Ask Dean's Coaches a Question

Earnest Money was created to bind a contract. This was the sole purpose of the money.

The parties involved in the sale of real estate have to exchange assets to bind a contract. The seller is exchanging the right to purchase the property. The buyers need to give something to fully bind the contract to purchase real estate. Money is often used to bind the contract.

This "binding" is done so that neither party can back out and say I never agreed to this. The seller cannot say I was never selling a property - it's in the contract. The buyer cannot say I was never purchasing because they gave the money.

It is true contracts happen without earnest money but to bind a contract earnest is needed.

The legal amount of earnest is $1. I have been told by a lawyer that $100 will bind any contract in the United States. I have heard from many Realtors that 1%, $1,000 or other amounts are the legal requirements. All answers seem to very and no one has yet to show me the proof in the law (because I have read the law).

Earnest does not have to be money. Earnest money can be an asset: chickens, eggs, gold, promissory notes, cars or anything of value above $1.

As time has gone on the earnest money has been made to show ones interest in a property. The more money you give the more interested you are in purchasing. This is not always the case if the seller needs to sell

The answer would be yes but we can't because of the liability of conflict of interest as well as if a deal does not work out we get blamed.

Do you have the Instant Equity Exchange program? Most of what you are looking for is found in this program. Dean has provided this as part of the program.

Completely wrong. More realtor ignorance/propoganda.

Exactly right. Something of value is required. Does NOT have to be money.

I normally do not suggest using the assessed value. Have you ever known the government to be on track? I haven't. I would suggest getting comparables if they are available. If there are no comparables for the property I would contact a CCIM and talk to them about land in the area. CCIM's should have more information about developing the are and what the value is worth.

To find out the planning and development possibilities of the properties you can call the planning and development division of your county. They can tell you how many properties are being built, where the movement is going, large business asking to come to the area and so on.

Yes, the macro level will affect the micro level. In other words large scale trends will have effects on local markets. This is not to say that local markets will always follow the national market because there are always pockets that are different than the national market. An example of knowing the larger market is when hurricane Katrina roared through the cost of wood went up. This cost directly affected the housing market and cost of building.

This is a great point. Ultimately, all RE is local. If you told me what price appreciation or the median selling price was in Miami, it wouldn't tell me anything about prices in San Diego. Even different neighborhoods in SD can be doing very different things.

But there ARE national trends that will affect everyone eg the price of oil/gasoline right now. A negative all around. Interest rates are another.

Let me through in my two cents worth. I grew up in a little town in Wyoming. Until recently the market was flat, no building of new homes not too much going on with real estate for as long as I can remember. Right now the South West portion of Wyoming has some real hot spots as far as real estate goes. There are not enough places to live for all the work that is available there. I have talked to several clients that are investing in property there to rent out. So even with the national market overall in the pits, there are still some great places with hot real estate market. The reason for the boom is OIL.

Hi, Nstreet,

I recently contacted the vice president of an investment firm who wholesales property, and I provided him some leads without the property address so he could see what I had to offer. They are both listed with Realtors and at least one of them is an REO. I wrote up a promissory note and used the non-disclosure agreement you provided as the contracts. In the promissory note I wrote my referral fee as 1% of the price paid for the property, paid to me within 48 hours of an accepted offer from them by the seller. THEN he told me it was the law in Arizona where I live, that I must be a REALTOR to receive a percentage fee. So he added in the contract "upon close of Escrow". Is this correct? If so, do I have to write up another contract with a different fee? And what about this "Upon Close of Escrow" instead of within 48 hours? He said It's because he wants an inspection period, which he was unclear on exactly how long that would be. I don't want to wait forever to get paid, and I don't want to get burned on the percentage fee for not being a Realtor because we did not discuss another form of fee - I got confused! What should I do??

I'll sign a disclosure and if we don't make a deal happen you pay your own expenses....sound good?

Thank you for the question. It is my opinion that you can get paid a finders fee without being a Realtor at all. However, you may be able to create a "Realtor" circumstance in the way you write the fee or the contracts used. I might suggest using a separate bill of service for the finders fee that will be given. I would also suggest checking this information with a lawyer in your area.

In order to invest in real estate and be successful, you will always want to pick the strategy that will best support the market cycle. In a Buyers Market, it may be difficult to turn a property quick, but there are different exit stragies that will allow you to hold the property until the market changes.

Sorry in advance if this has been answered elsewhere. I have searched, but not found an answer.

I "own" a home (not worth what I owe, of course). But, I just found a home in my neighborhood that would be cheaper and better-equipped. I have a potential tenant for my current home. But, I was told that because my current home doesn't have any equity, they would not use the rental income (which would cover the payment, taxes, ins) for qualification.

The new home is cheaper, so I would have lower pymnts, and the tenant would pay my expenses on the first home. Where can I get money right away to make this happen?

