A 20k Question...
I was told that homes listed on the MLS sell for an average of 97% of the asking price in my area by a realtor[ i saw the printup]. Being that this is the case why would anyone with less than 80/85% equity call our signs & not sell with a realtor. [ aside from the fact that they won't have to wait 3 months for it to sell]
Now i am not knocking the sub2 method at all or saying it won't work, this will be one of my key buying methods. I am discouraged though because my signs are bringing in calls from MANY people with no equity. I now think i see why, they can get what they ask for by listing if they want to wait a few months for it to sell.
I love talking to those that respond to my signs but hate that no equity is there for me to take advantage of.
Any words of inspiration given would be greatly appreciated.
Buy John Cash Locke's book
For example purposes only let's look at that equity real closely.
FMV: 100K
7% commission
3% reduction in price to sell
3-4% carrying cost (payment until sale)
2-4% closing cost and seller concessions
2-4% fixup and repairs
78%-82% of FMV is what they will get.
Adjust these numbers to fit your situation.
You showed 3 months to sell. Add another month to close.
Verbatim,
No equity? Perfect for Subject To deals. No one that I know of wants to have to pay out of their pocket to sell their house.
If your not picking these up Subject To, your missing out.
By The way can you tell us what types of signage and wording you are using to bring in these calls?
All the best to you!
Optimum,
Just we buy houses. Any condition.
but if the property value goes down what do you do?
and if the person you put in the home stops making payments what do you do?
these are questions i cant answer?
do you make the payments & take the loss or what?
If you buy a property with no equity you presumable put in vely little of your money. If it goes sour and you took it subject to someone elses loan, you abandon it, and the prior owner is back in foreclosure. If it works out you keep it and eventually refinance or sell it.
You make money if you are skilled at picking winners, not losers.
JayLevin,
That, I suppoze is one way to do business.
I never intend to walk away from a house after I've made promises to the people I bought the house from. I will keep it and use it for a rental, Lease/option it, or make the payments until I can make it good, or sell it for a loss. That's called integrity, and it is priceless, and it helps keep you out of court, and out of the news. Negative publicity from investors acting without regard to right and wrong just makes it more difficult for investors by making more objections to overcome when meeting with perspective sellers.
Jeff
Verbatim, search here in the Subject To Forum, all the answers to your questions are here.
(JayLevin)
"If it goes sour and you took it subject to someone elses loan, you abandon it, and the prior owner is back in foreclosure."
I would hope you don't "abandon it" .
I was going to comment, but looks like Jeff took care of that. Thanks Jeff.
[ Edited by Optimum on Date 11/24/2003 ]
Buy the manual....it will clear up and answer 98.325% of your questions.
nebulousd,
you sure it isn't 98.4%?
Jeff
If you're worried about right and wrong why aren't you embarrased to screw the lender out of his right to get his money back when the property sells?
The lender does get all of it's money when the property sells. Get it on the monthly payment and the refinancing at the end of the term.
This question has been answered many times.
Sellers have many reasons to sell. Divorce, foreclosure, transfer, you name it. Sometimes people don't have the luxury of being able to list it and "wait a few months" for it to sell. Maybe most all of them sell for 97% of list but most all isn't ALL. You only need a few a year to sell for less to make a nice living.
I bought a house last week that is worth between 120 and 130k for the loan balance of 95k. Why did they sell it to me? They live in FL and their tenants moved on them with no notice. They can't afford even one more payment on this house. What were their options?
Think they are the only ones out there in this type situation? I don't either.
[addsig]
Jay,
The lender doesn't have any of it's rights taken away. They can call the loan due at any time. If they choose to sit back and collect payments instead then I think that they made a wise decision.
Now, abandoning your sellers is pretty darn low. Not all of them were in foreclosure to begin with. Not even behind on payments. Abandon them and you put them in a worse situation than you found them. If you can't live up to your end of the bargain then don't do the deal.
Jay,
I haven't screwed the lender out of anything! The lender still has the right to call the loan due, just like it states in the loan docs. It isn't in the lenders best interest to do so given the fact that the payments are being made on time, and the loan will be paid in full within a couple of years. They have plenty of non-performing assets to take their time already, they won't go through the expense of foreclosing on a performing loan.
Jeff
If I was a bank, I'd prefer to make my money on the interest that is being paid for the two years instead of calling the loan due without any further interest income. Besides, it would cost the bank more money to foreclose on the property than to do it sub2 way.
Just my opinion.
