Posted by GL - ON on August 01, 2003 at 23:30:34:
Talk to Jess. He’s the one who will think it’s a good deal.
Posted by GL - ON on August 01, 2003 at 23:30:34:
Talk to Jess. He’s the one who will think it’s a good deal.
Making cash offers - Posted by Jess (NJ)
Posted by Jess (NJ) on July 31, 2003 at 01:30:20:
Ok, I’ll try asking this question again and see if people can see the REAL issue that I’m trying to address. (If you don’t know what I’m talking about, check out my matching thread below - it’s pretty interesting…)
When making a cash offer, what do you people generally take off the price? Also, (my main question) how long is a good time to give until closing if you are looking to assign it to someone? Does this all depend on each specific case?
PS - In order to avoid the barrage of “YOU STUPID NEWBIE” responses, I’ll admit right now - I AM a newbie who’s just trying to learn…
it makes no difference - Posted by rm
Posted by rm on August 02, 2003 at 09:13:35:
Cash is only important if time is of the essence- to the seller.
So, I’d say the value (in terms of discount), is directly proportional to the seller’s motivation.
And, there’s no fixed value, or percentage.
Typically, I’ll make multiple offers, and cash is a discount to what I’d consider a good deal.
Re: Making cash offers - Posted by Brent_IL
Posted by Brent_IL on July 31, 2003 at 13:52:24:
My thinking is that everything RE is case-specific. A very general question has to be answered in a very general way, as was stated by js.
If you want to get a high percentage of cash offers accepted at severe (Thanks, Jim-FL) discounts to FMV, you have to learn how to give the seller enough background information so that he or she can appreciate the basis for your offer. The offer may not be accepted, but you won’t be dismissed as a swindler.
The best rules-of-thumb are those developed by you for your area. I use proportions and percentages as short-cuts all of the time, but they only make sense in areas similar to mine. I?d be lost in CA.
When you are new, it’s common to think of a deal as a sum of parts instead of a synergistic whole. I write-in an “Estimated closing time” that?s given me by the sellers because that?s what they?re telling me, but that date is modified by five other requirements or contingencies. I can make a good legal argument that the settlement date could be extended, in a practical sense, indefinitely. I could probably go for a few years before a judge would rule that the deal is dead.
I’ve re-filed one memorandum of sale periodically since 1989 because the seller was a slime ball. Eventually, he’ll want to sell. What can I say, I’m easily amused.
The point is that in a good contract every thing interacts with every other thing. Now, imagine if I told a seller that I wanted to close when I got around to it, maybe a year form now, if he?s lucky. I?d never get to my offer presentation before I was escorted out of the door.
In most parts of the country, the time that it takes to assign a deal depends solely on the quality of the deal. If you negotiated a deal that enables both you to make money and your assignee to make a good profit, you could probably sell in a few days. A simple way to vary the closing day is two-pronged. Agree to settle within 14 days of the removal of all contingencies. Put in a contingency that only you can remove under very specific circumstances.
The settlement extensions I use are a carry-over from a time when FMV was increasing at 1% a month. Since I turn property over, a delay of a few months increased profit appreciably. Today, if I was worried about a settlement date coming too early, it would be because I had screwed up, and the deal was too poor to assign or re-sell.
Re: Making cash offers - Posted by GL - ON
Posted by GL - ON on July 31, 2003 at 10:51:17:
All cash can include a mortgage or borrowed money as long as it is all cash to the seller.
On an all cash, one line offer, 25% discount is the norm. Some will accept a counter offer of 20% off, others just tear them up. It depends how hot the local market is.
Can’t we all just get along. - Posted by js-Indianapolis
Posted by js-Indianapolis on July 31, 2003 at 04:25:44:
That title was a joke.
I’m going to be blunt, and this is not slamming you. You need to think about your questions. Really, this is common sense.
I’ll go through them, and be as direct as I can. Again, not ripping you, just being brutally honest.
"When making a cash offer, what do you people generally take off the price?"
There is no general figure ever. If someone is asking 1.8 million for a property worth $180K, how much would you take off for cash? What if that fresh listing in your email box was for $180K, and the property was worth $1.8 million? Make an offer that makes sense to you.
"Also, (my main question) how long is a good time to give until closing if you are looking to assign it to someone?"
You could assign it in 5 minutes time if you’ve got a buyers list lined up. That person could close in about 3 days if they’re really good. Then again, if you’re going to run an ad, and try to deal with someone unknown, who is then going to try to get their first deal done through you, you might want to write the contract for “A closing date to be when the cows come home.” Again, think for a moment. How long do you need, and more importantly, how long will the owner give you?
"Does this all depend on each specific case?"
yes, that’s why you’re getting all the sharp responses. Just think about it.
Board etiquette. - Posted by Redline
Posted by Redline on July 31, 2003 at 02:27:18:
It’s annoying and a waste of time to read the SAME POST written TWICE in two days time asking the SAME QUESTIONS by the SAME PERSON.
Learn proper board etiquette. If you had taken the time to read the “How to” articles and the archives all your questions would be answered by now.
Oh, you’ve gotta tell this story. - Posted by js-Indianapolis
Posted by js-Indianapolis on August 01, 2003 at 20:54:00:
“I’ve re-filed one memorandum of sale periodically since 1989 because the seller was a slime ball.”
