Dp2's answers on Trulia Voices

I already made more 10 offered so far but I got no answer from one of them. should i continue with my current?

Thu, 25 Jun 2009 09:34:19 PDT

Answer by Dp2: Bob, you've got serious issues; I have neither the time nor patience to deal with your . . . nonsense today. The sales data speaks for itself--period.

I already made more 10 offered so far but I got no answer from one of them. should i continue with my current?

Thu, 25 Jun 2009 09:26:42 PDT

Answer by Dp2: Wayne, I agree 100% with you that "[good offers] speak for themselves." I also mostly agree with the rest of what you wrote, but I've also seen evidence recently indicating that banks tend to strongly prefer all-cash offers (especially in certain markets--and OC is definitely one of them). I've personally found (and I've confirmed with other investors nationwide) that it's taking roughly 45-60 days on the average for loan underwriters (for conventional loan products) to (dis)approve a loan request, and for the lender to fund the purchase. Sometimes, it's taken as long as 90 days to process a FHA loan request. Sellers--especially when they're banks--aren't that patient these days, and they'll often go for a lesser amount of cash (with no financial contingency) with a quick closing in a heartbeat. Carl, I wrote many--not all--new listings are being snapped up, and you can easily confirm this by regularly checking the MLS sales data in that area. Although I do know a little bit about what's going on with some commercial projects (primarily apts and parking decks) in Essex county, I don't know enough about the residential market specifically in Upper Montclair to specifically address what's happening there. However, having stated that, I suspect that you should be able to check your MLS weekly sales data for the past 26 weeks. Do a week-by-week trending analysis on the absorption rate, the actual number of sales overall, and the actual number of sales with closings where the buyer paid all cash (ie with no financing). You might see that the number of all-cash closings is trending up, and that their percentage of overall sales is also trending upward. Additionally, you should be able to extract the sales with all-cash closings for properties listed for less than 30 days, and do a weekly trending analysis of this data too. Although I don't live in OC, I invest there (and in some other markets), and I know that the respective numbers are trending upward.

I already made more 10 offered so far but I got no answer from one of them. should i continue with my current?

Thu, 25 Jun 2009 05:03:58 PDT

Answer by Dp2: Bob, there you go again . . . always misreading what I actually wrote. Why do you always assume the worst? Are you really that cynical? No, I didn't intend to advise Utlui to pay cash, nor did I intend to advise agents (such as yourself) to recommend their clients to pay cash. I simply pointed out that there are several cash buyers out there in OC who are determined to gobble up everything in sight. They're pouncing on ALL of the "good stuff" (listings with cumulative DOM < 30 days), and they're raiding the pocket listings. Stated another way, buyers who aren't buying with all cash are basically swimming in shark infested waters during a feeding frenzy. Again, Utlui, that's most likely why your offers aren't getting any bites. So, if you'd like to get ANY of your offers accepted, then you'll need to ADAPT your strategy to avoid the feeding frenzy. You or your agent could contact one or more of those cash buyers (who purchased one of the properties in which you were interested), and offer to purchase one of the properties from him/her as-is wholesale. Another strategy for avoiding the feeding frenzy is to target homes that the first wave of cash-buyer sharks bypass which tend to be listings that are at least 30 days old. Bob, that IS how you were SUPPOSED to read my comment. Class dismissed.

I already made more 10 offered so far but I got no answer from one of them. should i continue with my current?

Wed, 24 Jun 2009 21:59:57 PDT

Answer by Dp2: As long as you continue to pasture with the other cattle, you're going to have to keep competing over the same patches of grass. It sounds like either you or your agent hasn't learned to play the game the right way. Unless you're making all-cash offers, then you're basically wasting your time if you're making offers on properties that have been on the market less than 30 days in OC.

My mom put her home on the market, got an offer quickly from pre-approved buyers, then the lender dropped it.

Wed, 24 Jun 2009 22:06:45 PDT

Answer by Dp2: Has your mother considered contacting the previous buyer and offering to sell the property with seller financing?

Is it wise to make a full price offer on a short sale of a house when you have not been able to see interior.?

