How to buy a house in next 96 hrs ??? single mom - Posted by Lin (OR)

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How to buy a house in next 96 hrs ??? single mom - Posted by Lin (OR)

Posted by Lin (OR) on June 03, 2004 at 16:29:24:

I’m not a “never bought a house before” newbie (I made $30k on my first deal last year), but my experience with creative deals is limited except for extensive reading. I’ve never developed a marketing machine. Real estate agents found me my acquisitions. I own quite a few courses, but have been busy with little kids and a part time job, so I’ve not put my knowledge to use.

My circumstances have recently changed.

Here’s the situation:
I’m a newly-single mom with three young boys, and I need to find a new place to live, FAST. I hate to go out and pay retail for my home just because I’m in a time crunch. I know I can do better than that.

Here’s the challenge:

I need a 3-4 bdr house in a decent neighborhood in move-in condition - no fixers. I’d like to buy at at least a 10% discount. I’d like to take possession in under 30 days. The town I live in has 50,000 people,and I would prefer not to leave the school district here. Median home is priced at $180k. Sellers market, very hot.

credit score: 740
cash: $20,000
$1800/mo net from Lonnie deals and rentals
$50k in equity in a vacant lot (free and clear)
$70k in equity in a duplex (private party note)
$70k in equity in current home (credit union loan)
no job = lots of time to work on REI
big brain, lots of ambition and drive

If you were in my situation, how would you find a motivated seller and buy a house for yourself to live in using as little of your cash, credit, or equity as possible? Certainly the time frame is more flexible than 96 hours, but I’m really wanting to wrap up this chapter of my life ASAP, and prove to myself once and for all that I can go out and do this. No more fence sitting.

If any of my objectives are unworkable or conflicting, I’d appreciate hearing why, as well.

So, seasoned investors, how would you proceed under these circumstances, given my resources?

Your responses are very much appreciated.

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Re: How to buy a house in next 96 hrs ??? - Posted by bf

Posted by bf on June 05, 2004 at 24:03:57:

I did this very thing five years ago. The similarities are uncanny. I wanted to buy a house about 10% under value. Single parent, my oldest daughter was coming back to live with me, and I wanted to buy in a particular high school district.

I took the following steps:

  1. Got preapproved for a loan. This made it easy for me to get realtors (and more importantly, sellers) to take me seriously. It was also a must because I am self employed.

  2. Chose one realtor, and worked with him exclusively. I did this because I wanted him to make me his number one priority for five or six days. I came to him with a recommendation from a prior good client who had also purchased in a hurry, so he took me seriously. He saw a real commission coming, not pie in the sky, for spending time with me.

  3. I told him how much I had to put down ($10,000) and my loan approval ($130,000). I told him I had no intention of spending $140,000 under any circumstances, and to get that number out of his head. I told him I was underbuying. I’m self-employed with variable cash flow, and I wanted to be able to make the payments.

  4. I told him my criteria, which were fairly specific, and specifically ordered (that is, I gave him my criteria in the order of importance to ME).
    A. It had to be in the particular high school district. I was not looking elsewhere (there was a new high school, and my daughter was coming for senior year. I thought she’d be more comfortable with a lot of other “new” seniors).
    B. It had to have a minimum of three bedrooms.
    C. It had to have central A/C (we are in Deep South Texas and we run the air until November).
    D. It had to be vacant. I needed to move in in fourteen days. I started looking the last week of July, and school started August 15.
    E. I had a strong preference for at least two baths, but would settle for 1.5 if I had to. I wanted 2.5
    F. I wanted to spend less than $100,000. I was negotiable on this, but did not tell my realtor so, even though he was “technically” working for me. You have to keep your realtor’s story consistent. Don’t tell them what they don’t need to tell other realtors.
    G. Fixer was okay by me, but my preference was no fixing.
    H. I wanted brick because I felt that resale value in that area was greatly diminished for sided houses. As it turned out, I had no choice, every house for sale in that area was brick three or four sides.
    I. Although I did not know it at the time, it turned out that size of the house was an important criteria for me. I told the realtor it was not, and therefore looked at everything regardless of size.

