If you discover that there is a $20,000 lien againt the property and you aren’t able to get it released or reduced then it would kill the deal.
If there is a $100 lien again the property from the city because they had to mow the lawn then you should be able to make it work.
If you discover there is a wife that is on the deed but she died 2 years ago - then you can get a copy of the death certificate - and perhaps you’ll need some heirship affidavits - but you should be able to save the deal.
Each deal is different - you’ll learn new things from every obstacle you face. Sometimes it will require renegotiating with the seller - sometimes it will just require additional paperwork - and sometimes it will kill the deal.
What ever obstacles you discover - you need to make your “partner” aware of them - don’t try to hide the facts.
Posted by Sonia(VA) on December 27, 1998 at 17:25:03:
Could anyone tell me where to find an ‘Assignment Contract’ to be used in flips?
Also, if my buyer does not have my full assignment fee and I take partial cash upfront with a note for the balance due at closing, how do I protect myself if the buyer does not close. I know about the ‘subject to approval by buyer’s partner’ clause in my purchase contract with the seller.
I also have another ‘question’. Please tell me if this is correct:
I find several vacant homes that need repair
I go to the courthouse in search of the owner’s name and address, and some comparable values
I send a letter to the owner stating that I buy homes, and if they want all cash with very quick closing, to contact me.
If I receive responses, I then look at the house, estimate the cost of repairs, and make an offer of 50% of the homes after repair value.
If the offer is accepted, I contact my list of rehab investors to see who is interested.
I sell my position in the purchase contract via an assignment contract to the rehab investor for a fee.
I am done with this deal. On to the next one!
I know I’ve made this sound very simple, but after reading, asking questions, and re-reading archived posts, this is how simple it sounds to me!
Flipping IS simple - you’ve basically got the steps down. The only thing I would add is getting the title checked out before you contact “partners”.
I would NOT advise taking back a note unless you know the investor quite well. If they don’t have the cash to buy the house, pay closing costs, pay you, buy the materials to fix up the houses, pay someone else to do the work PLUS have a reserve for holding costs - then they don’t have any business taking on a rehab.
Furthermore, if they don’t have much experience rehabbing then they could do a bad job on the house - underestimate the rehab costs, and it could take forever to sell - or sell for much less than they anticipate which could leave you with NO money for your note for a long, long time.
Deal with experienced investors with at least a few rehabs under their belt - get ALL your assignment fee either up front or at closing when they buy and you’ll have a lot less headaches.
Posted by SCook85 on December 28, 1998 at 24:50:28:
Sonia,
I see a number of people coming to the newsgroup saying to offer 50% of ARV. Where does this number come from? If you have a home that is worth $100,000 after repairs and it needs $50,000 in repairs, do you think $50,000 is a good deal for this home? I don’t. Most of the homes that I do buy end up in the 50-60% range of the ARV, but there is a method to how I come up with those numbers. I do factor in repairs.
The method that I use is to take 70% of the ARV and subtract my costs from there. This is how I derive my offers.
Example: $100,000 ARV
30,000 in repairs
3,500 in closing costs
I would make $70,000 the most I wanted to be in this home after all repairs and costs have been paid for. From this I would subtract $33,500 and come up with an offer of $36,500. (You still need to subtract your profits for your flip).
This is a basic formula that is much safer than offering 50% of ARV. In the case above you would get hurt if you offered $50,000 (Although there are some people who might by it, chances are it won’t happen in a reasonable amount of time to pull off your flip).
When you are talking about cheaper homes with ARV’s of 40k-60k, your formula can get way out of hand. Be careful and put a little more thought into how you come up with your offers.
Hey Sonia,
You should be able to find “Assignment of contract” forms at any office supply store such as staples OR I can fax or email you one. Just email me and let me know if want me to.
Good luck!
Tarun
Posted by Lucifer on December 29, 1998 at 12:03:46:
Jackie;
You are always there for Us newbies and we all appreciate your input and free advice as nothing these days or very little is free. Thank you .
You sent a contract to Sonia recently is this an assignment contraxct to flip a property to be released from the original? I mean after you sign from the seller with a clause and find a cash buyer is this where the contract comes in?
Thank you and Happy New Year
Lucifer
Posted by Sonia(VA) on December 28, 1998 at 17:59:36:
Jackie in Dallas,
This may sound like a silly question, but if I don’t ask, then I’ll really feel silly…
When you say check out the title before contacting ‘partners’, how do I do this? I know about the title companies and title insurance, but will you explain the mechanics of ‘checking out the title’ please?
Thanks
Sonia
P.S.
Thanks for the Assignment Contract. I have found about 10 properties that I am currently doing research on now! I have also talked to 3 rehab investors in my area who want me to call them when I have found something, and you were right, they were very helpful when I told them I was just starting out!
To “check out” a title means to have a title search done. Once you develop a working relationship with a title company they will do it for you for free - but until then you will probably have to pay $10 - $50 to get the title searched.
Ask the title company you plan to use who they recommend.
What you want to find out is if there are any other liens or judgements against the property that could screw up your deal. This could be back taxes - a pool that is not paid off, siding that was put on the house 5 years ago and not paid for, IRS liens, etc, etc.
A title search will also let you know if there are other people on the deed that need to be involved - like a wife or husband that the seller forgot to mention.
You’ll also find out if the seller is in bankruptcy
Of course you can just ask the seller if the title is clear - but you can’t count on a straight answer if there are problems.
You want to know about these kind of problems BEFORE you start calling investors. They could be deal killers!
Posted by Sonia(VA) on December 29, 1998 at 08:44:19:
If the title is NOT clear, ie the problems you mentioned, do I kill the deal? Or do I re-negotiate the purchase contract (subtract the amount from my offer)?
Is there a clause in the realtor’s or title company’s standard purchase contract that cover’s this, like…“Contract subject to clear title”?
Thanks
Sonia