Tue, 23 Jun 2009 08:58:35 PDT

Answer by Dp2: Andy, you know I'm a fan! :) Andy definitely thinks like an investor, and I agree 100% with everything he wrote--which is rare for me. ;) Right now, I (and many other investors I know) prefer REOs to short-sales for the reasons he mentioned, and for a few reasons that he didn't (like all of the inferior liens get removed after the gavel falls). Because short-sales can take a long time to be approved and to close, investors have to know how to price this into their offers. Many investors (myself included) will submit multiple offers at the same time, because it's a numbers game, and we'd end up starving if we were to tackle these deals one at a time. It sometimes takes 6 or more months just for the banks to get back with a "No." And don't get me started on the state of conventional financing. . . . Nevertheless, most investors who know what they're doing will know how to work around those financing issues (JVs, HMLs, creative financing, commercial financing, etc). Another sticky point with short-sales--that I prefer to avoid--is the fact that several states have foreclosure redemption laws in place. For example, in CA, VA, and a few other states a person who has been foreclosed upon has a period of time after the gavel falls to redeme that property. That time period is 6 months in VA, and I believe it might also be the same amount of time in CA. Yet another sticky point with short-sales--that I prefer to avoid--is the fact that several states have foreclosure consulting laws in place. Again, VA and CA are 2 examples of such states. Short-sale buyers in those states have to be especially careful how they solicit a potential seller, because if they erroneously make any reference to "trying to help save/repair a seller's credit", "trying to help a seller to 'sell' the home", etc; because they could be fined and/or jailed for breaking the law. Having expressed all of that, are they any decent opportunities available in short-sales? Of course, there are. Nevertheless, caveat emptor.

Is it wise to make a full price offer on a short sale of a house when you have not been able to see interior.?

Mon, 22 Jun 2009 21:45:27 PDT

Answer by Dp2: Although I (as an investor) would never make a full price offer on any property--unless the numbers made sense at that price--I tend to agree more with Maureen. In fact, I'm one of those investors that she described. I usually make offers on properties site unseen. She's also right that I'll ask for lots of pics, and I'll set up a team of people in an area (like Detroit) to handle inspections, appraisals, etc. Unless you're a carpenter, civil engineer, or inspector, so you wouldn't know what to look at anyway. Although I have a pretty good idea of what to look at, I don't want to play inspector/GC. The point is that I outsource the that's work outside of my areas of expertise to others who specialize in that line of work. If I determine via my due diligence that the property is worth less than what I offered, then I'll either re-negotiate my offer price with the seller, or I'll exercise my appraisal contingency (because obviously the property appraised for less than my offer price). Maureen is also correct that if the seller isn't "actively participating in the short sale, then it is not going to happen." So, you need to determine how motivated the seller is to sell that property.

Looking for advice and tips when just starting out

Mon, 22 Jun 2009 22:09:44 PDT

Answer by Dp2: If you intend to work with investors, then you probably should read some materials on working with investors.

What are the pros and cons of buying a six family building?

Mon, 22 Jun 2009 22:03:37 PDT

Answer by Dp2: pros: it's often easier to get a multi-unit to cash-flow. your property isn't 100% vacant if a tenant moves out increased cash-flow more upside--if managed properly--when sold commercial financing cons: more tenants sometimes can mean more headaches higher expenses

For residential investment, what are CAP rates doing these days in Oakland, increasing, decreasing?

Mon, 22 Jun 2009 21:11:02 PDT

Answer by Dp2: I posted the minimal numbers that would work for me earlier, and my criteria are also pretty conservative. Forget about the notion that your numbers will only work in "certain" locations, and make offers in ALL areas using the numbers that work for you. Unless your agent is also an investor with cash-flow properties, then s/he really isn't in a position to advise you about what you'll need to do with any future tenants. It's a different thing, however, if that agent simply relayed that message from the seller. Your statement about the short-sales is kind of irrelevant. All you need is to get 1 accepted offer, and it's impossible to get your offer to be accepted if you don't submit one. Whether the acceptance process takes a week or 6 months, the process begins with you submitting an offer. You don't know what the seller and/or lender(s) will accept until you make an offer.

For residential investment, what are CAP rates doing these days in Oakland, increasing, decreasing?

Tue, 16 Jun 2009 10:35:14 PDT

Answer by Dp2: I don't know where you were looking, but I know I saw at least 19 of them on the market back in March. Do you intend to occupy one of the units? If not, then why would it matter where your NOO rental is (of course as long as it's not in a warzone)? Whether or not you intend to occupy one of the units, you can still make an offer with numbers that make sense to you. The seller then has a choice to accept/reject your (bird in hand) offer. Also, keep in mind that you can also use the pre-tax cash-flow generated as part of your income. If you structure your purchase correctly, then you should be able to get your tenants to pay for your privilege to own that property.

Went to contract in Feb/9. Still waiting for buyer to get a Mortgage! Is this normal & how long do I wait?

