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Dealing with Untruthful Sellers

untruthfulsellerWhen purchasing a property, the Sellers of the property should fill out a Seller Disclosure which tells you about the condition of the property, any repairs made since the date of purchase and any problems that they are aware of on the home.  As an Investor, there are many times I will purchase the home without a receiving a Seller Disclosure, and without a home inspection other than my own personal inspection.  However, I highly recommend that Investors obtain a Seller Disclosure and a have a formal home inspection even though you are replacing a lot of things inside and outside of the home.

Recently, a Partner and I were working on purchasing a property from a 4-member limited liability company who had purchased the property at a Tax Sale.  Their Attorney informed us that the members would like to just sell the property and had purchased the property as a Tax Deed.  They started the rehab on the property with the assistant of the Attorney but had not completed it.  Our only contact was with the Attorney, who was a silent partner, and informed us of the following:  That they wanted $48,000 for the property, that they have all new windows for the property that they would give us included in the purchase price, that there was an open roof permit on the property that just needed the facia to be painted to close out the permit and that all the material in the property was also included with the purchase of the property.  We submitted the offer to the Attorney on October 31, 2016 and we still had not heard from him about our offer.  We had called a couple of times reminding the Attorney that our offer was only valid for 2 days and now it was 7 days still waiting on a response.

I was on my way to Clearwater for a few days to work with another partner that purchased a home in Clearwater, go shopping with partners at Home Depot for supplies, meet with an air conditioning guy, and meet with my 3-man rehab crew when finally, the Attorney texted me back and said they have another offer on the property and was going with another buyer.  I called him and asked what is up?  He was the one that told us that they wanted $48,000 for the property and said we had a deal, that he would have the Sellers sign the purchase agreement and return.  We had already inspected the property and knew that even if we paid $60,000 for the property it would be a good deal since the property only needed about $10,000 worth of work and the values were around $110,000.  He said that the other buyer offered $59,000 and I told him our highest and best was $60,000.

He informed me to resend the purchase agreement at that amount.  I was tired of the games of waiting and I had already signed an offer for $48,000, so I just told him to cross out the price and the fact that the Seller would take care of the open permit and return it back to us signed by the Seller.  Well, I got it while I was in Clearwater, initialed the changes of the counter offer and returned it to the attorney making this a legal and binding deal.

This is where the fun and frustration starts.  When purchasing a property, it is important that you obtain a Title Policy to ensure that there are no other liens or encumbrances on the property.  When purchasing a Tax Deed property, you will need to obtain a Title Search so you will know of all liens on the property.  The attorney that was representing the Sellers said that he would conduct a Quiet Title Action for us free of charge, but we had to pay the filing fees and processor fees.  A Quiet Title Action takes 90 days on average.  Since we were not getting Title work from the Sellers, that meant that we needed to protect ourselves and we ordered a title commitment from our own title company so we can make sure that we have all the necessary information for proper transfer.  When looking at their title work, it stated we needed to make sure we have a copy of the Operating Agreement of the LLC and an Affidavit from the Members stating that the party signing the documents has full authority to transfer the property.  In addition, we needed an Affidavit stating the company was in good standing, there were no contractors who have not been paid and none of the parties of the LLC are in bankruptcy.  The Attorney that was doing the closing had not done any of this and in addition, he was trying to give us a Quit Claim Deed from the Sellers and not a Warranty Deed.  Based on the lack of correct paperwork, I started to get concerned about the entire deal.  The Attorney was going to do a Quiet Title Action for us and now we were not comfortable with his experience.

During our inspection period, we found out that the Sellers had not even ordered or paid for the windows yet, the open permit for the roof was not just for the facia to be painted but had to do with the shingles were not installed properly.  We then did research on the Roof Company who had filed the Notice of Commencement and found out that their company dissolved and the transferrable warranty for the Roof that the Attorney said we would receive was not available.  The permit should have been close out several months ago, was the contractor even paid for his services?  What happened that caused him to not finish the job?  After finding out that the Attorney provided us with wrong information about the windows and the roof, lack of correct paperwork, and poor communication, we decided to do the following:  We prepared an addendum that lowered our offer back to the $48,000 but included the tax proration of $1,500 that we would pay (instead of the sellers paying), we excluded the windows all together (they didn’t have to pay for them), we agreed to do our own Quiet Title Action (let the Attorney off the hook), we would fix the roof (which was new, but now we have no warranty and no contractor to correct issues and pay for re-inspection), we would file our own Deed and close within 3 days.  More than fair!!

