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Becoming a Successful Real Estate Investor

I am writing this article because I mentor so many people who desire to become successful in real estate; however, their life gets in the way of educating themselves. Making offers on the Multiple Listing Service (MLS) is a great way to find Sellers, yet, when you submit an offer to the Seller, the Realtor really doesn’t know the answers to the following questions. Is there a mortgage on the property? Are the Sellers in foreclosure (unless it is a short sale)? Is it a probate matter and how many heirs are in the estate? What permits have been pulled for the property and what dates were items like the roof or A/C installed (this information is sometimes provided in a Sellers Disclosure)?

After talking with a Seller and/or finding a Vacant Home, the research you do is a vital part of your business success. I provide students with over 43 ways to find motivated sellers without using the MLS. Knowing in-depth information about the Seller’s situation, ownership and mortgage balance allows me to negotiate and close more deals than just listening to what a Seller has told me. In fact, Sellers normally tell you what they want and not what they NEED. In order to make a deal work for all parties, we need to find out what they NEED, not what they want, then see how/if we can create a win-win situation.

There are many moving parts to the puzzle. I am recommending saving the following websites as favorites in your computer to be successful in your county, city and state. This allows you easy access to public records that may or may not be free, but are a necessity in order to negotiate and close transactions. Once you find your county, city and state websites, you need to spend at least 1 hour exploring it. Click on all links and call the helpline for each website to understand step by step how to research property. If you don’t understand over the telephone how they are telling you to search, they all have computers in their office that are free to the public. Go down to the county, city or state office and ask them to show you step by step and see if they have handwritten instructions. If not, then make sure you write it down step by step so you have it for future reference.

City/County Treasurer along with Property Appraiser Website – I work in multiple states and have found that each State, County and City are different. What you really need to find out is the following: Information on the taxes, square footage on the house, and permits pulled on the property. Let’s start with the Treasurer’s Office. Google search the name of your City or County Treasurer and look for Tax Information. Enter the Seller’s address and what I am looking for here is to see if the mailing address for the tax bill is different than the home address, if the property is being claimed as a homestead or is it a rental, and if the taxes are paid and the amounts. Some Treasurer’s sites will provide you information about the property and land which includes square footage, permits, purchase amount, dates and comparables.

County Website For Recording Deeds – Google search the name of your county register of deeds and look for official record search. This site is where they record all of the deeds, mortgages, and probate documents. Some websites are known by register of deeds and others are known as county clerk’s office. This allows you to search by the Seller’s name. What I have learned from many of these websites is that the less information you enter in the better. For instance, if your Seller is Jane L. Doe, I would only search by Jane Doe and I would read the instructions as some use last name first and some require commas in between last and first name. This also allows you to pull up other documents that may have been recorded against the property but did not include the Seller’s middle initial. I would sort everything chronologically by clicking on the ‘date’ column header and see if it will sort with the most current year at the top. You will also need to know your legal description of the property in question as this is how the county files official documents based on legal descriptions and not addresses. This information is provided to you by two different websites: Your County/City Treasurer or your Property Appraiser Website.

County Website For Civil and Probate –Google search the name of your county civil court or your county probate court and look for official record search. Let’s start first with the Civil Court. This site is where they record all of the civil actions against the seller such as a foreclosure action, any legal actions (divorce, credit card debts, etc.) The Probate Court may allow you to see that there is a Probate action filed and may name the personal representative; however, since this information is private, you would have to personally go to the court to view the records as to how many heirs and what assets and debts are included in the probate. Both sites allow you to search by the Seller’s name. Again, less is best when searching for a Seller (read above instructions). Sort by date, if possible, and work your way through the information. Civil actions may say ‘closed,’ but you should still open them to view the outcome of each record.

One of the most helpful sites that I like to use is www.RealtyTrac.com which has a program, costing less than $200/year, where I am able to look up hundreds of properties. I can see if they are in foreclosure, how many mortgages are on the property, date of purchase and amount, name and address of owner, comparables and lots more. I do have to say that some of their information is not always current, so you will have to look closely at dates, as with most other programs out there. If you are just looking for foreclosures, I would recommend finding a local list provider for pre-foreclosures, as RealtyTrac is more national. Remember, judicial and non-judicial foreclosure actions are listed differently.

I would recommend that even if you don’t have a property to research, use your own address or your neighbor’s address to explore and learn these websites. Print and keep this article near your computer for future reference. Remember, your success is in your hands, as I have provided you with the tools…now take action and follow through with my instructions!