Sat, 6 Jun 2009 04:01:02 PDT

Answer by Dp2: Robin, As I stated before, I invest in multiple markets, and NYC happens to be one of those markets. I'm also somewhat familiar with the markets in Buffalo and Niagara Falls. So please stop making false assumptions about things that you obviously don't know, and don't give me any of that local nonsense. The fact is that I and others I know won't do a 10% (or even a 1%) EMD--on properties in NY or elsewhere. EVERYTHING is negotiable; one just needs to know how to ask for it. Dawn, Keep the faith. For every issue that arises, there is a bona fide solution. Neither deal has to fall apart, and you have several options (that we all provided) from which to choose. You probably should also contact your agent for your new property, and let him/her know what's going on, so that you both can put together a plan to further extend your deadline for that closing (if possible). Also, be upfront with him/her about what's been going on with your sell-side deal, and let him/her know about some of the options that you've just learned. S/he might know of a private money lender (who typically can make a decision to fund a deal within about 24-72 hours, and can fund a deal in as little as 1-2 weeks [sometimes sooner]) who can help temporarily fund your closing on the new property while you wait for the closing on your current one.

Went to contract in Feb/9. Still waiting for buyer to get a Mortgage! Is this normal & how long do I wait?

Fri, 5 Jun 2009 15:00:16 PDT

Answer by Dp2: Joanna, First, I read that sentence, but I didn't ASSUME that the reason why she couldn't proceed is due to insufficient funds or credit. Some people process things linearly, and they need to complete step 1 before proceeding to step 2. Several of you here already addressed the prior, so I opted to address the latter. Second, if you followed my posts, then you should have seen that I recommended a land contract or lease-option ahead of the wrap. A real-estate attorney who knows what s/he is doing can structure the mortgage such the the title is escrowed, and held deed in lieu of foreclosure, so that the seller can get the property back sooner--typically without needing to foreclose. Yet, if she opted to do a lease-option, then she could structure the lease agreement to be long enough (1-2 years) for the tenant/buyer (in this case) to be able to obtain his/her/their own financing. Afterwards, the buyer can exercise that option, and close with new financing. The point is that none of this is rocket science. For every problem you raised, there is a viable solution. Third, I didn't assume that she'd lose her deposit. She wrote that "[she stands] to loose a lot of money" if her end-buyer doesn't close soon enough. The loss could be the EMD, loan origination fees, money spent on home decorations, and/or whatever else she might have spent. I'm a consultant (engineer) as well as an investor, and I'm laser focused on resolving the problem. I'm not recommending that she shun anyone's advice. My advice is for her to explore ALL of her options. If she can help find that buyer a conventional lender that's willing to fund the deal, then that's great. However, I suspect you realize by now that a lot of conventional lenders are dragging their feet on funding various purchases. She's already stated that time is of the essence, so she really might need to consider other non-conventional financing alternatives (like hard money--but I won't go there). Fourth, although it's true that the options I presented do have some calculated risks, you're ignoring the fact that the "no-brainer" recommendations also involve several risks: 1) no lenders want to lend to that buyer, 2) the lender continues to stall long enough for Dawn to completely run out of time, 3) the buyer's lender pulls a bait and switch at closing (which unfortunately is happening more and more--especially on condo purchases), 4) a new lender orders a new appraisal and the results don't arrive soon enough, etc. There are only 2 guarantees in life: death and taxes. (Actually, I'd argue that there are others, but that's a topic for another time.) Finally, for me it's a no-brainer too: the obvious thing to do is to do everything possible to remove the obstacles preventing the closing. If I were Dawn, I'd take your advice and referrals, I'd take Robin's advice and referrals, and I'd run the seller financing ideas past my agent and/or real-estate attorney. Basically, I'd run a full court press--making several calls a day if that's what it took to get the deal done. I'd also look for other back-up buyers, and potential renters. I won't go down without a fight!

Went to contract in Feb/9. Still waiting for buyer to get a Mortgage! Is this normal & how long do I wait?