  5. I listened to my realtor when he told me which parts of my parameters were unrealistic. It was a very hot market, and that area was flaming. The chances of my buying anything in that particular area under $100,000 were, in his opinion, unlikely. There were only two listed under $110,000.00 (I think he also thought that when I saw the lesser houses I would consider them unsuitable, to his surprise I offered on one of them).

  6. I therefore raised my sights to $125,000 listing price, but only because I wanted to look at many houses, and be able to make multiple offers. I had no intention of paying that. I did not do this with apparent ease. From my realtor’s perspective, me raising my sights $25,000 was a very unhappy decision. I impressed upon him that I did not want to pay $125,000. I wanted to stay under $100,000. I allowed him to “force” me up. Reluctantly. And I harped on it ocasionally for the next few days. I’m convinced this helped in the end.

  7. The realtor gave me the “yada yada” about list not being the sale price to get me to raise my sights, but what he didn’t know was that I felt 110,000 was my top mortgage, despite my pre-approval.

I NEVER told him that my goal was to purchase under market. My goal, so far as the realtor was concerned, was to purchase within ten days because school was starting and my daughter was coming. This also gave the realtor an “acceptable” reason (in his mind) for me to be submitting multiple bids. It gave him a “story” for the sellers’ realtors. Don’t underestimate the need for this. It got the realtors and the sellers to take me and my short deadlines seriously.

The reason I was actually submitting multiple bids was a) to have more than one choice, b) to have leverage (playing one against the other), and c) to be certain of having a house in 14 days. I really was serious about my deadline.

  1. The realtor printed out the short MLS version of every single house for sale which met the must criteria above. I sat in his conference room, went through them, and chose which ones I wanted to see. I wanted to see everything that was not imminently unsuitable. I eliminated two, and we went looking at everything else that afternoon. (remember, they were all vacant, so appointments not necessary).

  2. We went and saw every single house on the list. I think the total was ten or twelve (I told you it was a hot market and I was looking at low price).

  3. I found three that were acceptable. I eliminated a few others for various reasons–too much fixing for the price asked, obviously not motivated to sell, one had a bad foundation, etc. I submitted offers on all three. Before submitting offers, I had the realtor run the long MLS listing on all three. I wanted to know how long they had been on the market, ownership history, etc. I wrote my offers accordingly.

  4. One of the houses, eminently acceptable and in an extremely desireable separately incorporated city with its own pool, community center, and fire dept., immediately accepted my offer of $79,900 with a $25 binder. Other somewhat larger houses in the immediate neighborhood were selling for $140,000 and up.

It was owned by an absentee landlord who had been trying to sell through MLS for five years, but had gotten no offers for whatever reason. I offered the mortgage; because of the new school district and other factors in the general area, the value of his house had greatly surpassed his mortgage, but I don’t think he knew that.

My offer was substantially less than his asking price, which I do not remember off-hand but was very low for the area; probably right around 99,000. I was very surprised (as were both realtors) that he accepted 20% under asking without negotiating. He would have had to pay the realtor’s commission out of his own pocket. However, it would have gotten him off the hook for the mortgage, and at the time it had been sitting empty for two or three months. This was obviously his criteria, I just lucked into hitting the right button first time at bat.

I still kick myself that I didn’t have the money for two houses. If the house I bought had not been on the market, or had not been priced as low as I ended up purchasing, I would have purchased this house even at full price. Nothing else came even close value-for-money. But I knew I was going to have a kid in college the following year, and I didn’t want to be paying for unforseen renovations that just happen in an older house.

My point, though, is that I had a signed contract for a house that met all my stated criteria–including far more than 10% under actual, verifiable comps after selling costs–in less than three days, well under your 96-hour requirement.

  1. One of the other sellers was not serious, and came back with a full-price counter. I made another offer, to keep the house in play for leverage, but basically eliminated this house from consideration.

  2. The house I ended up purchasing was the third one. After some negotiating, I purchased for 116,000 a house worth (on the date of purchase) $130,000. The builder was building the identical house just down the road (same high school) for that price.

