Posted by Tim Fierro (Tacoma, WA) on April 18, 2002 at 04:14:28:
Being a newbie, relying solely on statistics, predictions, word of mouth; and not understanding how the other things you mention affect a deal, quite possibly will end you up in the poor house. I didn’t even mention the fact that you don’t live near the property you are interested in buying.
To your questions.
Should you be concerned? Yes. Whenever you purchase property and things are found, you need to be concerned. Did you expect this? Did you account for any repairs blindly?
Will your contract protect you in that the repairs will be fixed before you sign? Check your contract. What did you write in the contract to cover the inspection? If you have this covered, then it will be fixed, or you won’t sign. If you don’t have it covered, you may still be obligated to buy; or lose the earnest money or whatever remedy you agreed to.
Appraisal assist in negotiations? Sure. If the appraisal comes back less than the purchase price, it could be a negotiation tool if you have a clause to cover this scenario. Do you have a clause that covers if the appraisal comes back to low?
Appraisal AFTER the acceptance. It shouldn’t seem odd to you. You negotiate a deal for a price, now you have it appraised by your loan company to get the funds. There is nothing stopping you from doing an appraisal before you negotiate a selling price, but you will have to pay for it. If you then decide not to enter into a contract with the seller, you wasted the money for the appraisal for no reason. Do this on 5 different properties and you start losing some good change. Better is to arrange a deal and get the terms; then get the appraisal if necessary for your funding. If you pay all cash with no funding, you don’t even have to do an appraisal if you don’t want one.
You could use all the guidance you can get… Yes, I think you could use some. I would suggest starting your investments a little closer to home, and I would try to read up or get a course to help understand some contract wording and the processes of purchasing real estate.
I hope this all works out like you plan it Sharon. You didn’t mention if this property is a really good deal and that is why you are doing it in Florida, and not in an area you live; so hopefully it works out. You also don’t mention your exit strategy. Are you going to turn around and resell it? Are you going to hold it for a rental? If a rental, who will manage it?
Investing, getting the deal, and closing the deal are only some aspects; you also need an exit strategy.