Posted by Jackie in Dallas on April 06, 1999 at 22:30:16:
You’re absolutely right Alex.
As Ron LeGrand says - “The less I do, the more I make!”
Posted by Jackie in Dallas on April 06, 1999 at 22:30:16:
You’re absolutely right Alex.
As Ron LeGrand says - “The less I do, the more I make!”
Landlording headaches Vs. Retailing Headaches - Posted by SCook85
Posted by SCook85 on April 03, 1999 at 10:10:10:
I have read numerous times in books and on this newsgroup the pitfalls and headaches of landlording. I will say that I have very little experience with being a landlord so far, and I have little experience with retailing.
I have had no headaches with landlording to date (as I knock on wood) but am constantly pulling my hair out while retailing. What are others experiences with retailing. o you have the headaches that I have? Does it take 60 days to get a loan processed and closed for your buyers. I have 3 now that will be at least 60 days before they close.
Let me know your experiences.
Selling Retail…Part II - Posted by JPiper
Posted by JPiper on April 04, 1999 at 05:07:59:
In thinking about this thread, and reading some of the further posts, I’ve been thinking about problems I’ve had with retail loans. I thought I’d mention a few of them.
One time I sold a house for around $79K as I recall?.an FHA loan. When the house was appraised it came in $1500 too low. For those of you who know me, you know I’m tight?.I didn’t want to lose that $1500. So I got a copy of the appraisal, and looked it over. The house had a sun room, built on top of a deck, which had been supported by piers from underneath. Beautiful room. The appraiser had compared it to decks (because of the lack of foundation) on the other comps. As it happens he had given it $2500 extra value over a deck. So I disputed the appraisal. When I called the appraiser he said “no way, I won’t change it”?.so I called the lender, a savings and loan. After considerable ruckus lasting over a few days, they decided to have their senior member of a loan committee come out and personally look at the sun room. He did, and was favorably impressed. But he was concerned over the lack of foundation under the sun room. So we offered to get a structural engineer to take a look at it. He didn’t promise anything, but said he would take a look if we provided it. So we got an engineer’s report that in essence said the room would stand longer than the house. So the senior member called the appraiser personally. The appraiser turned him down too. So the senior member came up with a little known FHA rule?.that the lender can loan in excess of appraised value! But only by a small margin?.in this case $1500. Of course they fully documented their reasoning with pictures of the sun room, and the engineer’s report and a personal report by the senior member. The loan closed in under 30 days?.and was a real tribute to a problem solving lender and loan officer.
Another house I sold to an FHA buyer. Everything was smooth until the appraisal. The house had a crawl space under the kitchen?with no access except through a very small “hole” that no one could get through. The crawl space had a dirt floor, which was too close to the wood floor. The appraiser required that the crawl space be dug out to increase the clearance?which was impossible. I made a call to my loan officer. I told her that her we had a good house, with a good borrower, but that in making this particular requirement the appraiser was blocking FHA from doing a good loan. I told her that I thought we all owed it to ourselves and the buyer to not just come up with a problem, but to come up with a solution to the problem as well. She made various calls, and again a senior member of the bank decided to look at the house, with the appraiser and the appraiser’s supervisor. After he saw the problem, we all came up with a solution?termite treat the dirt, cover the dirt with a plastic cover, and termite treat on top of the cover. Frankly, I don’t know if this worked, but it got the loan through in under 30 days.
Another guy I sent to a large national lender?FHA loan?who I have never dealt with since. (I finally remembered one of these). I had a good loan officer there who I had confidence in?but he lost my business with this one. The borrower was a telemarketer with a few credit glitches?a couple of collections that we cleared up for him, a late payment or two. The problem was this guy had had umpteen jobs?a new one every few months. They were always in the telemarketing field?but new employers repeatedly throughout the prior two or three years. The lender drug their feet with this guy, despite my repeated cajoling?and after 2 months?turned him down because of the numerous jobs. Part of the problem was the way the jobs were presented in the 1003. So from there I took this buyer to another lender?.the sun room lender. Because of our prior experience we repackaged the guy. He flew through this time in a little over 3 weeks. Still an FHA loan, still the same guidelines?just a shift in the way he was presented.
And finally, as an offset to the above, I could tell you about a time when I did an FHA loan in 7 days?.no kidding. I had a preapproved buyer, a loan officer that was awesome, who had an inhouse appraiser?and we slam dunked it.
