans in the area, such as a new school, park, train station, developement, etc.  This could be good or bad depending on what it is they're planning; sometimes the home may be in an eminent domain or re-developement zone.  Beware that a special tax may be implemented if there is a park, train, etc. built near by.

  • Check basement for soft beams, water damage, termite damage,etc.  Check if water gets in by checking flaking in concrete or paint, mold, or wet spots.  Check the exterior perimeter of the home and get an idea of what is causing water to get in, such as missing leaders or gutters.  It may be something minor but you can use this to your advantage when negotiating the sales price.  Always check the sill plate just above the foundation in the basement. It runs around the perimeter of the house.  See if it is rotted or if there is evident termite or other wooddestroying insect damage. This is a costly repair because the house needs to be partially picked up by sections and the sill plate needs to be replaced.

  • Check roof for sagging, amount of layers, rotten wood, if it's level, etc. It is more expensive to put a new roof when you have to rip 3 layers of shingles off before laying the new one.  Don't miscalculate this costly repair and make it known to the seller.

  • Check if all floors and ceilings are level, if there are spaces between walls or floors it might mean that the house is shifting and there might be major structural damage.  You can also check for any cracks in the foundation and waves in the basement floor.  The house could have settled years ago or it might have some major damage.  If you see anything suspicious, get a licensed contractor or if necessary an engineer or architect.

  • See if the home is next to a gas station, auto body, power plant, or any other potential hazards.  Buyers should stay away from these properties as it could potentially reduce the Fair Market Value dramatically.

  • Make sure to understand how much commission you will be paying if you will be re-selling your property.  Don't be stingy on the commission.  Check details in After Purchase Notes below.

  • The location of the property is key and in some towns the value of the home can change dramatically from one block to the next.  You need to be very careful and familiar with the town you're looking to purchase a property in.  This might happen for any of the following reasons:

                                    School District Changes/Public School Transportation limits

                                    Neighborhood/Section changes (some are less desirable than others)

                                    Gangs-Drugs-Violence

                                    Re-Development zone

                                    Tax implications

                                    On street parking restrictions

 

AFTER PURCHASE:

  • Don't over price your home: Check comparables in the area that are your competition and price it at the bottom of the market rather than at the top.

  • Don't list FSBO.  This is the worst thing a seller can do.  Realtors do this for a living, and although all of us don't have the IQ of a rocket scientist, some really know how to gain maximum exposure and get top dollar for your home.  Exposure of your property is second most important after pricing.  Do your homework and partner up with a good realtor that is LOCAL to the property you're selling. 

  • Don't cut the commission to save a couple bucks.  The more you offer to the selling agent, the faster your home will sell and for more money.  Randy and I always offer a big commission to the selling agency which almost always includes an attractive bonus.  For Example:  (2.5% +$5000 Bonus)  The bonus is very important because at many real estate brokerages, the Broker will allow the agent to keep 100% of the bonus.  So, don't skimp on the commission.

MORE COMING SOON......

 

Video of an Oil Tank Situation- This is an REO property that we have under contract.  We got the bank to accept to remove the underground oil tank under the parking lot, so we could make sure that it is not a "leaker".  PART  I -The removal was quoted at $1450.  It turns out the tank was filled with sand and that the disposal of the sand inside the tank has some hefty additional cost.  The tank is 550 gallons and the oil tank company estimated about 11 barrels of sand which would cost an additional $250 per barrel to dispose of, that's an extra $2750.  We had to ask them to fill the hole back in instead of removing it because we don't have authorization from the bank to spend that kind of money.  (So back to the negotiating table with the bank on this REO deal) Sorry for the noisy wind, it was darn cold out.  In PART II, we got the authorization to remove the fill out of the tank.  So, on this day, the oil tank company went back there and removed 11 barrels of fill.  When they removed the fill,  they started pullling out the oil tank, and, of course, with our luck, there was a huge hole on the bottom of the tank, which means, it's a leaker.  As a result, we have to wait again with purchasing this house from the bank and see if they would be willing to remove the contaminated soil.  In reality, the bank has no choice, so we will probably hang around untill it's done and go through with the purchase.  This could take another month or so.  There is a great lesson to be learned here.  This all came about because we spent $225 on an oil tank sweep.  If we didn't do it, we would be owners of a property with a leaking oil tank.  Now, that is how you can loose your shirt in this business. 

SO, BE SMART & DO AN OIL TANK SWEEP ON PROPERTIES THAT YOU ARE LOOKING TO PURCHASE!

                                                           PART I                                                                               PART II

                                                           
 

About Us | Contact Us | Terms of Use | Tell a Friend | Advertise With Us