My parents' house has a sale date of 9/24/08; would it be possible for me to buy it with no money down.
The property is located in Brentwood, NY, 11717
Please advise asap-out of time

I found a property that is a short sale and I offered $138,000. The property is worth $220,000. I am waiting for a response from the lender. If the offer is accepted I was considering hard money to go no money down? I have tried to find a lender to go stated but it just isn't out there right now. After I get this hard money loan, I intend to refinance in 6 months or less and pull the purchase price back out of the property. Is this a good strategy?

The other thing that I am doing is marketing the property on line before I even get the property under contract. This will give me an indication of what the demand will be. I have listed it without pictures or the address. I have also made everyone aware that the property may not be available for at least a month. If buyers are motivated enough to contact me just based upon the information that I provided then that will make me feel comfortable when the bank accepts my offer to move forward. Is this a good idea or do you see a problem with this approach?

Would you be able to come up with 3% down? If so you may be able to do an FHA loan. Your debt to income ratio has to be at 45% or below and you have to go full documentation. If not, you can attempt to see if the seller can allow you to finance the property with them directly. This would eliminate you having to qualify by conventional means. Another idea but only if you have found a deal with tremendous equity, would be to get into the property with a hard money lender and within 6 months refi. and get a lower interest conventional loan. You must have a deal with at least 70 equity to go this route. This is a viable option but it comes with 2 risks. Risk 1: The home values drop in the next 6 months and your loan to value drops making refinancing impossible. Risk 2: You have a hickup in your credit that makes refinancing impossible. Hard money lenders can be a great asset to get you into property but should only be used short term to get you into great equity deals or quick rehab and flips. You need a good exit strategy when it comes to hard money or the loan will hurt you.

Is there any equity in your parents home. How is your credit and income? If yes to the first question you might be able to get a hard money loan quickly in your name.

This list is very benificial. Thanks for this. I mean it! Im starting to get it now Im starting to get it now YAYAYAYAYAYAY!

Beth-A-Roni!

Your San Francisco Treat

I have a bit of the head knowledge but am hoping to get my first deal very shortly. I have 1 in process and a few potentials soon. We all care about each others success and get excited to see others prosper. That is the nature of the people on this website and I commend you all for this. Reach for your dreams, take action and you will achieve all that you wish for. Don't let adversity get you down and remember that "He who began a good work in you will be faithful to complete it."

You can purchase very quickly using hard money lenders or private lenders. They can give you cash to purchase quickly and can lend on the value of the property not the offer price you give.

You might be able to count the other home (second home) as the income property so that you can use its equity and income towards your purchase. Purchase the second home move into it and rent the first property.

I spoke to a hard money lender and he said that I would have to come in with $100,000 to make the deal work. I guess I will keep searching. Do you have any hard money lenders that you have used that might be good to call?

Yes this is a good strategy? Yes. Can you find hard money that deal with the value of the property? Yes. Most of the "easy" ways of finding hard money will not yield good results. Easy methods would be talking to a mortgage broker, Realtor, or looking on the internet.

Some good questions and answers from the coaches.

I started my journal about a week ago and seem to have lost access to the link to do entries. Could someone please help? Thanks.

Sandra

Here's the link.
http://www.deangraziosi.com/node/10619
I think you accidentally started your journal in the wrong forum (Buying Foreclosures, REOs and More). Maybe you want to copy the posts and put them in the "Investing Journals". Then whenever you click on "Member Journals" you can find it easily.

Hope that helps.

Rina

Huh? That's right out of Dean's course. I don't see how it fit into this forum topic.

So I've started my search for properties. I decided to give the Penny Saver a try and searched for properties using key words such as "motivated". I've opened up my options to Las Vegas, as well as Los Angeles where I live simply because a lot of properties in my area are in the neighborhood of $300,000 and up.

One property is listed as a foreclosure for $108,000. It's located in North Las Vegas. Its 4 bdrms, 2 ba. and was built in 1997.

From what I can ascertain from Yahoo R.E. Home Values the same size home sold for $220,000 in 2008.

The home sale history says it was last sold on 2/20/2009. The sold price was $145,297 and the assessed tax value is $83,814.

Assuming this home is in good condition and needs no work done to it, how could this place be in foreclosure if it last sold on 2/20????

Applying what I learned in the book, I would offer anywhere from 10-30% off that price. If that offer is accepted then I would lock in the deal for say 14 days (which takes it off the market and where it can't be sold). Then I would find a buyer that I can offer this house to -- say I bought it for $90,000, I could offer it to the buyer for $100,000 which could yield me approx. $8,000 which is my profit after paying closing costs.

This is a nice looking house from the pictures, though pictures don't tell the whole story until you inspect the property. The fact that I live in CA does pose a bit of a problem for me as far as traveling to Las Vegas to do see the property in person. How does one handle this kind of situation where you can't personally visit and inspect a property?

Anyone's input into this appreciated.

ETA: I talked to the agent who said that the 2/20 date is when the bank took back this property. He also said that the house needs some new paint inside and new carpet. It doesn't sound like this property is in need of a lot of work.

What would you do with this?