The Attorney responded back to us and said that they will not accept $48,000 and they had another offer for $59,000, nothing was misrepresented and wanted to know if we wanted to send this Addendum to the Seller.  Both my partner and I laughed when we read the email and replied please send to the Seller and they can either accept or cancel giving them a deadline until Sunday at 6:00 p.m.

Many Investors would still accept this deal knowing about all the untrue statements that were provided to us by the Attorney.  Since the Attorney was involved in the deal as a silent partner, we truly believe the Sellers are unaware of the untrue statements provided to us.  Honestly, we don’t even know for a fact if there was another offer on the property and if there was, they too would be told the same information as us.  As Christians, we always deal honestly and fairly and really believe that we were taken advantage of and should not rush into a deal with so much misrepresentation.  We still had to do a Quiet Title Action which could bring a claim from someone stating they were not properly notified, but we kind of doubt it; however, we need to protect ourselves.

We are waiting on a response and believe whatever it will be, whether we get the deal or we don’t, we did the right thing.  Remember, there are lots of deals out there and if you are misinformed on one thing, just think what else you will find after you buy it.  Therefore, always reduce your price to reflect the amount of protection should someone claim an interest in the property and/or there are additional fees needed to do the rehab, the $12,000 difference in the price will cover us.

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

Like me on www.facebook.com/sellfastrealty

 

 

 

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Buying Houses with Hurricane Matthew’s Damage

hurricanedamageThe State of Florida and many other states were affected by Hurricane Matthew, leaving many Sellers with problem houses.  I am located in Oviedo, Florida, and being a transplant from Michigan, I have never been in a Florida Hurricane.  All of my houses were blessed with minor damage such as big trees down in the back yard, shingles flying off the roof, branches and trash everywhere. I am very grateful to God for these blessings.  Other Sellers were not so fortunate and my heart goes out to them.  They now have to deal with making a huge decision of fixing the house or selling the house.  Some Sellers may not even have insurance on their house.  However, if they do have insurance, let me explain the process.

An insurance claim can be long and dragged out with many Sellers becoming very frustrated with the insurance company’s findings.  These are Sellers that may need your help with you buying their house.  First, let me explain the process on Insurance Claims.  Sellers will notify the insurance company of damage to the property along with providing them a list of items damaged.  If the Insurance Company and the Sellers can come to an agreement, then a check is sent to them in their name and the names of all mortgage companies that may have a lien on the property.  Pursuant to the terms of the mortgage that was signed by the Sellers, all insurance proceeds are to be used to re-build the property to make sure that the mortgage companies have an asset that is worth the amount of their loan.   When there are large claims of loss to the insurance company, they normally dispute the amount of the claim and the Seller will have to hire an independent insurance adjuster to assist them in disputing the claim.

I am going to tell you about a home that I purchased from a Seller that had fire damage.  First off, the Seller had already contacted the insurance company and the claim was approved.  However, the funds were to be sent to the Seller’s contractor in drafts.  My company is a Limited Liability Company, so we were the company that would be the contractor for the Seller.  We had to perform a specific amount of work and then they would send out someone to inspect the work and issue a check to our company.   So … we knew how much money the Insurance Company was going to pay for the repairs to the home.  We knew how much money it was going to cost for the repairs which, by the way, was lower than the amount that the Seller was given on the insurance claim.

How did I figure out the purchase price of the home?  First, I needed to know the value of the home after all the repairs; this is the After Repaired Value.  I then needed to know my cost for the repairs of the home and the cost for the repairs that the insurance company was willing to pay.  I used a simple formula…I took the ARV x 65% – My Repair Cost = Maximum Allowable Offer.  I also deducted the amount of insurance claim from the amount of my repairs to see how much more I could give the Seller.  Let me give you an example:

ARV ($100,000) x 65% = $65,000 – My Repairs ($25,000) = Maximum Allowable Offer $40,000

Insurance Claim $45,000 – My Repairs $25,000 = $20,000 difference

Maximum Allowable Offer $40,000 + $20,000 = New Maximum Allowable Offer of $60,000

This was a win-win situation for my Seller.  I prepared a contract that clearly stated all the terms and conditions of the agreement and a Deed was held in escrow until the insurance claim was completed and I could purchase the property.  If I would have purchased the property immediately then the insurance claim could be invalid as the Seller no longer owns the home and I didn’t want to take the chance with having any problems.  Should you purchase a property from a Seller who has an insurance claim and you are thinking of acting as their contractor, you will need to read all the paperwork.  A Licensed Contractor may be necessary, as it was in my deal, along with having an Attorney assist you with all the paperwork.

