Need Help With First Deal. Please Walk Me Through It
Need help with first deal. I have a property picked out I have financing now what do I do. How do I go about getting a contract that I can get out of if my lender dont like it? What is a earnest money contract ? Once I get through the first deal I will breath a sigh of relief. Thank You
You can get purchase agreements (contracts) from officemax or an attorney. Add a clause at the end saying "subject to inspection" (you should ALWAYS have it inspected). This will let you get out of the deal if the inspector finds something wrong, or if you simply change your mind. Earnest money is money you have to put down up front when you buy. Hope that helps!
That helps alot thank you. How much earnest money is usually put down? Will the contracts I find on the internet to download work? Or Is there a certain kind I need?
Is this an investment property? Do you know what your going to do with it? Have you calculated your holding cost?
If your living here, nevermind.
All I'm trying to say here is before you go through the front door, know how your going to go through the back door.
We don't like any wiggle clauses, if this is your first deal, why not try to create a sandwich option.
You as an investor, advertise for tenant/buyers. With this YOUR buyers information, find a rental unit from a anxious seller who will accept a Lease Option (L/O), remember you are the guarantor on the monthly payments. Create the L/O documents which says you can assign the property the YOUR position of the deal.
Seller say's yes to 3 years, you bring your buyer. These agreements do not say the buyer can assign the agreement to someone else. Their term is 2 years. (the 12 month cushion is there in case YOUR buyer needs more time to purchase) Next, receive their lease option consideration payment, and 1st month's rent. Deal is complete. When you are ready to purchase after say 12 months, you have received steady payments, and can present a seasonded lease agreement from YOUR buyer to apply to the mortgage application. A Win for you!
Sounds simple, yet you have accepted being the landlord to YOUR tenant. You also have the responsibility to pay the rent you have agreed to pay. Work with YOUR buyer at all times, and the mortgage broker, monitor the progress. Don't forget to ask for the referral from YOUR buyer.
Good Luck,
Eric & Rosa
We did not include EVERY what if, but this is what the courses from the Guru's are for.
[addsig]
I don't know what your deal is without more details, but the option of bringing a realtor in to help you probably exists.
A realtor works for a commission, usually 2.8% of the selling price, however that is negotiable.
Because you already found the house you should be able to get a realtor to do the contract and close for you from anywhere from .5% to 1.5% of the cost of the house.
It is traditional for the seller to pay for the realtors commisions, so even if you have a private deal arranged with the seller, if they sold the house traditionally they would still have to pay 2.8% for their realtor and 2.8% for yours, so there is some leverage in getting them to pay for your realtor.
Using a realtor will allow you to ask the million questions you will have and get answers, during your first deal. It will also help protect you from shooting yourself in the head on your first deal. A simple mistake in real estate can be very costly especially in the beginning.
Creating a contract to protect you will be part of the realtors duties.
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Mike - Denver, Colorado - "I had my hair cut twice and it is still too short!"[ Edited by The-Rehabinator on Date 10/31/2003 ]
Quote: We don't like any wiggle clauses
I would not say that "with approval of inspection" is really a wiggle clause. Who would buy a house without ever inspecting it?
I like the comment about knowing how to get out before you get in.
I personally love weasel clauses. This is the age of "self protection". If I were selling a home I would put in "subject to buyers inspection" and allow them to renegotiate the deal if they found something major that had been overlooked.
THis allows the uneducated buyer to avoid making costly mistakes on the lower end of the learning curve.
That said, unless you are buying a personal residence and just need "a little help" I think you have no business doing an investiment deal without some education (i.e. books read, courses studied, time spent reading articles and posts).
....Unless you have money to lose...
A bunch of things.
First, you should use the standard TX real estate contract form. I have a copy if you need it. Adding subject to inspection is a good idea, even my RE agent does that. There is no shame in bailing out if you just contracted to purchase a money pit. That's why we have inspections! I do not approve, however, of people who add escape clauses to their contracts when they have no intent of purchasing the home, and are hoping to flip it.
So far, all 4 deals I've done with $1000 in earnest money each. Since we are dealing with 100k+ homes, I feel it is reasonable if you are serious about purchasing the house.
As far as your lender goes, if you choose a good property, your lender will love it. If you are purchasing a rehab and your LTV is good, a hard money lender will love it. The bottom line is, buy right and you can't go wrong.
I emailed you my phone number. Drop me a line and we can discuss RE over lunch (my treat). I can also put you in contact with an excellent RE agent, an inspector, appraiser, and a good loan officer. Also, if you just want a second opinion on the house, I could walk it with you.
While I'm defenately not Carleton Sheets, I'll help you out where I can.
-Chris
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Live long and be profitable![ Edited by c-brainard on Date 10/31/2003 ]