I mention these because I hope they illustrate that problems can be overcome. I could go on and on with stories of these types. Again, many of the problems that we all experience with lenders are self-induced. Now, I happen to like to sell with lease/options myself. But this is a conscious choice for financial reasons, not because of the lending process. If I had significant problems getting loans down, I would want to evaluate what was happening and why. Loans go down everyday?smoothly and easily. They have to do with good loan officers, mortgage brokers, knowledgeable sellers and/or realtors?.and they have to do with being on top of the process throughout every element of the deal.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Bud Branstetter
Posted by Bud Branstetter on April 04, 1999 at 24:32:07:
I have lost a buyer for a retail rehab property after all the qualifying because the underwriter didn’t like the constant payments near the 15th instead of the 1st when due. Yes, you have to get ahead of the curve and control as much as you can. But I have still heard on numerous instances of last minute LTV changes. While the Ed Garcia’s would be the first to defend that many of those are not the brokers fault(I agree) he would not try to defend someone that is doing it unscrupulessly.
My only suggestion is try to have more than one mortgage broker you work with. Do not be afraid to pull the file and take it to another broker if you think you can or should do better.
The difference with l/o and regular tenants is two fold . Tenant buyers have more money at risk and the expectation of ownership.
Re: Landlording headaches Vs. Retailing Headaches - Posted by JPiper
Posted by JPiper on April 03, 1999 at 21:23:37:
I’m rather surprised after having read this thread and your post to see the types of problems that people are experiencing with selling retail. I’ve had very few problems of the type mentioned below.
First, I think the problems tend to increase directly depending on how involved you are in the process. In my case I’m involved right from the beginning. I have certain lenders that I deal with that I take the buyer to. Note, I don’t send the buyer, I personally take them (or my wife does). We sit there during the loan application. The reason for this is because we have the lender pull an in-file credit report from the 3 bureaus. We look at it?we know if there’s a problem in credit from day one. We listen to the information the buyer gives the lender on the 1003. We’re going to be aware of any problem from any of these fronts in the beginning. We inform the buyer prior to the meeting with the lender what he needs to show up with. Things like 2 years tax returns, a months paystubs, a months bank statements, credit card and loan information, prior addresses, prior landlords, prior employment, copy of bankruptcy discharge, etc etc etc.
In other words, from the first day we are taking control of this process?.making sure that the buyer shows up with ALL the information that that particular loan is going to require so that the process doesn’t bog down.
Another important step is to understand what qualifies any particular buyer under a specific loan program. If you don’t understand the income guidelines as an example?you need to. If you don’t understand credit guidelines, you need to. I always thoroughly question the buyer before we ever go to the lender as to these and other issues. Knowing loans backwards and forwards (at least to the extent this is possible) is an important part of your business. Knowledge tends to short circuit problems, because you see them before they come up.
Once the buyer has made application, we’re off and running. Of course we know who the loan officer is. We also know who the processor is. We understand the timeline concerning the loan. When key days come up we’re talking with the processor. Did the credit report come back? How did it look? Any problems? Was the appraisal ordered? Meanwhile we’re scheduling things at appropriate times like the termite inspection, whole house inspections, etc. For government loans, or where repairs are required, we’re on those quickly. We take charge of getting things moving quickly. Once the repairs are done, we make sure the appraiser or inspector is back out quickly to verify the repairs.
In short, we’re on top of EVERY detail in the loan process. When are you sending it to underwriting? How long in underwriting? What did underwriting say? Understand that problems come up?they’re to be expected. And you’re expected to solve them. Over time we have found certain lenders we deal with. We have picked them based on how they respond, how good the processor is, whether we are kept informed, how good they are at solving the inevitable problems. It took some time to locate these loan officers. We have followed them from lender to lender as well?.never to our regret.
I can say that we haven’t experienced the types of problems mentioned here. I’ve seen loans drag out as an example. But come to find out, the buyer didn’t submit all the information that the lender needed, or any of a myriad of other kinds of problems that are not lender related. Sometimes I think lenders get a bad rap. When the loan fails, the lender gets blamed. Many times the problem was with an unqualified borrower, and an unknowledgeable seller.
I’ve done a lot of FHA loans over the last 7 years as an example. I can get an FHA loan closed in under 30 days. I can get a VA loan closed in under 30 days using a direct endorsement underwriter. I’m trying to recall if I’ve ever had a loan go 60 days, and I don’t think I have. By the way, I have done considerable retail selling. I’ve spent considerable time educating myself about loans, and of course the more you do the more you know. The more you know, the fewer problems?just like anything else. By the way, this all takes time?both learning and monitoring the loan process. And as an aside, it’s time away from finding deals. In light of some of the recent discussions regarding systems on the newsgroup, it’s something to ponder.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Nancy in NC
Posted by Nancy in NC on April 03, 1999 at 19:47:03:
I am a landlord and spent all day today painting and getting ready to re-rent. Yes we (the husband and I) do most of our own work. However the tenants are paying for the houses and the carrying cost. They are building my wealth foundation. And that makes me like the landlording business VERY MUCH!!!