I, too, am easily amused. Please do tell.
Re: Making cash offers - Posted by js-Indianapolis
Posted by js-Indianapolis on August 01, 2003 at 20:56:24:
I’ll sell you my house for $300K, or $225K cash. It’s worth about $200K. Cool?
Re: Oh, you’ve gotta tell this story. - Posted by Brent_IL
Posted by Brent_IL on August 03, 2003 at 23:40:12:
There?s not much to the story, but it?s worth telling to convey the suggestion not to wait until settlement to have the sellers sign a performance mortgage. Now I paperclip the document to the purchase contract. I recommend to other CRE investors that use them that they get them signed with the accepted offer.
This was in my pre-trust using days. At the time I was calling FSBO ads and I spoke to the wife of the seller. She explained that they wanted to move to Arizona. Her mother put down 30% to get a loan with easy qualifying, and bought a condo for them. They needed money to repay Mom and pay the balance because they couldn?t afford to make payments. The sales price of the condo was only half of their sales price.
I wasn?t familiar with the area, so I met the couple at their house.
The first paragraph in the purchase contract I use states who is to be paid a RE commission and the split percentage between the agencies. I explain everything on the front of the contract even when it doesn?t apply because I put N/A in the blanks that I?m not using. I was surprised when I was told that the property was listed. They were unhappy because they hadn?t seen any activity for five weeks. They signed a MLS board contract. The agent was a broker for 20 years, the listing price was very conservative in an area that was semi-depressed and always had been that way, and I didn?t think he would waste his time playing them. I explained that they still owed the agent a commission.
Working together, we got Mom some of her money now and some later. I agreed to make payments to the condo lender. The rest was deferred for a while and then amortized on an unsecured loan with an effective APR of less than 2%. I was pleased because the previous day I met with a woman who wanted to use her VA certificate on a lease/purchase. It didn?t work out on that house because I wanted to keep the existing financing in place. After recording the memorandum the next morning, I took her to see the new purchase. When I told her that we would patch paint and re-carpet before she moved in, (pre-appraisal, of course) she was overjoyed.
Two days later, my buyer called me to say that she had received a call from the seller who offered to kickback $10,000 if she bought the house directly from him. She didn?t know what to say, so she told him she would ask her attorney. I called the broker. He learned of the sale from me. He hates CRE offers as much as any RE broker, and started to fuss, but after quickly being reassured about his commission, he admitted that he had no other buyers and he promised to control his clients
Fast-forward a few weeks. We scheduled the closing at the title company because it was nearby my lawyer?s office. Present were husband, wife, RE broker, title company closing agent, mortgage broker waiting for a check, my VA buyer, her husband, my lawyer, and me.
When the selling husband read the amount of the broker?s commission, he started to rant. The broker didn?t deserve 6% because he was the one who placed the ad and sold the house. In a cute reversal, he claimed that I didn?t deserve to make money on the re-sale because I took advantage of him when his broker wasn?t present. Had he realized the true consequences of his unsecured loan with a cash resale, I would have been bludgeoned. At this point he had the legal right to pay me 3% + costs and cancel the sales contract and it made sense to do it because he could have signed up my buyer, but the thought that that was too much money for two hours work on my part.
This went on and on and on and on, interrupted periodically by the closer saying he had two more closings scheduled. The seller?s wife is in tears, consoled by her mother. My buyer is crying because her first home is slipping away. Her husband was trying hard to follow my attorney?s instructions to sit tight and let the guy run down. Suddenly, the seller reached across his Mother-in-law knocking her out of her chair to the floor, grabbed his wife and backhanded her twice, threw her on the table scattering the assembled pile of documents, and stormed out of the office.
Without his signature, the deal fell apart. The seller?s wife got an Order of Protection and moved in with her mother. I lost the VA buyer. The broker was too disgusted to bother filing for his commission. I was the only one in a legal position to color the title easily.
The seller agreed to the terms of a performance mortgage warranting his compliance with all of the terms of the contract to purchase when he signed the offer. He agreed to record the mortgage. But, I had no mortgage to record.
The repairs were done by a semi-controlled entity so they filed a mechanic?s lien for the cost. A couple of months later, I was contacted for a pay-off amount. I immediately filed an affidavit of continuing interest. Four days later I received a check for the amount of the lien in return for a release. Two weeks after that, a title rep called for information about the existing purchase contract. I confirmed my interest and explained to him that since time was not of the essence contractually, I was willing to wait for the seller, but that I would counter-claim in a flash. There was no further contact.
A couple of years later, I got a similar call from a lawyer who specializes in $350 closings. We danced around for a few minutes about the possibility of his clients paying for litigation as I explained my position. Never heard from him again.
I don?t know what became of the sellers or their marriage. The property is still in the seller?s names. I re-file things periodically to indicate that we are waiting for the sellers to close and check to make sure that no one else is filing any liens that affect me. Since prices in general have escalated since that time, I tell others that someday I?ll track the sellers down, sue, and get the title. In my heart, I know that I won?t bother because I keep it going just because it gives me pleasure to dream of that jerk asking me to settle.
If I had had the seller?s signature on a performance mortgage, the broker or my wife could have verified that they signed it, and notarized the signatures. I would have recorded it and foreclosed because they failed to comply with the purchase agreement.
That was lesson number 4,356 in my CREI educational studies.