Fri, 5 Jun 2009 12:29:53 PDT

Answer by Dp2: Robin, While it's true that in the days of easy money, that wraps and other forms of seller financing weren't in vogue. I can assure you that they were--and still are--done, and they're coming back with a vengence these days. Please keep in mind that I invest in both commercial and residential real estate in multiple markets, so I know that the deals exists--and I'm not the only one doing these deals. For starters, take a moment to search Trulia, Craigslist, BiggerPockets, and other forums for threads on creative or seller financing. Next, try calling at least 20-30 title companies to see what they tell you. Afterwards, try reading some of the articles posted recently on CNBC.com about it. And I could go on. . . . Dawn expressed frustration about dealing with a transaction that's taking way longer than planned to close. I provided a solution. I didn't see anywhere in her initial question or follow up comments that she needs the money from the first transaction to fund the second one. However, if that is the case, then there are ways to deal with this too: 1) she can sell the mortgage note (after doing the wrap) to a note buyer; 2) she could purchase the new property with hard or private money, and refinance after the buyer refinances; etc. Keep in mind that all she really needs to complete that new purchase is enough for the down-payment--not the pay off of the current home. So, she can either require her buyer to at least put that amount down for the purchase. (Of course, I'd advise to either take slightly more up front to ensure that she has enough to service the previous mortgage if the buyer defaults before refinancing.) Afterwards, she'll receive payments, and will be able to make her own payments on the new place. Of course, cash is king, but time is ticking away, and she stands to lose the cash that she invested already in the new home--provided she doesn't take action soon. Do you know of any other loan programs available using conventional financing that will qualify and approve her buyer in enough time? If so, then please present it so that we all may learn about the program. If otherwise, then please don't shoot down what I wrote simply because of your own preferences. Right now, it's all about Dawn--not me--so let's work together to help supply her with as many options as we can to help her to get her deal done. Done is done: it doesn't matter how the deal is done--as long as everything is legal and both parties approve of the transaction.

Went to contract in Feb/9. Still waiting for buyer to get a Mortgage! Is this normal & how long do I wait?

Fri, 5 Jun 2009 09:40:31 PDT

Answer by Dp2: You'll never know what your buyer will go for until you present the option. The point isn't force the buyer to buy; rather, it's to help remove as many obstacles as you possibly can to help encourage your buyer to close ASAP. The seller financing option can be tailored to meet both your and the buyer's needs. The buyer can still pursue getting the FHA loan as a refi instead of as a new loan. Although there is a minimum seasoning period of 90 days for a rate and terms refi, the underwriting criteria to refinance are often not quite as stringent as the criteria used to qualify borrowers for new financing (at least since April). Plus, you can charge a slightly higher than market interest rate (maybe 1%-2% above your current interest rate), and you can earn a little extra off of the interest spread. As an investor myself, I like to sell using seller financing for this reason. Also, keep in mind that it's possible for you to sell your property with seller financing (using a land contract or lease-option), and to retain your tax benefits (depreciation) from this property until the buyer refinances you out of the deal. (You'll need to speak with a knowledgeable tax attorney or CPA--ideally a professional who's also a real-estate investor--on this.) Of course, the buyer (if s/he knows anything about creative or seller financing) might prefer to buy using a wrap instead, and that should be OK too. Remember, your goal is close ASAP.

Went to contract in Feb/9. Still waiting for buyer to get a Mortgage! Is this normal & how long do I wait?

Thu, 4 Jun 2009 20:36:41 PDT

Answer by Dp2: Instead of getting upset, you do have other alternatives. One of those alternatives is to sell your current home to that buyer using seller financing. You could do a subject-to mortgage with a 1-2 year balloon, and have your buyer to obtain new financing to refinance you out of the deal within 1-2 years. This way you can sell, move, and get on with your life. If the seller defaults, then you could foreclose, and resell the property to someone else--but hopefully that won't happen.

Can low commission hurt my sale?

Fri, 5 Jun 2009 04:58:24 PDT

Answer by Dp2: Do you want a Mac or PC, a burger from Fuddrucker's or Burger King, a Benz or Hyundai, a steak from Morton's or Old Country Buffet, etc? I agree most with Dunes and Danilo in spirit. Yes, commissions are negotiable, and yes the stars like to get paid. The real question that you need to ask yourself is how motivated would you be to do the work that you do if your boss were to ask you to double or triple your workload and take a 33% pay cut, because this is exactly what you're asking the agents to do.

Does a home sell faster when there are open houses scheduled regularly? How often should you have open houses?

Fri, 5 Jun 2009 04:38:13 PDT

Answer by Dp2: I agree with Bill, and I'll go a step further. You could show your place once per month or daily, but if the price isn't right, then the buyers won't bite.

Is there any recourse when I don't agree with an appraisal?