Landlording is a skill and anyone can learn how. I think the gurus are too negative abount tenants and scare new investors.
I just closed on a deal, and yes it took two months to get the money. The banks are all busy, because money is easy and interest rates are low. My tenanst just bought a nicer house than the one they were renting from me.
My next focus will be retailing so I am absorbing all the info I can so that I can offset some of the delays. As we each go through the retail business wwe can share techiques and maybe we can reduce the timeframe.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Jackie in Dallas
Posted by Jackie in Dallas on April 03, 1999 at 19:38:04:
I’ve been pondering the same question.
Dealing with traditional mortgage brokers, lenders and underwriters is the absolute WORST part of this business. I’ve almost lost several deals because of their incompetence or stalling tactics.
The thing that gets me the most is when the lenders decide a day or two before closing that your buyer will only qualify for a 85% loan instead of a 90% loan even though they have had ALL the information on the buyer for more than 30 days - it has happened so many times I know it’s no accident! Guess who they expect to carry a second - when it’s the day before closing they know they’ve got you right where they want you.
There just has to be a quick and easy way to get a loan for my buyers. If hard money lenders can make quick loans that are completely hassle free - why can’t other lenders?
I’m going to just sell with lease options or owner financing until I come up with a better solution.
Let me know if you find a better way.
Re: Landlording headaches Vs. Retailing Headaches - Posted by MilNC
Posted by MilNC on April 03, 1999 at 19:10:58:
After reading your earlier post, and then later listening to Roger Dawson’s tapes “Power Negotiating” and “Power Negotiating for Salespeople”, it occurred to me that these lender delays are artificial, ie, contrived.
I believe it was an earlier post of yours that discussed an eleventh -hour change of terms.
I am wondering if you have thought of any other solutions. Is it possible to line up short term hard-money lenders to get the deal done and then look for better terms later? or at least have them waiting in the wings?
It just seems to me that the long period of closing, and then the last minute changes tend to hold you hostage. I don’t think it’s an accident.
And, like Phil said, there is that vacation that the person who has the final say so is on. That is “higher power” tactic according to Dawson.
It seems to me that one goes into the deal thinking there are two negotiatos: the buyer and the seller. But
it turns out, that there are several side players, and on of those is the lender.
I do of course understand that they might want up to the minute employment information, but otherwise, I think they are using stalling tactics to extract more
money in fees, rates, etc.
So, I’m thinking, what would one recommend for getting around this?
We are constantly advised in our courses to write our contracts favorable to us, but it seems the terms regarding the lender are all in his court.
I’ve been pondering this ever since your earlier post (I’m pretty sure it was yours).
That’s why I love L/O’s - Posted by The Baze
Posted by The Baze on April 03, 1999 at 17:39:30:
I sell almost all of my properties on a L/O basis. So I don’t have the normal headaches associated w/ retailing, and I eliminate almost all of the landlording headaches. Yeah, I have to wait a couple to three years to make that big chunk of change, but I get a small chunk up front, and some cash flow to boot. It’s worked pretty well so far. Good luck.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Tim jensen
Posted by Tim jensen on April 03, 1999 at 16:31:47:
I have only started retailing some of my properties. It has no been much of a headache retailing for me.
I work the lower end of the market and what I have done is hook up with a mortgage broker. This broker can get people with bad credit and no money down financed. The only catch is that I may have to take back a mortgage up to 25%. But what I do is find the right appraiser. That appraiser can make almost any deal work.
My point is that you may be able to get retail or over, but you may have to wait to get 25% of your money. That shouldn’t be much of a problem since you steal the properties you buy. (a compliment) This seems to have opened the market of buyers that much more and so far the mortgage broker has been able to get these type of deals done in 30-45 days. Also, you may find that people think they have bad credit when in fact it is not that bad and they may be able to get qualified for a regular 90% mortgage.
Re: Landlording headaches Vs. Retailing Headaches - Posted by phil fernandez
Posted by phil fernandez on April 03, 1999 at 12:06:38:
When retailing I always set a goal for myself to get my buyer financed and closed within 30 days. Never works out that way though. The standard time seems to be 45 days. Always a problem. The appraisers are backed up. Joe Banker goes on two weeks vacation and all verification stops at his desk until he comes back. You’d think they would have someone else take over his workload, but that would make too much sense.
