I have prepared a thorough analysis of the customary timeline that a residential real estate transaction proceeds along for you to share with your first time home buyers.
On short sale transactions I make it a point to order title immediately. This makes clear the potential hurdles we will face during the transaction. The following are items that I look for specifically:
Wholesaling is a great way to make a profit on properties that you can procure at a reduced price. The key is to find a property at a discount, enter into a contract which will give you an equitable right to market the property and then locate a cash buyer that you will either assign your rights to or proceed with that party to a “double closing”. In the real world, what this means is that an investor will purchase a property for a sharply reduced price for instance let’s say the property is worth $100,000 and you get it for $50,000. You enter into a contract for that $50,000 price and then market the property to an “end” buyer who, say, agrees to pay $80,000. The first deal where you are buying for $50,000 is considered the “A-B deal“. The deal where you are selling it for $80,000 is considered the “B-Cdeal“. Most often, wholesalers will enter into a simultaneous transaction where they will use the money from “C“ to pay off “A”. This is a basic synopsis but conveys the spirit of a wholesale transaction.
There are instances where a homeowner will lose the property at a sheriff sale. They are given a 10 calendar day window within which to redeem the property. Often, an investor will be willing to purchase the property for the redemption amount plus a little extra to give the seller incentive to proceed with an expedited sale. In this instrance, the seller must move quickly to enter into a cash contract and sell within 10 calendar days. Often, the amount of the redemption figure will be paid to redeem the property and then the fine points of the transaction will be ironed out after the redemption has been paid to the sheriff. For example, if there are inspection issues and there is not enough time to work them out, the parties may agree to pay the redemption and hold escrow back from the seller if there is a profit to be made so that inspection issues can be properly addressed by the buyer’s contractors. As the real estate agent, you can make a very quick commission on such a deal since the property will typically go into contract on Monday and is sold by the following Tuesday at the latest.
Real estate owned (REO) and Dept of Housing and Urban Development (HUD) properties are properties that are basically owned a bank. REO properties have been foreclosed upon and are owned by the lender that foreclosed. HUD homes have been foreclosed upon by FHA lenders. Your best bet is to work directly with an REO broker to find these properties. To secure these deals, there are 4 main tips I can convey:
I will typcially reach out to local matrimonial attorneys on behalf of my real estate agents in an effort to generate listings for them. Quite often, parties that are divorcing need to sell their house and if you develop a strong relationship with a number of matrimonial attorneys that are local, they will be able to provide you with listings for parties will need to sell their house pursuant to a divorce. The same goes for estates - developing a relationship with a local Estate lawyer can produce the same types of listings.
I have conducted countless open houses and I use those as opportunities to develop one on one personal relationships with each person that walks in the door. In our business, any client that walks through the door is a prospective lead especially at an open house because they are looking for property and they are a captive audicen. If you are the listing agent and you are at an open house do not discount the fact that those buyers may become clients of yours for other reasons. I know that a lot of real estate agents focus mainly on listings but those buyers are looking for houses and even though they may not buy the house you are doing the open house on, they may be interested in something else down the street or in the area. I make it a specific point to personally get to know the people that come through the door and furthermore make it a point not to lose that lead – I specifically direct my attention to developing that lead. I strike while the iron is hot. Once a day or 2 goes by, the moment is lost. I do my best to engage the people, to get their phone numbers & email addresses and email and text them within 24 hours. I find out where they live currently and find out what communituies they are looking to move into; I take the time to get to know them individually & do not just let them walk around the house – I walk the house with them. If they show up with one of their own agents, of course let them be, but try to get to know the people that are coming to your home because they may ultimately become a client elsewhere for another reason – do not simply take for granted the fact that they are one of many looking at the house that you were showing that day. I take people around the house, room to room, and try to get them to envision themselves living in the house; I talk about their children and their families, the events they will have in the home and in the neighborhood, block parties, barbecues, birthdays, holiday gatherings, etc. As the broker, you need to bring that house to life - remember you are a SALESPERSON and YOU are selling that house.
Hardmoney lenders are a great resource - I work with at least five or six of them and you may need them from time to time on certain transactions where a client cannot obtain conventional financing - certain builders may also want to use a hard money lender who is in the business of lending to builders – there are number of lenders I work with that will lend 90% or even 100% to a builder if the builder has a proven track record. Do not discount the fact that a hard money lender might be able to rescue a deal for you - of course conventional lending is the best way to go for a client but some people don’t fit into that category and you need to go outside the box and have a resource of hard money lenders at your disposal that are available to jump in when and if a deal goes sideways. Clients who take advantage of a hard money loan should be advised that a typical hard money lender will loan up to 65% LTV (loan to value) of the home and interest rate are typically 12% and up. However, if the buyer repairs their credit and is timely with their payments, they often can re-finance within 12 months into a more conventional loan.
When a house is going into foreclosure, many investors will contact the homeowner directly to obtain authorization to work with foreclosing bank. The investor will seek to negotiate a loan modification or a forbearance agreement or a short sale on behalf of the seller at a greatly reduced rate if they can represent to the bank they can close quickly. Many homeowners have no idea how much they owe to the bank but investors who see a good opportunity and who can contact a lender directly on behalf of the seller can work with the lender pre-foreclosure since the bank is motivated to work with the homeowner before they have spend fees and costs on the foreclosure process. Furthermore, many of these banks do not want to take ownership of the physical property and maintain it because they then are responsible if something gets stolen or breaks etc. Therefore, jumping into a deal before foreclosure is underway sometimes will benefit an investor who can get a good deal, rehabilitate the home and either rent it out or sell it.
For those interested, a great website is noteschool.com.
Buying notes is often a better investment than owning property & collecting rent since, as the note holder, you are the bank. You do not have the “tenants and toilets” issue, per se. Many investors will look for performing (those that are being paid upon) and/or non-performing (those that are not being paid upon) notes and negotiate a reduced amount with the note holder to purchase them and then collect upon them. Often times, if you are the owner of a performing note you may think that the length of the note is the amount of time that you will be spending collecting but that is not the case - quite often, homeowners will sell the property or refinance it and a 15 year note maybe paid off in 5 years. Again, the beauty of beung a note holder is that you are not maintaining the property - you are just collecting upon the payments made by the homeowner. Of course there is work involved because if the homeowner stops paying and it becomes a non-performing note then you must foreclose but that is why you want to negotiate the best price and budget for that potential outcome.