Fri, 5 Jun 2009 04:32:10 PDT

Answer by Dp2: Check with your agent to see a trending analysis of the sold price for homes in the neighborhood where your investment home is located. You need to determine--just as Jeremy alluded to earlier (with his "1% per month" comment)--whether the prices are continuing to march downward and by how much. You also need to be strategic about ordering appraisals--especially as more time passes, because you may have to disclose the results of the latest appraisal. Keep in mind that the longer you wait--especially in a market where the current market value is declining steadily--the less you'll receive (if you opt to sell in this market). Instead of flipping that property to a retail buyer, as an investor myself I think it might be better for you to rent the property, and hold it or flip that rental to another investor. The property probably will sell for a higher price if it were flipped as a rental.

What do I do to move to Hawaii, when I can't get my current home sold, due to the current economy?

Fri, 5 Jun 2009 04:08:37 PDT

Answer by Dp2: I agree with Katie, and I'll go a step further. You have several options. Which is more important to you time or price? If the prior is more important, then you'll need to consciously underprice your competition; OTOH, if the latter is more important, then you'll need to be more flexible on your timing and terms. You could either sell with seller financing, or you could rent your place (and sell it after the market recovers).

In a loan application would a townhouse be considered a single family dwelling or a condo?

Fri, 5 Jun 2009 03:58:58 PDT

Answer by Dp2: I agree with Joe: you have to take a look at the deed. Some THs are classified as SFHs, and others as condos. Chances are that if a TH is detached it's considered to be a SFH more often than not. It's a coin toss if otherwise.

mold issue

Fri, 5 Jun 2009 02:40:39 PDT

Answer by Dp2: Having taken microbiology, and having grown up with a medical technologist, I've learned through the years that one can't always correctly identify a particular species of mold (another form of fungi--or their microscopic spores) with the naked eyes. Some species may be identified when viewed under a microscope, and others need to be identified via other methods like streaking, chromatography, etc. Grace is correct that the lethal forms of mold are rare, and that there are many relatively common species whose spores trigger the listed symptoms. Not all mold is bad; penicillin is made from a mold (that's related to bread mold [and so is LSD for that matter]), and cooking yeast is a close relative to mold. However, what Grace failed to mention is that when mold spores germinate, there are often several species of mold growing together in colonies. Different species of mold prefer different growth media (hence why they can be distinguished using techniques like streaking). While it's true that using bleach will kill certain strains of mold, bleach doesn't kill the spores, and other species of mold are resistant to bleach--and they need to be treated via other means. Additionally, the point with remediation is--not only to get rid of the mold that you sometimes can see--to get rid of the spores that you don't see. It seems that many want to act as a microbiologist, but if I were you I'd proceed with caution on this if you're not one.

mold issue

Thu, 4 Jun 2009 20:48:21 PDT

Answer by Dp2: Mold is nothing with which to play around. Some species of mold are lethal. You're far better off letting the mold company handle the remediation--just like Michael recommended. Consider what could happen if your contractor was uninsured (or under-insured), and if one of their workers died from being exposed to the spores in your home. You could be sued--both by the contractor and by the decedent's family.

CASH OFFER less than my cash offer being accepted TWICE

Thu, 4 Jun 2009 20:13:06 PDT

Answer by Dp2: Perhaps the bank accepted the other offers before you submitted--or they received--it.

does anyone know of any land contract deals in the bath county, ky....preston area?

Thu, 4 Jun 2009 19:20:51 PDT

Answer by Dp2: If you intend to buy using one, then why not just make your offer?

Seeking Southern Nevada Realestate Agent...

Wed, 3 Jun 2009 12:02:02 PDT

Answer by Dp2: Tony, Tax liens and note buying are about as good as it gets when it comes to hassle-free and low-risk REI. The next best thing (as for the hassle-free part) is a NNN property. You're correct that someone has to contribute equity to the deal, but that somebody doesn't have to be the sponsor of the syndicate--hence that deal can be a nothing down for him/her. I agree that syndicate purchasing can be good for risk management, and it also can be good for get money off of the sidelines and into the game. It appears that you and I operate similarly--but not exactly the same way (after all I'm not an agent--but I'm the one who finds the deals, works the numbers, and structures the deals). I'm positive that your firm isn't the only one that operates in the manner you described--both in NV and nationwide. Basically, your group appears to operate as a syndicator that caters to accredited investors; whereas, I (and others I know) will work with accredited and sophisticated investors. Sure, according to SEC Regulation D Rule 506, I'm limited to 35 sophisticated investors, but I can also work with an unlimited number of accredited investors. Besides, I prefer to keep the number of investors--sophisticated or otherwise--well under 35 (typically no more than 10). Perhaps, we may collaborate with one another on future projects and jointly leverage our networks to do some interesting deals together.

Seeking Southern Nevada Realestate Agent...

