Some answers - Posted by B.L.Renfrow
Posted by B.L.Renfrow on November 19, 2000 at 09:27:17:
Regarding #3, your ad, aside from the issues about offering to sell a house for another, I would keep it short and simple. I’ve found I get the most responses from ads which say something like: “I BUY HOUSES, ANY PRICE/CONDITION. CALL BRIAN AT…” I do occasionally change the wording a little, but when I stray too far from the basic message, the calls go down.
Another thought about the ad: I wouldn’t go too far in “dissing” the Realtors in public, specifically where you wrote, “Call me before you call a Realtor.” Don’t know about your area, but in mine, even though I rarely work with agents, I don’t need them bad-mouthing me all over town. I will certainly explain the advantages of dealing with me when talking with a seller, but I wouldn’t take aim at the profession in public like that!
Also, I agree with the other post which advised to get rid of the line about buying houses as a hobby. When you go see an auto mechanic, or a doctor, do you want to see someone who repairs cars or practices medicine as a hobby? Even if you are a part-time investor, it’s important to project an image as a professional.
Your profit: I was thinking mostly of closing costs and advertising expenses. You are correct in that you could certainly stipulate an upper limit to the costs you would bear. But, more importantly, why limit your profit to $5k per deal? There are plenty of deals out there where the profit potential is significantly greater…find the motivated sellers, and many times they’ll make you a FAR better deal.
Double closes: You could certainly try to assign the option to the buyer, or alternatively, assign your purchase contract back to the seller. But unless the purchaser is coming out of pocket for your assignment fee, it’s questionable whether many conventional lenders would let that slip through nowadays. Also, remember that conventional lenders are going to lend based on the LOWER of appraised value OR purchase price. That the property may comp at $85k does not mean a lender will lend based on that amount, if a buyer is purchasing for $82k.
Depending on the economics of your area, there may or may not be buyers out there who have the $3-$5k for an assignment fee in addition to the downpayment amount required by the lender. Around here, they’d be pretty scarce.
The title seasoning issue is one that is still unfolding; where it will end up is hard to say with certainty. But as of now, NO subprime lenders of which I am aware, and FEW conventional lenders will approve a deal with no title seasoning. Exceptions are VA and FHA loans…for the time being.
How to get around this?
- Deal with cash buyers only, such as flips to other investors.
- Assign your option. See discussion above.
- Create a note between the original seller and your buyer and broker the note at closing for cash.
- Season the title. This means you either buy with cash, owner financing or take title subject-to the existing financing. This has been my approach. I have stopped doing sandwich L/Os precisely because of this title seasoning business. Of my two remaining sandwich L/Os, I just negotiated one into a subject-to deal last week in which I took title in a land trust. The other, I’m not sure what I will do with quite yet. For various reasons, it’s not a subject-to candidate, so I may go the note route. But my point is, sandwich L/Os are what I started with, and up until fairly recently, they were an excellent starting place for newbies. But that has changed. They are now difficult, if not impossible, to pull off. So the answer is, when the market changes, change your methods.
Regarding disclosure requirements, it depends on your state. In mine, there are none. But that’s unusual these days. Nevertheless, the lead disclosure is mandatory everywhere.
I applaud your creative thinking. I think you have the drive to make it work for you. It’s just a matter of seeing what works for others, then applying the proven strategies to your own business.