The tipping point, for me, was that this house was only one year old (vs. 30 years for the less expensive house) and needed no work at all, and wouldn’t for the foreseeable future. The other house needed minor renovation (paint and carpet were optional, but it did need a kitchen facelift).

The house I purchased was also nearly 1000 sq. ft. larger, and had 2.5 baths rather than 1.75. Finally, it had a MUCH larger yard (not in my up-front criteria, but it did tip the scales). Both houses, as it turned out, were four-sides brick.

Since I was buying for personal use, and not rental or resale, I allowed factors usually not considered by investors to influence my purchase (otherwise I would have bought the other house). As a result, I ended up paying more than I stated I wanted to pay, but got the house I really wanted, well under market, and my mortgage was no more than I had been willing to go anyway. To this day, because I looked at everything available, I remain convinced there was not a better house for me on the market at that time.

Did I close in 14 days?
No. I signed a final negotiated contract in four or five days. It took three days to do the inspections. The seller was ready to close less than five days after contract. I did not let the contract go on the smaller house until the inspections were done.

However, despite my pre-approval, the mortgage process was a nightmare because I was self-employed. The owner did not want to make more payments and I didn’t want to have to drive my kids to school each day, so we negotiated for me to pay rent and move into the house on Labor Day weekend, as it became apparent that the closing would drag on. I eventually closed on October 18, nearly 3 months after I signed the contract.

Moral to that: pre-approved does not mean pre-approved when you are self-employed.

Epilogue: Was it a good buy?
Yes. Since I was purchasing for personal use and because I was buying on short notice, I expected to overpay. But, I made a few lucky choices, most importantly the location.

The new high school proved far too popular, and I suffered redistricting (both of the other houses I offered on did as well). Unfortunately, because the house was on the edge of the school district, it is now no longer in the school district (though my children were grandfathered). It went to a much less desireable school district. The other two houses went to a much better school district that they had previously been part of. However . . .

I have still gotten substantial appreciation, even in a much less desireable high school district (for future buyers). A nearly identical house (different color brick, much smaller yard, nicer landscaping) six doors down sold three months ago for $159,800. After selling costs, call it $150,000. This means my house has appreciated from $116,000 to (say) 145,000 in not quite five years, not bad for a consumer item.

In two years, my house will be in the new, replacement high school district being built, and I expect appreciation to zoom. This was just luck on my part, the new high school district wasn’t even conceived never mind funded(because the school district got caught by surprise) when I purchased the house. The other two houses I offered on will remain in the high school district they’ve been redistricted to. So I really did get lucky, though it will take two more years, because in the end, my house will be in the most desireable high school district. Some things, you can’t foretell.

What are the musts?

  1. You must be able to access MLS. When you are buying in a hurry, you need a large pool to efficiently look at and make offers on.

  2. You must have an experienced realtor who has credibility with other realtors. You can make low offers all day long on MLS properties, but without a credible agent, the listing agents won’t present them. Sure it’s against the law. Do you see a cop?

  3. You must have pristine credibility with your realtor. If he doesn’t believe you, you’re sunk before you start. If you don’t have a working relationship, get a referral, preferably from a professional just like you who actually purchased from the realtor recommended. Call around and find someone who can recommend you to the realtor you want to use.

  4. Your realtor must have a good story to tell the listing realtors. The realtors MUST believe that you are a serious buyer and that you mean to close, despite the low offers. “Divorced single mother” won’t do it. What’s your marketing hook? And can your realtor parrot it believably without you sitting in the background?

  5. Don’t waste your realtor’s time. Work with one realtor, not many. If you work with several, none will be motivated to spend the time you need to spend to get the deal done in short order.

  6. You must have reasonable criteria. Based on the houses you look at, adjust your criteria. If you are completely unreasonable, you’ll get nothing.

  7. You must have exact criteria. Make a list of what you MUST have, and which things are optional. Order the list. Present it to the realtor in rank order. If it has been a long time since you have purchased a house, you may discover your criteria are slightly off, as I did, but get as close as you can. It makes the offers easier, and gives you selection criteria if you don’t find a “clear best choice.”

What would I do differently?