Seems no equity deals are better suited for L/O then sub2. Property value goes south, you are not locked in, especially if you use a lease with 6 month increments.
Quote:
On 2003-11-26 21:42, mrstooie wrote:
Seems no equity deals are better suited for L/O then sub2. Property value goes south, you are not locked in, especially if you use a lease with 6 month increments.
Assuming that everyone that wanted to buy a house had perfect credit, and could qualify for a loan today, i'd say you're right. There are alot of buyers out there that simply can't qualify for a loan today, but will not have the same problem in two years. If property value goes south, the pertinent questions are: How far south will they go? and How long will they stay there. A 5% or even 10% drop in value won't happen over night, It'll take some time. Those people that can't qualify for a loan of their own today because they do not have any significant length of time at their current job, or a recent bankruptcy due to medical bills etc. will be willing to pay a little more for a home they can buy today. You can structure their deal in a lease option, and collect non-refundable option payments, giving them credit towards down payment, with proof of down payment to show the lender etc. They won't be as willing to walk away from the property as you think. If it takes a little longer than a couple of years for property values to recover so you can sell the property for a profit, OK. It takes a couple of more years! Live with it! It'll be ok! If property values go in the toilet as you fear, finance companies will likely have too many other properties to worry about with people walking away because they owe more than the property is worth. They won't be messing with you making all of your payments on time. Sub2 will always be a viable way to acquire properties.
Jeff
Quote:
On 2003-11-24 21:23, thomasgsweat wrote:
The lender doesn't have any of it's rights taken away. They can call the loan due at any time. If they choose to sit back and collect payments instead then I think that they made a wise decision.
I am really excited about this type of investing, but I do have some questions about the ethics as you have stated here.
Are you saying the lender is informed that the property has been sold? Who tells them?
I thonk you've put your finger on the critical question - 3 answers
1 - you do tell them
2 - while you dont tell them, you dont do anything to hid the sale - ie you put your name on the insurance, you send them a check with your name on it, etc.
3 - you do the kind of thing tht is considered sharp practice by most but called creative investing here - ie you conspire with the owner to hide the sale. The loan docs allow estate plannihng trusts - but it is hard for the lender to tell an estate planning trust from any trust - so you do things described in the archives here to hide the sale from the lender.
You justify this by convincing yourself that lenders are evil, lawyers and real estate salesmen are stupid and greedy, and that you are like robin hood.
HMMM.
I am so glad I screen my investors and affiliates for experience and $$.
It seems that poor moral values and business ethics cloud every industry. I thought the financial service industry was loaded with hucksters, crooks and amateurs.
BOY!
C-
(General comment no directed at any person, groupe or forum. Industry statement only)
Dear Jeff,
Yes you are doing the right thing. After all you have some intelligence and I am sure given time you will work it all out.
The Action you have described is called a Stripper. It is quite common but is more associated with a desending market. . A Stripper may find himself upside down. Mortgage payments higher then what he can rent the property. What he does is rent for less and instead of making up the difference himself he abandons the property. In many instance he will rent for a really reduced amount if he can get say three to six months rent in advance. If he has any decency he executes a John Doe Deed, (I like to use the name John Locke) just kidding John. Records this deed so that prior owner does not get a check mark on his credit. This is Classic Stripper. Wait til we get a down market, you will see a lot of that in the slummy areas.
My advice is to weather the storm, make up small amounts to keep mortgages current. After all according to all the Pundits our economy is perking up.
As a Licensed Real Estate Broker and a Realtor, when I take a listing I talk to my listing client. I know, I know not very typical but I do. If there is a problem and there are no funds to make payments. I may volunteer but normaly what I do is put the property on a fast track. I pick up the phone and call an investor. He buys the property and the listing client may have to come back with a second for his equity. But I work it out. Actual time on target in these semi slummy areas of the Valley, in LaLa land the listing time is more like 30 days or less and some proerties have bidding wars. Pocket listing is rampant cause they are a moving at or close to value,
Don't tar us all with the same feathers, some of us are helpful. The best Investor I know was a lady who listed her house cause she was in foreclosure had three kids and hubby left with the bank account, the car and the dog. The dog I think put up a fight. We had to sell everything out but fast but we got her equity out about $150,000 and she from her new cheapy condo is making money . She put her experiences to good use. Should have watched me getting the Quit Claim Deed from her soon to be ex husband. But thats what a Realtor does. wrestle with ex husbands.
