Finding Deals in a Seller’s Market

findingdealsThe number one thing that makes an Investor successful is finding, buying and selling properties from a Motivated Seller. As I have stated in previous articles, the only thing that makes Investors money is a Motivated Seller. So … how do you find motivated Sellers when it’s a Seller’s market? There are several ways to become successful and as an Investor the key to your success is having a marketing machine running all the time. A Seller’s market means that when a property is listed on the Multiple Listing Service, the Sellers receive multiple offers from Investors, homeowners and landlords. Obviously a homeowner is willing to pay list price or more for the house since they are going to live in the property and there is a personal attachment. Landlords will pay up to 75% to 80% of the market value and Investors pay 60% to 65% of market value. Yes, the repairs come into consideration for the Landlord and the Investor, however, the homeowner is more accepting of repairs needed to the home, as they are planning on making changes anyway. Therefore, submitting offers on the Multiple Listing Service is very time consuming for an Investor and the rate of acceptance is much lower than for a homeowner.

The first thing that I would recommend to all Investors is that you need to find a List Source that is accurate and updated every 30 days, at minimum, so that we could mail to them and/or door knock. Recently I have been mentoring a group of students and we were all using the same list provider and we decided that since we were not getting as many calls as I truly believed we should have received, we started comparing this List with another List Source. What we found out is that the List source that we had been using was more than 1 year outdated, meaning that when the property was sold to another individual, the old Seller’s name was still on this list, wasting all of our marketing dollars. I know that Investors get disappointed easily as many people sell the sizzle of investing in real estate and not the meat and potatoes of what is required to get your business up, going and successful.

Every Investor should have 1-2 List Sources to use for marketing. They should also review their leads and make sure that the information that the List Source is providing is correct information. I am not saying go through all your leads, I am just saying go through the first three to four leads to determine if your List Source has the correct information.

What I have also found, as a Mentor, many Investors will spend most of their money on training and not leave a marketing budget to implement the training and allow you to become successful. Yes, there are several cheap ways to market such as business cards, bandit signs, flyers, social media and websites; however, to be successful in real estate you will need to do 5 different types of marketing. During my 1 Year Mentor Program, I help get you properly “business” structured, build a team, set a marketing budget and teach you how to find Sellers in several ways other than just making offers on the Multiple Listing Service. I truly do believe that Investors should do what their pocket book allows, meaning if you have to write, print and mail your own letters then let’s do it. However, when I Mentor individuals, I find out that life gets in their way, stopping them from mailing out letters, handing out business cards, putting up bandit signs, handing out flyers, and even marketing on social media. Therefore, I am recommending to my Students and everyone that is reading this article it is time for a SHIFT. You need to hire a company that specializes in sending out marketing letters and have them send out at least 500 letters for you to start your marketing machine. I know what you are thinking . . . I can’t afford it. Well, I am telling you that you can’t afford not too! Take the time to find a company that will write, print, stuff and mail your letters immediately. Trust me, you will start seeing a big increase in your deals!

I suggested this to one of my Mentor students from Michigan and on his first mailing, he got at least 7 Seller leads. He went and met with a Seller that is willing to sell her house to him well below market value. Your leads are ‘hot leads’ which means when a Seller calls you about their house, you should have an appointment set within 24 hrs to go look at their house even though you may not know for sure that it is a deal. Honestly, I can tell you that most Sellers will advise you that the house is in perfect shape and needs no repairs. That could be true for a house built in 1969, however, if we are buying that house to rehab and then competing to sell that house in this market, I will need to update the house to today’s standards to get top dollar when I sell.

Prior to going out to the house, you should have done research on the property so that you can see the values of the property (Zillow, RealtyTrac, Trulia) no more than .5 miles away and specifically in the same subdivision. If you are going to buy and then resell to a new homeowner, you will need to know what your market is bearing. Comparables need to be houses that have sold no more than 3 to 6 months ago. I also look at what is pending and active with contract, as they will also have an effect on the value of my home when I sell it.

You also need to do research on public websites to see who the owners are on the property, what they bought it for and all liens on the properties. Obviously, we can ask the Sellers these questions, however, sometimes that will not tell you the truth and/or they will believe that the second loan on the house is not owed because maybe it was taken out by their deceased spouse, sister etc. Every question that I have on my Seller Information Sheet is vital and needs an answer from the Seller, as there are several ways to purchase a home. Subject to, Cash, Installment for Contract, Option, Lease Option or a combination of things.