  1. I would make sure I was really “approved” not “pre-approved.” Pre-approval means nothing. If you have other sources of cash, you don’t have this problem. And by the way, investor cash usually will NOT work when you are buying for personal use. I nearly lost the deal because of the slow close.
  1. I would have found a way to buy that other house to flip. Or maybe not, I had a lot on my plate that year.

  2. I would have used a local mortgage broker, instead of one recommended to me in a distant city, because I could have gone to his office and grabbed him by the throat. :slight_smile:

Seriously, use someone you already have a working relationship with. If I had used my own banker, I would have closed much sooner. Consider a hard-money loan, and then refinance if allowed in your state (wasn’t allowed in Texas at the time). Use a mortgage banker that the REALTOR has worked with before if possible. DO NOT use an out-of-state lender. Pay an extra few dollars in closing fees in return for better service.

Hope this helps, sorry it was so long.

Re: How to buy a house in next 96 hrs - Posted by Bryan (NC)

Posted by Bryan (NC) on June 04, 2004 at 12:18:01:

You mentioned that you never got a marketing machine rolling. Now’s a great time to do that. I just ordered a couple hundred bandit signs 3 weeks ago. They arrived 2 weeks ago. I put up about 20 the first night and another 20 the second night. Within 48 hours of putting up the first sign I had 5 calls and have had plenty more since then. Seems to generate about 50% with some motivating factor: inherited property, 2 payments, unemployed, etc. In my case, my poor negotiating skills and the nervousness I have yet to completely overcome have kept the deals out of my hands so far, but I’m still working on it.

If you’re interested I’d be glad to share where I got my signs from, I’m just not sure if it would break any board rules or not.

Re: How to buy a house in next 96 hrs - Posted by Ken (Fl)

Posted by Ken (Fl) on June 04, 2004 at 08:19:30:

You have received some great suggestions. Also tell you?re RE agent to find anyone with a purchase agreement that is contingent on selling their current home. These are usually motivated sellers. With the right proof of funds, you may get a nice retail deal. Your RE agent will need to make many calls to other agents but with a commission check guaranteed in 96 hrs or so, the agent is also motivated.

I think I will try that myself on my next move. Thanks for the thought.

God Bless,

Re: How to buy a house in next 96 hrs ? single mom - Posted by Rob

Posted by Rob on June 04, 2004 at 24:55:19:

I’d suggest seeking out the distressed sellers using the local courthouse. As mentioned by JeWood, seek out those with “Notice of Default” or “Lis Pendens”, ask the court clerk to help you find these. These are sellers who are just being notified that they are beginning the foreclosure process. Also, at the courthouse, find out who is in probate and who is getting a divorce, these too may lead to motivated sellers. If possible, you may be able to download the files at the courthouse onto a disk and then mail merge into a letter or mailing labels; sort by ZIP code to get your target area (school area).

For those that may be in a non-combative motivated seller situation, go knock on their doors. Tell them that you were doing some research at the courthouse and found that they may have a pending problem with their property and you are stopping by to see if you can help them. You specialize in helping people just like them solve their problems (you buy motivated sellers houses). If they?re not interested, or if they?ve ?taken care of it?, tell them that you may like to buy their home if they?d like to sell and to keep your card handy if they get in a pinch. If you buy their house before the sheriffs sale, you save them from foreclosure and get yourself a nice house for what is owed, you can let them know this. Make sure to check for clean title and existing liens against the property first. You may need to talk to the bank and ask them if they?ll stop the foreclosure if you buy it. Make sure you have the right payoff amounts!

Or, at the courthouse, seek out all those filing eviction notices, those may be tired landlords just waiting for you to save them. You may only find fixer uppers though.

Absentee owners in the tax records at the assessor?s office (property address is different than taxpayer’s address), again, may be tired landlords or ones who’ve inherited houses that they don’t want.

Just a few more ideas for you.

Hope they help.