Two Fall Lucius
To all,
Please forgive my optimism. I have been blessed to have been able to start investing in an area that is growing at phenominal rates, and doesn't seem to be slowing down. Part of my optimism also is due to the fact that I haven't had to pay full market value for homes with no equity because by the time the new homeowners are in a position to talk to me, there is already some equity in the property. Local property values increased 14% last year, and are predicted to do at least as well next year as well. I'll stick by what I've stated because It is real for me. But then I don't live in the same areas that alot of you do. I will do what is necessary (if the time comes) to fulfill my commitments and keep promises I've made.
And Jay, You're probably a great person. I disagree with your methods, and some of your opinions, but that's ok, you're entitled to them
Best of luck to all,
Jeff
So I will assume from the lack of response that the general attitude is "Don't ask; don't tell"? Or maybe more specifically "What the lender doesn't know won't hurt them"?
My conscience won't let me work that way. Even if it did, my business partner wouldn't
Quote:
On 2003-12-03 18:03, director38 wrote:
So I will assume from the lack of response that the general attitude is "Don't ask; don't tell"? Or maybe more specifically "What the lender doesn't know won't hurt them"?
My conscience won't let me work that way. Even if it did, my business partner wouldn't
director38,
I understand your point of view, as I had it too. The more knowledgeable I became, the less it was an issue. I don't feel that I've compromised anything in the process either. My point of view simply shifted. I know it's different, but a simplified explanation would be like asking if you can use your debit card to make a purchase at a store that has signs in the window stating "We accept VISA and MASTER CARD". It just doesn't seem to matter! As long as the storekeeper gets paid as expected. He is happy. And no, I'm not using someone elses VISA. The property was the collateral for the loan when it was written, and it still is.
I hope this helps. If you're still not sure, keep reading. There are several lengthy posts regarding the moral and legal implications of sub2 investing by those much more qualified than I.
In one of my earlier posts, I stated that I'd do whatever is necessary to make things right. If that means getting new financing on a property, I'm prepared to do that.
I hope this helps. In the end, You are going to make your own decisions, and that's the way it should be.
Good luck to all,
Jeff
Investors who walk away from committments that they have made will make increasingly difficult for the RE investors who try to do the right thing for the people... Case in point, in MN, they have arrested a real estate agent who is accused of equity stripping 300 homeowners. Due to this, they have introduced new legislation to regulate the preforeclosure industry.
Do the right thing.
Just my 2 cents
Your right, unless they need to sell it and get it off their books.
Brandon2002,
Banks are in the business of making money by loaning money. Those loans are only liabilities if the payments aren't being made. So, why would a bank need or want to sell a performing asset and get it off their books?
Quote:
On 2003-12-03 23:20, jeff12002 wrote:
... The property was the collateral for the loan when it was written, and it still is...
I hate to beat a dead horse, but the point I completely failed to make earlier is that when a mortgage has a DOS, and a sale occurs, legally the note is due and payable in full. If the lender is notified of the sale and they choose not to call the note then I have no problem. It is just my suspicion that this is not what happens.
This is not to say that I think that the lenders are getting shafted. If the payments are being made they're fine. My concern is that the original borrower is defaulting on an agreement they made - a legally binding agreement - and Sub2 investors are encouraging it.
Sure it's a great deal for everyone, but I never believe that ends justify means.
Maybe I'm too self-righteous for this business, but I'm sure there are other ways to accomplish the same goal w/o asking anyone to compromise their integrity. How can I claim to be honest if I encourage dishonesty in others?
[quote]
On 2003-12-03 23:20, jeff12002 wrote:
Quote:
There are several lengthy posts regarding the moral and legal implications of sub2 investing by those much more qualified than I.
In the end, You are going to make your own decisions, and that's the way it should be.
Good luck to all,
Jeff
Different opinions are great. Between people like you and people like me, we give the sellers options. I think that you will agree that although we think differently with regards to sub2, Sellers having choices is a good thing.
It is against the law in the state of michigan to assist, advise, or participate in an act to hide, mislead or prevent a lender from enforcing the due on sale clause in the mortgage contract. A licensed professional in any business can be stripped of their business license and fined, furthermore, SUED
I'm done with this string after this post. I would encourage everyone to read more on the subject, and make your own decisions. There is a wealth of information on this website, and these arguments have been made before. It is not my intention to convince anyone that this is or isn't legal. I'm not an attorney, The legal counsel that I have used does not have an issue with purchasing property sub2, and I can live with that. If you have an attorney that has a different opinion, then you should go with what you are comfortable with.
Jeff