Posted by Frustrated on March 18, 2000 at 24:07:21:
Sure the courses say find motivated sellers. They also say to use realtors and keep making offers! When working w/ realtors you don’t really know if the seller is truely motivated or not. As long as the numbers work, just make the offer, right? Why limit yourself to searching just for motivated sellers? I think it is important to do both in order to maximize your deals. Thanks for responding!!!
HOW AM I SUPPOSED TO FLIP W/ NO MONEY? - Posted by Frustrated
Posted by Frustrated on March 17, 2000 at 17:08:31:
I have selected some houses and am in the middle of signing the contracts and I find out that the buyer will expect proof that I have the money to buy before they will accept and sign the contract.
The price of the offers range from $75,000 - $160,000. I do not have this kind of money so where am I supposed to get proof that I do? I thought flipping properties was a good place to start because you don’t need money.
I made all cash, quick closing, and no contingency offers with $1000 earnest money like the study courses say. But they don’t say where to get the proof that I have the money when I really don’t.
Please help!
-Frustrated
Re: HOW AM I SUPPOSED TO FLIP W/ NO MONEY? - Posted by Jim IL
Posted by Jim IL on March 17, 2000 at 21:04:53:
Frustrated,
There are many ways to address this issue, if and when it shows its head.
I did my first flip deal on a bank owned home.
The seller (the bank) wanted me to show proof of funds, because they previously had contracts fall through. (could not really blame them)
I did not have the money, and my buyer was not quite done getting the loan they apllied for. I was confident that my buyer would get the loan, but we still did not have “proof of funds” for my buyer or me.
So, I handled the first one this way;
I drafted a letter to the seller, and said that I would NOT show them proof of funds. I told them that I was an investor and utilized many different funding sources, all of which required a signed contract to get. I told them that if this was not good enough, so be it, and on to the next deal. I also told them that this was a business decision and that my choice of funding was one of the ways I worked to maximize my profits.
Can you believe they took it?
There were some factors here though.
This was December of 1998, around the 10th of the month, and the seller wanted me to close by the end of the month. (they needed to clear the books.)
I said I could and would, and to be sure, the seller included a clause in the agreement that stated I pay them an extra $50/day for every day we extended the close. That was the compromise for the lack of proof of funds. (gotta be creative when you do not have CASH!)
So, since my buyer was confident they could close that fast, I also put the $50/day clause in that agreement as well.
Good thing too.
The closing did not take place until mid January, and my buyer paid me the funds I needed to pay my seller.
The deal was good enough, so the extra $50/day was a drop in the bucket.
After this deal, I did encounter a few more like this.
Basically, what I did now was to have a lender friend draw up a letter saying that he had done loans for me before and based on what I had told him of the deal at hand, I would get funding.
If this was not good enough for the seller, I walked away.
I do not really do flips anymore, but if and when I have to, I can tell you my exit plan will be more solid than before.
But, since I had no money, or source of funds to begin, I just made my contracts all have liquidated damages clauses saying that my earnest money was the only thing I lost if I could not close.
To date, only one deal did not close, and frankly, that was my own fault.
I failed at my due diligence and contracted too high.
No big deal, my earnest money was small anyway and all that I lost.
So, what I am saying to you is this;
Get the deal low enough, and funds will be available, and if not, maybe you contracted too high.
And, if a lender or seller is asking for you to jump thru hoops to buy their property, walk away.
There are plenty of truly motivated sellers out there to sweat just one deal.
Hope this rambling post helps a bit.
I am now off to go drink some irish whisky and good beer.
Happy St. Patricks day,
Jim IL
P.S. The only times I have been asked for “proof of funds” was when the homes were bank owned properties. Other sellers never ask for anything except “when can you close?”.
Am I misunderstanding - Posted by doone
Posted by doone on March 17, 2000 at 19:28:20:
I’ve been interested in flipping, but haven’t actually done one, so please excuse me if I’m being ignorant.
Did you say that the ‘buyer’ expects you to show proof that you have funding, not the ‘seller’? Why would the buyer care if you have funding if you’re doing a simultaneous close? If this is the case, could you find another buyer? How about owner financing with someone to buy the note short term at the closing?
Am I missing something here?
Doone
Since your already in this pickle… - Posted by Ben (NJ)
Posted by Ben (NJ) on March 17, 2000 at 19:11:56:
why not find a hard money lender who will put up the funds for the short time period you need to find a buyer. If you have a good LTV (65% or less) you should have no problem.
Re: Who is teaching that? (NAME PLEASE)>>> - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on March 17, 2000 at 18:25:40:
Hello Frustrated, You ain’t seen nuttin yet. When you start signing contracts that you cannot complete you are having a serious problem. As a matter of fact you are the problem. The $1,000 that you mentioned (earnest money) is gone… If the seller (s) decide to press the issue you might be forced to close on all of the transaction(s). You probably should find lots of money fast. Perhaps it is time to re-read the meterial…ED
Your first line says it all. - Posted by Brandi_TX
Posted by Brandi_TX on March 17, 2000 at 17:35:22:
You said “I have selected some houses…”
Find motivated sellers, not houses. I am near positive your courses did say to do that.
Brandi_TX
Thanks for the helpful response! - Posted by Frustrated
Posted by Frustrated on March 17, 2000 at 23:34:10:
I really appreciate your advice! I’m glad you took the time to respond. It really helps to hear someone’s personal story that directly relates to my problem! Thanks!
My bad…sorry! - Posted by Frustrated
Posted by Frustrated on March 17, 2000 at 23:23:01:
You certainly have a reason to be confused. I did mean to say seller, not buyer. The seller wants proof. Sorry about that. I guess I was typing fast and didn’t really proof read it. Unfortunately it is listed w/ a realtor and they are asking cash or conventional financing. Owner financing would be a much better situation. Thank you very much for catching my error and responding!!!
I HAVN’T SIGNED ANY CONTRACTS! - Posted by Frustrated
Posted by Frustrated on March 17, 2000 at 23:48:17:
I didn’t mean to give you the wrong idea! I was just going over the contracts with my realtor when she mentioned that the seller’s would expect proof of funds before signing. I have not submitted any contracts yet. I certainly know my risks once the contract has been signed by the seller. This is why I am asking about where to get proof of funds when you don’t really have any yet. Thanks for responding!!!
contingencies in contracts? - Posted by doone
Posted by doone on March 17, 2000 at 19:33:37:
Aren’t you supposed to have a bunch of contingencies in a contract if you’re flipping? E.G: “offer subject to associates inspection/approval”. An escape?
Doone
Re: Who is teaching that? (NAME PLEASE)>>> - Posted by David Alexander
Posted by David Alexander on March 17, 2000 at 18:35:08:
the point is and BRandi made it. If your dealing with motivated sellers you wont have to put up any earnest money.
I have only had to put up earnest money twice in Investing careeer although short.
Once on a Hud home, 500 bucks, and once on a Mh park (sizable property, sizable price) a 1000. The Hud home I closed on, it was a good deal. The parks I’m still working on.
Motivated sellers are the key.
David Alexander