I hope this thought will help you assist many Sellers that may have to sell, have insurance and need our help.  Be fair with your offer and make a win-win situation and don’t take advantage of the situation.  We all need to work together to help people during these times of need.  Whatever you do as an Investor, it affects all of us, so make it a win-win situation or walk away!

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

Like me on www.facebook.com/sellfastrealty

 

 

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Fighting Value on Short Sales

number1The number one thing you need to understand about a short sale is that the short sale lender must realize the true market value of a property.  Recently we got a house in Sanford that needs everything and I mean everything redone inside and out.  The house has multiple types of siding, the tile inside the house has been pieced together, various sizes and colors, and is pushing up from the ground due to water damage, the rotted wall from the 3rd bedroom was removed which makes the house a 2 bedroom, the air conditioner is not working, doors, lights, fixtures are all missing, and the kitchen cabinets have mold all over them.  SPS is the servicer for the Short Sale Lender and they are really easy to work with.  In fact, they normally process a short sale within 30 days, so you need to be ready when you submit the short sale package to the bank and ask them to provide you with a Broker Price Opinion (BPO) or an Appraisal.

We submitted everything into the bank and were very excited to immediately hear from a BPO Agent (Real Estate Agent) stating that she has been instructed by the Bank to go out and get value.  We scheduled an appointment to meet her out there.  We had everything ready in a BPO/Appraisal Package to provide to her.  We had the following items:  Purchase Agreement, Estimate for Repairs from a Contractor, Comparables and liens from the City for major code violations.  We were at the house 30 minutes in advance so that we could be ready to meet, as some BPO Agents/Appraisers will come to the property earlier than what they stated and we did not want to miss meeting her there.  However, to our surprise, she sent a guy to take pictures of the property which we call “a picture taker.”  Now you would think that pictures are worth a thousand words, however, this picture taker did not provide the Real Estate Agent with any information about the repairs, comparables or liens on the property.  However, we did forward it to the Agent, but since they only make $50 to $75 on a BPO, she was pretty much done with the value on the property.  As you would guess, the value came back “HIGH.”

This was very disappointing knowing that SPS works quickly now we have to fight the value of the property.  First off, we instructed SPS that the Real Estate Agent did not even come to the house and sent a picture taker doing a MAJOR disservice to the Bank.  What that means is that she as a Real Estate Agent is giving her opinion of value on a home that she didn’t even look at.  Of course we pointed out all the problems with the house to the picture taker but the physical smell and condition alone would have had this Real Estate Agent rethinking her value by far, had she actually shown up.  This house can only be sold to a cash buyer due to the condition of everything!!  A conventional buyer would not be able to even get financing due to every single room in the house has major damage including the roof!  The house is not habitable as it stands.

When you fight value of the property depending on the type of loan, the purpose to dispute the value is to get another BPO Agent that will come out to the house and report all of the repairs needed.  Obviously, if you have been doing short sales for sometime you understand that any cosmetic repairs such as paint, carpet and updating is not considered.  However, non-functional use of the property such as it has missing doors, tile pushed up from the ground, mold, entire walls removed, air conditioner not working, roof leaking these items are not cosmetic and need to be considered in the value.

So now the fight is on!!  We have to send in all the pictures, repair costs with pictures of the condition and the repairs needed and comparables to justify that their price is too high.  I wish we could send them the smell or the feel of the property when you walk in, as you can’t even catch your breath!  Then we need to wait for the investor to review the pictures, repair estimates and comparables to see if they are willing to order another BPO.  If they do not, then we need to wait out the BPO value for 90 days, as that is how long the value will be effective with the Bank.  During this time, the house will just deteriorate even more which is disappointing.  All it took was for a Real Estate Agent to come out and do her job instead of just looking at pictures.  Our goal is for the Bank to see the injustice that the BPO Agent did and re-order another BPO so that this property can be sold asap.

 

The lesson learned on this situation is if the Real Estate Agent states that she is coming out and sends a picture taker instead, refuse to allow access to them and call the bank and request another BPO Agent as they are suppose to spend a minimum of 15 minutes in a home, per another BPO Agent.  If you know anything about BPO Agents, they race through the home in 5 minutes or less and they don’t tell the true story to the Bank which causes lots of delays in short sales.  Always meet the BPO Agent, have a list of repairs from a contractor and comparables.  Remember though, they do not have to take this information from you, but the Bank will always want to see them, so you need to be prepared!!!

 

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

Like me on www.facebook.com/sellfastrealty

 

 

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