When you go to the house, make sure you take pictures of every room as if you were going to market the house. Also, in every room of the house, take pictures of all the bad things that need repairs and/or questions you may have. You should be at a house for at least 30 minutes or more in order to take your time and build rapport with the Seller. You should also have a purchase contract ready to be signed on the property the day you go or within 24 hours after seeing the house. You should fill out a Property Inspection Report (provided in my System) that will help you determine what you think needs to be done to the house, versus trying to remember everything.

Many Investors are afraid that if they make an offer on the property and it is too high, that they will lose money on the deal. You all need to get over this! A Purchase Contract has a minimum of 15 days inspection period so during that time, you can have contractors, inspectors and/or Mentors/Partners come out and review the condition of the home. If the price is too high on your offer, you can counter the Sellers and if they won’t accept the offer, then back out of the contract. Stop thinking about it, just go get a deal and make a mess! If you have a good Mentor, then she will clean up your mess! That is what I tell all my Student/Partners!

I am going to summarize this Article to break it down and make it so simple for you.

1) Obtain a List Source,

2) Pay to have a minimum of 500 letters mailed out for you,

3) Fill out Seller Information Sheets and set an appointment with the Seller 24 hours from the time of their call,

4) Do research on the property such as values, deeds, mortgages or any other liens,

5) Have a Purchase Contract ready to sign when you go to the house,

6) Take pictures of the house good and ugly, fill out the Property Inspection Report to determine the possible costs for repairs (Take a guess if you don’t know and then learn costs for future deals,

7) Fill in the amount of the Purchase Contract whether it is terms or cash,

8) Have an inspection with your contractors, mentors/partners or maybe even possible buyers,

9) Counter the Seller if the numbers don’t make sense,

10) Close the deal and make MONEY!!!

I hope that this article has helped you all move past the FEAR of failure, as in any deal, there is an escape clause and Buyers always can walk away from deals without losing 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 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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Still Crushing Short Sales!

crushingshortsaleMany Investors don’t think that they can short sale an FHA loan and still make a profit, due to the guideline that FHA accepts a minimum 88% of the appraised value. I am here to tell you about an FHA deal that will bring a Pretty Profit!! This house is a 3 Bed/1.5 Bath/1.5 car garage, approximately 1200 sq ft in Casselberry. From the beginning, it was challenging since we had non-paying tenants in the home that were not as cooperate as a Seller would be for access to the property. The best part of a typical short sale is that a lender will obtain a value that is good for 90 days and if you are in a Seller’s market, you end up with a higher profit, since the values are increasing based on the sales.

The Seller just wanted out of this house debt and didn’t know what to do with non-paying Tenants!! The lead came in from my office signage. The property was listed and an offer was submitted. It took the short sale lender about 90 days before they ordered the value on the property. We were very concerned about having access to the home when the appraiser came out from the short sale lender. On an FHA deal, the short sale lender requires an appraisal on the home which is good for 4 to 6 months, versus the standard 90 days for a BPO value.

I knew that the Tenants were going to be a problem and I was prepared to handle that situation. The Tenants had knowledge of how a short sale worked, so they wanted to live in the house as long as possible without paying rent. Since the number one thing in a short sale is to meet the BPO Agent/Appraiser to make sure that all the repairs were considered when determining value, I knew the Tenants needed to go! The Tenants were evicted so there were no problems with meeting the BPO Agent/Appraiser out at the house.

The house was built in the 1980’s and was not in bad shape at all. The repair was a light rehab which consisted of a new roof, new air conditioning, adding a shower in the master bathroom, paint, carpet, new garage door and new kitchen cabinets. The cost for the rehab and the supplies was approximately $20,000, most of this was from the new roof and new air conditioner.

Whenever I purchase a property and plan on rehabbing and then reselling it, I include a minimum of 4 months hold-time due to the seasoning on the property. Seasoning is how long the new Seller has owned the property. If I wanted to sell the property to another FHA buyer, then they require 91 days of seasoning and two appraisals to make sure that the value on the property is correct. If I wanted to sell the property to a conventional buyer, as long as that lender was not mirroring the FHA guidelines, I could sell to a buyer in 31 days. Obviously, there is no seasoning required for a cash buyer.