As far as landlording, if you follow a few simple rules you will be eliminating 95% of future problems. Screen , screen screen the potential tenant. And verify everything to ensure a good tenant. Mr. Landlord newsletter is a tremendous resource.
Properties in good neighborhoods with parking attract a good quality tenant. If the neighborhood is junky, good tenants are not going to want to live there.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Laure
Posted by Laure on April 03, 1999 at 11:24:53:
Steve, I am doing most of my deals on L/O. It’s the best of both worlds. I try to get 12 month option, but sometimes have to go with 18 or 24 months. I have gotten 3-5,000 down as option money, and I am going to stick to 5,000 down in the future. I get higher than market rents also on these deals. Now I have all the time in the world to get financing, and I don’t care how long it takes ! I have 5 properties on L/O right now, and getting ready for the next.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Ed Garcia
Posted by Ed Garcia on April 04, 1999 at 10:34:43:
On the contrary, I agree with you, it was the brokers fault.
It?s a weak broker, when they can?t sell a deal like that. Personally I
think their using the underwriter as an escape goat.
A good broker would have fought to get that deal down, or changed
I also agree that until you have a strong relationship with your broker,
don?t put all you eggs in one basket. That?s why I teach having lenders
fighting to give you money.
But Bud, I have to say that it is obvious that you did not have the control
of the deal that you thought you had, or you would not have lost that deal
because of a broker.
By the way Bud, it was a pleasure meeting you in Dallas, I wish I could
have spent more time talking to you.
Another “cog” for the system? - Posted by Reif
Posted by Reif on April 04, 1999 at 18:51:37:
I am still looking for my first deal, but I am thinking long term.
It seems that once one gets rolling, this would be a perfect job (getting a buyer funded on his loan) for an RE agent on one’s pay roll. They could take over the whole process from listing to closing. One could even add an incentive to the agent’s commission based on how long it takes to close.
Like Jim said, holding the buyer’s hand must take time that could be done more inexpensively by someone else; time away from doing deals. If one has a real etate agent on the payroll, or at least working very closely with the seller, it seems that more time could be freed up looking for deals.
Of course it would be less profit per deal, but maybe more deals and/or free time is worth it.
Just something I’m thinking about.
A BIG THANKS !!! - Posted by L.A.
Posted by L.A. on April 04, 1999 at 04:06:32:
A big THANKS to U…JPiper !!!
U just saved 5 months of my time !
Thanks how long it took me to do my last retail deal.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Craig_NOLA
Posted by Craig_NOLA on April 04, 1999 at 01:01:39:
Golden information, as usual. Thanks for sharing!
Re: Landlording headaches Vs. Retailing Headaches - Posted by SCook85
Posted by SCook85 on April 03, 1999 at 23:44:38:
I’m glad to hear that I am not the only one. I too have decided to do everything on L/O’s and Owner financing. Like others have said then you have all the time in the world to get them financing. I’m a little surprised to hear others have not had these problems at all. I have on 3 occasions now received a commitment at a certain LTV only to have it lowered later. It is frustrating. I would rather have the prospective buyers living in the property paying my mortgage while the financing process is taking place. If I get what I want great, if not I wait longer for them to improve their situation.
If I come up with something better I’ll be sure to post it.
Loan commitment - Posted by Rene Perrin
Posted by Rene Perrin on April 03, 1999 at 20:40:01:
Unfortunately, you cannot rely on any mortgage broker/banker to give you a verbal approval. While I understand your frustration, I feel that almost everyone forgets that the broker or banker is rarely putting their money on the table unless THEY have a commitment from a takeout lender. That’s a true formula for disaster- a broker/banker’s lifeline is their warehouse line of credit. If they tie it up with loans that they can’t sell, they lose their ability to fund new loans.
Don’t start spending your money unless you have a loan commitment in writing. And even then realize that the “golden rule” prevails.
Re: Last minute loan changes - Posted by Nancy in NC
Posted by Nancy in NC on April 03, 1999 at 19:51:00:
What benefit does the lender derive from these last minute changes?
I haven’t had this problem yet, but may soon be in that position and I want a plan “B” prepared.
Re: That’s why I love L/O’s - Posted by Nancy in NC
Posted by Nancy in NC on April 03, 1999 at 19:52:47:
Even in two years or so, the buyer will have to get a loan to pay you off and the same situation will occur. What will you do then? How do you handle it now?