If you mention subject-to to most realtors they will look at you like you are on crack. They would never advise a seller to let the property go subject-to because of the potential risks involved. Besides, it is not that likely that someone so desparate that they would sell subject-to would be listing with a realtor. That would take too much time.
If you are calling on a FSBO, that is a different story. But most realtors, if asked the loan balance, would say it is none of your business.
Properties Already Under Contract! - Posted by Sharon Jones
Posted by Sharon Jones on March 17, 2001 at 15:01:55:
I’m currently working with several agents who send me listings. After I drive-by, I’m finding out that some (if not most) of the “hot properties” are already under contract.
Is it a better idea to submit an offer w/an inspection clause before even looking at the property?
I figure that way I can lock up a good deal w/out wasting gas and valuable time driving by or inspecting them before submitting an offer.
Your agent may be getting these “hot” properties from the MLS. In which case, he/she may be presenting your offer to the listing agent. The listing agent, in an effort to keep the entire sale commission (rather than split it with your agent for bringing you in as the buyer) is more interested in getting it to one of their buyers. That may be one of the reasons why your agent gives you a list of houses that are already under contract. This wouldn’t happen if the realtor LISTED the houses that he/she showed you. I had this same problem until I figured out how it works.
I find it’s better to deal with Realtors that actually list for lenders with REO’s (foreclosed properties). When a lender gives it’s Realtor an REO, the realtor usually calls its investors (who usually close fast with cash) FIRST with the hot deals. The ones that don’t sell to the investors (no “inside” investor wanted the property) then hit the MLS to be gobbled up by investors who don’t have an “in” with the Realtor. At least that’s how it works in THIS hot market.
I suggest you contact Realtors and tell them that you are a RE Investor looking for REO’s that they LIST. Be ready to show proof of funds (bank statements showing money) or preapproval letters. And know your market neighborhood by neighborhood. When the realtor calls, get there right away (you’ll often run into other investors), inspect the property, and put an offer in immediately. Then due your DD.
Sharon,
YES!
You have the right idea. Make full price offers sight unseen with an inspection/due diligence clause. In an area I used to work, the new listings came out at midnight. Your offer needs to be in the sellers hand BEFORE they leave for work in the morning! If you wait until lunch, you will be someone else’s lunch and so will the deal. If your agent will not do this (prepare and deliver the bid by 6:30 or 7:00AM) find a new agent. Remind them that they are in business to make money and this is how it’s done.
BillW.
Bill, how do you know what offer to make when you don’t even know the details of the property, such as loan bal. I’m rather new to this business and can’t seem to get past the “realtor phobia”. Any help would be appreciated. Tom
Your agent may be getting these “hot” properties from the MLS. In which case, he/she may be presenting your offer to the listing agent. The listing agent, in an effort to keep the entire sale commission (rather than split it with your agent for bringing you in as the buyer) is more interested in getting it to one of their buyers. That may be one of the reasons why your agent gives you a list of houses that are already under contract. This wouldn’t happen if the realtor LISTED the houses that he/she showed you. I had this same problem until I figured out how it works.
I find it’s better to deal with Realtors that actually list for lenders with REO’s (foreclosed properties). When a lender gives it’s Realtor an REO, the realtor usually calls its investors (who usually close fast with cash) FIRST with the hot deals. The ones that don’t sell to the investors (no “inside” investor wanted the property) then hit the MLS to be gobbled up by investors who don’t have an “in” with the Realtor. At least that’s how it works in THIS hot market.
I suggest you contact Realtors and tell them that you are a RE Investor looking for REO’s that they LIST. Be ready to show proof of funds (bank statements showing money) or preapproval letters. And know your market neighborhood by neighborhood. When the realtor calls, get there right away (you’ll often run into other investors), inspect the property, and put an offer in immediately. Then due your DD.
Tom, What you’ll need to do is to become very familiar with your target territory. Know the values in the area inside and out. Then construct yourself a set of parameters that will allow you to make bids that you want. Tell the agent to look for properties that fit certain guidelines and requirements. When the agent finds one, submit the bid. The object here is to jam your foot in the door before some other investor does and lock out the others until you have time to inspet the place. Upon inspection, you then can modify the contract, depending on the condition of the property or possibly modify the terms. You’ll be looking for properties that are underpriced, run down, or owned by desperate motivated sellers and by banks and other lenders only. To give you an example, in one area I work on, property values are about 90 to 110K for starter homes in good condition.(Typical for many areas of the country). I will be looking to buy for at least 20 percent below this and preferably more. I will also be looking for property owned by banks, and out of town sellers, and desperate sellers. If one should become available, I’ll try to lock it up with an offer. (Don’t forget, you must be able to close).If I can lock it up, then go to the next step and inspect, looking for things which I might be able to use to lower the price. ("Gee, you didn’t tell me that the (wiring, plumbing, foundation, etc. -insert problem here) was bad. This is going to cost a lot to fix. I’m going to need a price adjustment for this. " Then you calculate what it’s worth to you and either you make the adjustment and take the deal, or you withdraw your offer. Once you agree and make the deal, you MUST close it! If you don’t your reputation will be trashed and future deals will be MUCH harder. If you don’t have the ability, cash, etc to close, get a partner who can and will. Hard money lenders are OK, but don’t forget, you still have to pay the carrying costs.
Good luck,
BillW.
Nate, by your response, I’m assuming that you can’t do any creative deals on mls listings? If I’m talking to a fsbo, I need to know what their loan bal. is in order to make an offer, don’t I? How do I buy subject to if I don’t even know the loan bal? I’m sure it is different working with a realtor than with a fsbo, aside from the comm. paid out. I just needed to know what to expect from dealing with realtors and how to use their info . Thanks for any info you might have to help clarify my thoughts, Tom