Tue, 2 Jun 2009 17:53:32 PDT

Answer by Dp2: Tony, I didn't misread the intentions for some who utilize that lease-back strategy; I opted to not address it, because that's not my cup of tea. I'm intimately familiar with tax liens, and I don't have a problem with them. However, using them to acquire properties--although it's possible--is probably not an ideal strategy, because the 1st lien holder (usually a bank) typically will pay the back taxes and take over the foreclosure action (at least in roughly 95+% of the time). You mentioned you might be interested in working on an aggregate acquisition of at least $3M. Are you talking about bulk REOs in the case of residential or apartments/offices/strip malls/etc in the case of commercial. Yes, you're missing a few alternatives: 1) wholesaling, and 2) syndicating.

Seeking Southern Nevada Realestate Agent...

Tue, 2 Jun 2009 12:15:31 PDT

Answer by Dp2: Tony, Although your observations about the situation with conventional financing are valid, many of the issues that you raised and your underlying suppositions don't apply for his case. You're examining the situation from a retail buyer's perspective; John is an investor (as am I)--not a retail buyer. As investors, we have access to other forms of capital: hard or private money, cross collateral, commercial loans, etc. Even in the cases when investors use conventional financing, they still end up needing to eventually rely more heavily on other forms of capital, because the Fannie Mae underwriting guidelines restrict an investor to at most 10 mortgages on residential properties. Although that "lease back" exit strategy that you suggested as a possible exit strategy sound nice, and looks nice to some on paper, that idea doesn't make a lot of sense fiscally--at least to the person(s) who have to invest the money upfront. Think about it for a moment . . . if that seller (who's in pre-foreclosure) couldn't afford to make the payments before, then how is s/he going to afford to make then now? I realize that many sellers paid too much for their homes, and that some could have weathered the storm had they been allowed to refinance. Unfortunately, we're all being forced to pay for the past sins of a few--even though many of us (myself included) are innocent. Anyway, so are you open to working with investors there in Vegas?

Seeking Southern Nevada Realestate Agent...

Wed, 22 Apr 2009 20:11:06 PDT

Answer by Dp2: I have a slight preference for commercial, but I also invest in residential. Do you specialize in a particular type of property or neighborhood?

can we afford to buy a $300,000 house if our monthly income is just $4000?

Tue, 2 Jun 2009 16:18:46 PDT

Answer by Dp2: Actually, unless you purchases a home with all cash, the UNDERWRITER will use the same formulas that I used to (dis)qualify you. Stated another way, the underwriter--not the loan officer--approves/denies a loan request. Keep in mind that buying a home doesn't just end with the purchase itself; there are ongoing costs. Barbara is correct you definitely don't want to over extend yourself, and the payment structure that she suggested could possibly work--assuming that you don't have too much debt. Something that you'll have to ask yourself is what would you do if you were to purchase that 300K home this month, you were to lose your job at the end of this month, and it were to take you 3-6 months to find a new job. Could you afford to keep making those payments and paying your other bills on-time for the next 3-6 months while looking for work? If not, then you should probably wait or consider buying something less expensive.

can we afford to buy a $300,000 house if our monthly income is just $4000?

Tue, 2 Jun 2009 12:40:25 PDT

Answer by Dp2: Unless that $4K is your net income, you have great credit, have no other debt, and can afford to put down at least 10% to 20%, then the answer is "no". Also, even if the aforementioned are true, then you'd be skating on very thin ice for a while, and you could easily end up losing that home if you were hit with a storm. Here's how I determined that: .4 * 4K = 1.6K (the maximal mortgage payment you'd be able to qualify for--assuming you had no other debt) .8 * 300K * (.055/12) / (1 - (1 + .055/12) ^ -360) = 1362.69 .8 * 300K * (.06/12) / (1 - (1 + .06/12) ^ -360) = 1438.92 .85 * 300K * (.055/12) / (1 - (1 + .055/12) ^ -360) = 1447.86 + mortgage insurance .85 * 300K * (.06/12) / (1 - (1 + .06/12) ^ -360) = 1528.85 + mortgage insurance .9 * 300K * (.055/12) / (1 - (1 + .055/12) ^ -360) = 1533.03 + mortgage insurance .9 * 300K * (.06/12) / (1 - (1 + .06/12) ^ -360) = 1618.79 + mortgage insurance

I would like to put an offer on a short sale that has a tenant. The tenants are taking down all the ceiling