Oh, by the way, none of those work in my area though, hopefully you?ll have better luck with them in yours. ;-p

One more thing… - Posted by Kristine-CA

Posted by Kristine-CA on June 03, 2004 at 22:29:29:

Lin: one more thing: While the idea of setting a goal and getting it done within a certain frame is motivating, I have found that all deals have their own time frame. This year I set a dollar goal. This is the sixth month and I am target. However, many of the deals that I thought would get me here didn’t close (or haven’t yet) and ones that I didn’t plan on showed up and closed quickly. I have one closing tomorrow that’s been in probate and escrow for over year. I was sure that would have been part of the first quarter profits. And a deal I was counting on for June just got pulled. And then a seller I’ve been working with for over a year called while I was on vacation last week and said she needed to get this thing wrapped up asap. It wasn’t even on my list of deals anymore. We are closing this month.

So, even though you need a house asap, you may find that the effort you put in place today will not bring you the house. And that you’ll be getting calls six months from now–after you have a house. At least that’s how it works for me. Kristine

Re: How to buy a house in next 96 hrs ??? - Posted by Kristine-CA

Posted by Kristine-CA on June 03, 2004 at 22:23:14:

Lin: with 96 hours, you are leaving yourself to a numbers game. That being said, if it were me, I’d make 80%-90% offers on everything listed in your school district. Make your offers sight unseen and subject to inspection. If you have access to your equity via HELOCs or if you can easily refinance, I’d make the offers all-cash, with no loan contingency. I’d give yourself 45-60 days in the contract to close though.

Also, call your title company and ask for mailing labels for all non-owner occupied SFHs and duplexes. Write a letter stating that you are a cash buyer and will look at anything (seriously!). And then send those letters via regular mail with a first-class stamp. Even in a hot market you will get calls. Of course most of them will be shopping around seeing if they can get their asking price without paying a commission. But there may be a deal in there.

You have way more financial resources than many when looking for a creative deal. For example, you can afford to do some mail marketing or advertising. And you know the vocabulary and how the buying/selling process works. Plus you can crunch the numbers. This is totally do-able in my opinion. Have fun. Kristine

Re: Find house fast - Posted by JeWood

Posted by JeWood on June 03, 2004 at 20:30:36:

First, good luck. You’ll need it. Now that I have that out of the way, I would suggest that you first find a couple of Realtors to start working for you. Give them your criteria and they will work hard for your business. This might not produce the results you want, but at least you can get more than one person working for the same goal which will drastically increase your chances. Second, start searching through the notice of defaults and notice of trustee sales (or whatever they are called in your state) and conduct extensive document searches on the homeowners in distress to find out just how distressed they are. You’re looking for the people with not only NTS’s and Notice of Defaults, but also liens, judgements, and cetera. The reason is that this would indicate a true financial crisis and a high level of need on their part. You can really help these people and yourself at the same time. Next, visit the ones you feel are qualified based on your findings. When you make contact, don’t start off with telling them that you saw they were in foreclosure or financial distress. Start off by saying you were looking for a house in the area and theirs caught your eye, or someting of that nature. You may need to contact quite a few before you get someone willing to talk and/or negotiate, but I have had tremendous luck with this. Given several days of searching, you are bound to find one or more. However, this method obviously does not exhaust the techniques available to you, this is just one that I am familiar with.
Again, good luck,

Re: One more thing… - Posted by John-Fl

Posted by John-Fl on June 04, 2004 at 09:39:50:

Can you tell more about the probate deal?

Did you lease option the property for the last year with a deed held in escrow?

Re: One more thing… - Posted by Kristine-CA

Posted by Kristine-CA on June 04, 2004 at 09:55:03:

John-Fl: I did not lease option the property. Even though the owner was living there until last spring, the property was a junker and needed total rehab. It sat empty this year while we waited out the probate court. My buyer deposited 2/3 of the funds and distributed them to me so I could pay the heirs when the court finally transferred title a few months ago. Because this deal was in probate so long, my buyer had used his money to buy other properties (some from me) and wanted to include this property in an exchange. So we waited out the sale of another property which finally closed last week.

Problem with a lease/option is that there was no one to legally get the l/o from. The probate action was a petition that transferred title to the heirs (after many many months), so there was no adminstrator. And the heirs were not easy to work with. They were very frustrated with me because of the court delays, even though I paid them 15K as an advance in February. I didn’t need the headache of an l/o with them. Just keeping up with the vandalism at the property was enough.

I am so glad this one is over. Kristine