The property was purchased for $78,000 and I will not be listing it through the MLS, as I am going to sell the house quickly without paying a realtor commission. The property will be sold for $145,000.00 with a profit of $25,000. Not bad for a light rehab!

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!

 

Still Crushing Short Sales,

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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Short Sales Still Sailing Strong!

short sale floridaRight now, in my office, I am receiving short sales from sellers who decided to do a loan modification which was only valid for 3-5 years. In my opinion, this is the second wave of short sales that you will be coming across. Many Investors stay away from short sales because they say it takes “too long” or they do not want to the negotiate the short sale itself. After speaking with them, I find out that they really don’t understand the short sale process. So they miss out on BIG profits that are available by making offers on short sales that are listed and/or controlling the whole deal by finding the seller that needs to do a short sale, list it and have a title company process the short sale. When you close and make your $thousands$, that would get you real excited about short sales! The key to a successful short sale is making sure that the Short Sale Lender has the correct value on the property and this is where so many Investors and Realtors fail!

Many title companies will agree to negotiate the short sale on the property for the cost of title work so all they need is the financial package from the Seller and a Purchase Agreement from YOU! In fact, title companies are contacting the Seller directly, so you do not even have to obtain the information from the Seller when it is needed. Why, then, are Investors not making offers??? I believe it is due to a lack of knowledge. You have to know what to tell the title company’s negotiator to say to the short sale lender’s negotiator if you want to create a great discount. My Home Study Course teaches you what to say and ask, in order to create your great discount.

I believe that every Investor should have the knowledge of how a short sale works so that when they make an offer on the house, they make sure that the Realtor knows the key to a successful short sale which is the value of the home! The process of the Short Sale is very simple, you need a HUD, Purchase Agreement, Financial Package, Proof of Funds letter from the Buyer and an Authorization. Once the Short Sale Lender receives this information, they will schedule someone to come out and obtain the value on the property. That someone could be a Realtor or Broker which performs a BPO (Broker Price Opinion) or an Appraiser who completes a full appraisal. I always recommend the following:

  1. Make sure that the lock box code to the house is not on the MLS or they will sneak in without you.
  2. Make sure that there is not an electronic lockbox on the home.
  3. Make sure that YOU as the Buyer are able to meet the Appraiser or Realtor.
  4. Make sure that you bring a copy of the Purchase Agreement.
  5. Make sure you have 3 Sold Comparables, no more than .5 miles away, that have closed within 3 to 6 months.
  6. Make sure you have a Rehab Estimate, or two, including all the major problems with the house with pictures of what needs to be repaired
  7. Make sure that YOU are at the house 30 minutes prior to appointment time, they often show up early and you’ll miss them.

groupMany Investors/Buyers will allow the listing agent to control the BPO/Appraisal and they don’t even meet that person there to provide them with the information of the house. Therefore all parties, Buyer, Seller, listing agent and selling agent are always confused as to why the value did not come in at a reasonable value for the house. Many Realtors/Appraisers will not even consider any of the repairs and they are left to guess because it takes extra time for them to figure out the cost of the repairs, which they are not willing to do. Also, the Short Sale Lender does not consider any cosmetic repairs as a “qualified” repair. What are cosmetic repairs? Carpet, paint, appliances, landscaping, and updating the kitchen and bathrooms. What are qualified repairs? Air conditioner, plumbing, roof, electrical, drywall damage, missing cabinet doors where the cabinets will need to be replaced, mold, and major damages, etc. On the Rehab/Repair Estimate, should you still include the cosmetic items that the Short Sale Lender does not consider? Definitely yes; however remember you must have other qualified items included on the Rehab/Repair Estimate as well, or the BPO Agent/Appraiser will state there are no repairs needed in the home.

An Appraisal value is good for 4-6 months on a Fannie Mae, Freddie Mac, and FHA file. A BPO value is good for 90 days. So … if your Rehab/Repair Estimate is considered along with comparables, you should be able to purchase the short sale at a great discount!! Remember, if you are in a Seller’s market and you are seeing the values increasing monthly, you should have a slam dunk!

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!

Happy Negotiating!

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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