Tue, 2 Jun 2009 15:41:08 PDT

Answer by Dp2: You've received several responses from an agent's/broker's perspective. Now, I'm going to give you one from an investor's perspective. Many investors (myself included) LOVE ugly homes, because they're diamonds--albeit in the rough at the moment. Have your agent to help you draft a LOI--instead of a P&S agreement--for your offer that contains a choice between 2 sets of terms. Think of it as 2 offers contained within a single offer. The first option could be the terms that you're willing to accept provided you acquire the house in the condition that you photographed. The second option could be the terms you're willing to accept otherwise. Regardless of the unique terms of both offers, both offers will also have a common set of terms (ie your contingencies, closing date, etc). In the first set of terms, I'd set an offer price, list all of the fixtures that you expect to be included in the home (both inside and outside). One of my mentors once told me that he knew of a seller who sold a home, and uprooted a lemon tree in the back yard--after closing--to transplant into the yard of his/her new home. Of course, the buyer was irate, demanded an explanation why the tree had been removed, and threatened to sue the seller. The seller told the buyer that the tree wasn't included in the fixture list, and that the seller had no intent of leaving the lemon tree. However, the seller returned the lemon tree anyway, and it ended up dying. (I don't know how that story ended, but I do know that the buyer filed a lawsuit.) Anyway, my point is be as explicit as possible about what you expect to be there, and many locales have laws in place that specify what happens with various fixtures by default--provided the buyer and seller don't negotiate another arrangement. In the second set of terms, assume the worst possible outcome--and adjust your offer price accordingly (roughly 40% to 50% of the value determined by the CMA). This will put a concrete dollar figure on the damage. Besides the inspection, appraisal, and financing contingencies, you might also have your agent add the following contingencies (that will apply for both offers): your offer is subject to the seller and/or tenant having moved out on or before the closing date; your offer is subject to the seller not further encumbering the property with any additional liens; your offer is subject to the seller's ability to obtain a certificate of occupancy for that property; and your offer is subject to the buyer or buyer's agent being able to show the property to prospective buyers or tenants upon 24 hours notice.

some real estate companies are giving the buyer part of the comm. to close the deal. can a buyer write their?

Tue, 2 Jun 2009 13:20:00 PDT

Answer by Dp2: First, Kathleen, your time line is off. Please scroll further down in this thread, and you'll see that my first answer preceded yours. My second answer was meant to 1) help support Andy's, 2) to further expound on my previous one, and 3) to address some of the issues that you raised. Second, I'll restate what I wrote the 2nd time another way using your example to help clear up a few misunderstandings. Yes, Janet (or any other buyer)--without using an agent or attorney--can write a LOI that contains her offer, and present it directly to the listing agent or the seller for that matter. She can also give her LOI to her buyer's agent, and have her agent to present the offer to the seller or seller's agent. She also may tell her agent what she'd like to do, and have her agent to write up the offer (using the state approved P&S agreement or a LOI). No, I didn't state anything about cutting anyone--or anyone's proceeds for that matter--out of the deal. In fact, I tried to hammer the point--several times--that the discount or cash-back has nothing to do with both the seller's and buyer's agents commissions. The transaction you described is dual agency representation (in which case I believe that the agent involved deserves to receive the full commission [6%]) with a rebated commission. If she were to receive any cash back from the transaction, those proceeds by definition would not be a commission--because she's a principal in this deal. An agent/broker helps to facilitate a deal, and typically isn't also a principal in that deal. In most states (especially the ones in which I invest), facilitators have to be licensed. Keep in mind that it's possible for an agent/broker to also be a principal in the deal--in which case s/he may collect a commission and request a commission rebate. (The commission is the fee for facilitating the deal, and the commission rebate is the cash that the principal receives at closing.) I hope this is clearer now.

some real estate companies are giving the buyer part of the comm. to close the deal. can a buyer write their?

Tue, 2 Jun 2009 11:29:30 PDT

Answer by Dp2: Kathleen, Actually, Andy is correct. Any buyer can request a broker's commission rebate (aka commission rebate) in his/her offer. Although this type of request isn't as common in residential real estate, it happens quite a bit in commercial circles. The request has nothing to do with the seller's broker/agent or his/her commission. Please understand there's a big difference between a commission rebate and a rebated commission. You're speaking about the latter; whereas, Andy and I are speaking about the prior--something different. Just to hammer this point home--and hopefully to leave no stone unturned--a commission rebate also has nothing to do with co-broking, the buyer's broker/agent, or his/her commission too. Furthermore, a buyer could ask for a 10% or 20% commission rebate. Nevertheless, most of the residential agents with whom I've worked haven't heard of commission rebates (and I've encountered a few that tried to fight me on it--until I after I explained what they are [and provided references]). At least 1 or 2 agents told me that I should have simply lowered my offer price or asked for cash back, and I took their advice: I lower my offer price (more often than not--at least on residential deals).

some real estate companies are giving the buyer part of the comm. to close the deal. can a buyer write their?