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 kick off 2017 with high success and help you 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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Knowing the After Repaired Value on Your Flip House

As an Investor, having a Realtor to work with is important in your business if you are buying or selling houses on the Multiple Listing Services. Many new Investors rely on their Realtor to send them “good deals” to buy, hold, fix and/or flip. However, a Realtor does not know what good deal means to an Investor. A good deal for us could be the cash flow that you receive on a rental property or it could be the profit that you would receive from reselling the home. As Investors, you are taught a MAO “Maximum Allowable Offer” Formula in which you use to make offers on homes for buying, fixing and reselling. The formula varies based on your own situation. The average formula used for Investors who have to get hard money to purchase the home would be: ARV (After repaired Value) x 65% – Repairs = MAO. Let me give you an example: $100,000 (ARV) x 65% = $65,000 – $10,000 Repairs = $55,000 Maximum Allowable Offer. This formula would then leave you with $35,000 for holding costs, cost of money, closing costs of purchase and resale, and then profit. Your MAO formula would be different if you are purchasing the home as a Landlord and/or you have your own money to fund the deal. You may be willing to pay between 70-75% of the After Repaired Value for the home – Repairs = Your MAO.

Determining the After Repaired Value on a property is very important and you should use comparables no more than .5 miles away and no more than 6 months old. I like to stay in the subdivision where your property is, as each subdivision has its own amenities such as gates, pools, and homeowner associations which will make a difference on your comparables. When making an offer on a home, you should always drive AT LEAST 2 streets in front of the house and 2 streets behind the house. Always pay attention if the subdivisions change drastically in the price and the subdivision amenities. I also like to ask for active, active with contracts and pending properties in that area so you will know what comparables are going to close that you are able to use for comparables. Obviously, you can’t use active houses or pending houses until they sell, but knowing that the same square footage house as yours in the same neighborhood is selling for $20,000 more is very important.

Many Realtors are able to set you up with a website for your comparables so that you can take the time to look at each and every one of them. Key factors to look for are the date they sold, what type of sale it was, and all the updates that were completed. I have found that often Investors will either go too high or too low on determining their After Repaired Value. When I first started out as an Investor, I hired an Appraiser to come out and appraise the house in its present condition and also in an after-repaired condition, too. I learned so much from the Appraiser as to what would increase the value on the property and what would not; but this was done after the home passed my home inspection and I had used sold comparables to determine what I thought would be a fair after repaired value. You could also ask your Realtor to provide you with a comparative market analysis (CMA) by either providing them the address and pictures of the house, or taking them to the house and providing them with a list of upgrades. Also, ask them what they what price they would list the house. However, what I did find was that, if you were using the same Realtor to buy the house and then to re-list to sell, sometimes their values would be higher than what you could truly get.

I would suggest that you have a minimum of 6 solid comparables that you can use to determine the after repaired value on your property. The comparables should have almost the same amenities such as: garage, carport, pool, basement, Florida room, same number of bedrooms/bathrooms, no more than 100 square feet difference than your house, and should be all one story or all two stories, if possible. Why six comparables? That is because if you are selling your home to an FHA Buyer, you will need two appraisals when selling after 90 days from your purchase date, as they require that the Seller (You/Investor) has owned the home for a period of 90 days. In addition, the Purchase Agreement cannot be signed between the Seller (You) and your new Buyer until the 91st day that the Seller/Investor has owned the property which is called “seasoning.” You can sell to a cash, conventional or VA buyer; however, before signing a contract with any Buyer, always call the mortgage company and ask if there is a “seasoning” requirement for the Seller as you are selling a flip house. I also like to have sold comparables that are no more than 6 months old so that is why I will look at the active, active with contract and pending properties, too.

Remember, you will need to purchase the property, rehab it, and if you can’t sell it to cash, conventional or VA Buyer, then you will need to wait 91 days to sell to an FHA Buyer. This would mean that if you are counting on your comparables which are already 6 months old from the date of purchase, they are now 9 months old and the appraiser may not use them due to the fact that our market is always changing. Remember though, an appraisal is just an opinion and if you have provide the appraiser with comparables close to all the amenities of your house and a list of all the updates, you should have no problems with the house appraising especially in a Sellers’ market.

I suggest you learn your market and stick to investing in a few select neighborhoods that you really know the market value of houses. I am not saying don’t make offers out of your area, but finding your niche neighborhoods will make you tons of money.

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 kick off 2017 with high success 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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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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