Fri, 29 May 2009 13:31:32 PDT

Answer by Dp2: There are legal ways to do what you're asking to do--even in CA. Yet, if all you're trying to do is save 3%, then why not use an agent and discount your eventual offer price (as determined by the CMA/BPO or appraisal) by another 3%?

my husband and i really want to buy a house, but we are stuck in an apt. and our lease doesn't end until Feb.

Fri, 29 May 2009 13:19:52 PDT

Answer by Dp2: Have you and your husband reviewed your lease to see if you can 1) sublease/sublet, or 2) opt out earlier? If not, then you should probably do that first.

Do you think we are in recovery or is the media and government doing all they can to keep the sheep docile?

Fri, 29 May 2009 11:21:17 PDT

Answer by Dp2: Initially, I couldn't tell whether this was a serious question/comment or troll. It's obvious that the media and government aren't in cahoots. The government wants us to spend, and the media hasn't collectively decided where they want to stand. I can tell that some things are beginning to show possible signs of recovery, and other things are showing that some parts of the economy are getting weaker.

Where can I find lease/option to buy or land contract homes in Northern Indiana??

Mon, 25 May 2009 22:15:11 PDT

Answer by Dp2: There's nothing tricky or mystical about lease-options. Darin is correct: there's plenty of information available both on-/offline about them. You could search for a few of my or his earlier posts here on Trulia, or you could go visit www.biggerpockets.com to learn more about them. Ideally, you probably should work with a knowledgeable pro (an agent, RE lawyer, investor, title company, etc) to help you with your offer.

Where can I find lease/option to buy or land contract homes in Northern Indiana??

Mon, 25 May 2009 14:16:44 PDT

Answer by Dp2: Instead of asking where to find them, you should make an offer on property that you'd like to purchase using a lease-option or land contract.

Buying a house from mom

Mon, 25 May 2009 21:58:31 PDT

Answer by Dp2: Heidi, First, I know what I'm talking about. I also INVEST in CA (and in several other markets for that matter) in both commercial and residential real-estate, and guess what . . . I use real-estate and title attorneys for some of my transactions, and I know other investors who also use them in CA (especially in the Bay area due to many of rent control issues). Second, please google for "real estate attorney" CA; you'll get several links including the following one: http://www.lawinfo.com/attorney/Real-Estate/California/. I'll leave googling for title attorneys in CA as an exercise for the reader. Third, please stop making assumptions what I (and others who aren't based in CA) know. (Please note that I've made no assumptions about your knowledge about any of the markets in VA.) Finally, just because you might not use them, that doesn't mean that others don't. You have a right to opt to not use them, and I'll continue to use them when feel the need to use them.

Buying a house from mom

Mon, 25 May 2009 16:24:22 PDT

Answer by Dp2: One of my mentors is a real-estate and title attorney who is licensed to practice in CA. He described the process for handling a nearly identical transaction pretty much the way Scott described it. Although Barry brought up a good point about the disclosures and other forms, his statement, "[the aforementioned] forms are only available from CA licensed REALTORs," isn't entirely accurate. One may obtain those forms from the title companies or the state board for realtors. Keep in mind that title companies HAVE to be proficient in processing those forms too, because they're the ones responsible for WRITING the closing instructions (which might include re-doing any of the documentation that wasn't handled properly). Before you do anything, you probably should get in contact with 5-10 title companies, and explain what you're trying to do. They'll let you know whether or not they'd prefer to handle all of the paperwork, and keep in mind that some title companies also have real-estate agents on staff. So, you still should be covered in either case.

are maintenance fees negotiable for co-ops in the mt vernon area?

Mon, 25 May 2009 15:54:58 PDT

Answer by Dp2: You'll never know unless you make an offer with that request. For example, you could request (as one of your seller's concessions) to cap your co-op fees for the first X years, and have the current seller to pay for any overage.

How much less can I offer on a home that's $300,000 and it's been on the market 125 days?

Mon, 25 May 2009 15:50:13 PDT

Answer by Dp2: Staci's right: it depends. You need to get the comps, cumulative DOM, and other marketing data to determine what to offer. Afterwards, you need to make sure that the property at least appraises for your offer price (assuming the seller accepts your offer).