Im nervous...making my first offer tomorrow.

I'm right there with ya Larry and have similar questions. I just put in my first offer to purchase a forclosure property - and am also extremely nervous!!! I plan to do an assignment. I've heard that assignments sometimes can work with banks so I'm giving it a shot. The house is in an HOA community that has a pool, playground, tennis courts, a lake - overall very nice subdivision on the outskirts of Charlotte, NC. The property's needs paint, carpet and the yard redone. I think after $3-4k in improvements, the FMV would be +/- $230k. The asking price is $179k and my offer is $170k which the realtor thinks the bank will take. The realtor is requiring $500 earnest money which will not be deposited until either I qualify for a loan or my buyer/investor presents his prequalification. I have 45 days to close and 10 days to "start my loan application", which because of my credit right now, I know I will be denied.

My questions are as follow to whomever can quickly help me out:

1) Does this deal sound like it's worth pursuing especially since it's a bank-owned property and I cannot get the realtor to submit the offer without the $500 earnest check?

2) Do I need to demand that the bank sign the Investor Disclosure Statement Acknowledgement (or any other specific document right now) or the deals off?

3) Any other suggestions/comments?

Thanks all.
Chris

right??^^^^

im hoping things work out for you. sounds like a good deal, and in my opinion i think just getting your first deal done is a huge deal.

also. since my partner is pre qual'd can i just assign him the contract.???

and IEE's only work if theres equity right....

up please really need some advice

Anybody (besides Larry and I) out there? We both could use someone's input for our pending deals. I re-read Chapter 9 in PFRERN about setting up assignment deals. I'm a bit confused and hope I have not already left myself vulnerable.

Along with my previous questions, I was trying to figure out from the text if I need to submit an Assignment Contract, Investor Disclosure (or anything else) along with the Offer to Purchase?

Thing is I do not yet have a buyer/investor. I went ahead and submitted an earnest money check for $500 (since the realtor said the bank would reject any offers without one). He also said the check will not be deposited until I get approved financing which is an escape clause in the Offer. However, I feel like I'm not protected. I need some words of wisdom ASAP, please. Thanks.

Chris

Why would you sell it to your partner for a finders fee unless he is going to hold it and rent or you both are working off a buyers list and have a buyer ready to go. As far as the refi, did you inquire as to the seasoning of the loan. I know you have the right intentions, but it seems a little messed up . I am not knocking it, possibly I am not reading your post right..Jan

thanks jan

but ya, me and him plan to own it and rent it out. i just figured using the IEE, this way if i lock the price at say 130. and sell it for 140. at closing i get the 10,000 and we split it rather than sellingit to him for the same price i locked it at, and we have to wait to get the money until the refinance is final.

would that work or no?

also some on help out my freind in this thread as well

You would not make any money buy buying and then selling to your partner like that. If you locked it up for 130 and sold to your partner for 140, then your partner would need to come up with 140k. You would be getting 10k from your partner, he would be paying you 10k to invest in the house with you which makes no sense. If you want to make money on an assignment then get a buyers list and assign it to a buyer, not your partner.

Jeremy

^^^^even if the property is worth 180,000? he's offering it for 175,000 and i lock it for 130,000....wouldnt my freind be making money??? i sell it to hime for 140,000 at closing i make 10,000 which we split 5,000 each. then we still get the house for cheaper than FMV. refi, and grab the equity?

if thats wrong or wont work, how should i go about this???

i really wanna make this offer but i wanna be ready for the next steps if its accepted

When you're making offers to banks there are lots of hoops they make you jump through. They don't like assignments so you have to know exactly what you're doing or your offer will get rejected every time. You need to find motivated sellers and forget dealing with banks until you have some more experience or a good agent on your team. There's plenty of motivated sellers still out there. Also with banks you don't make money right away, they like to take their time making decisions and that may take weeks. On my assignment my buyer closed within two weeks and I got paid quickly! That typically doesn't happen with REOs OR foreclosures. Just a heads up. Never go into a deal blindly just because it sounds good, do your homework (due diligence) first!

You need define the roles here... either he is your partner, or he isn't.

You are making it too complicated I suspect... if he is buying it with his money, and you guys are going to rent it out, get the cashflow, and then split the profits at the end, I don't see why you are charging him for the deal.

Either simply just lock up the property, and assign it to your friend for $X, he owns it, he sells it and keeps any profits. Or, if he rents it, maybe you work out a separate deal to get X% of profits from the sale for doing the prop management.

But the whole idea really doesn't like a good deal for your partner the way you are setting it up, and maybe that is why I don't see how this is suppose to work.

If your main goal is getting paid a lump sum right away and your friend wants to live in or own the property for investment, just assign it to him for X and that is the end of it. If not, there is no sense in dragging him in, because all you would be doing is putting him on the hook to get a upfront payment. That is doing a deal, but that don't confuse that with doing it as partners, since you got paid and he didn't, he still owes $140k to the bank and you owe nothing. Just find a buyer who does want the property for investment or living purposes and do it that way.

However, since you said preforclosure, I don't think you will have much luck with assignment, so I would scratch that.

Plus, the whole assigning it to your friend and splitting the profit is not necessary if you want to put cash in pocket. He could put all the available financing in his pocket if he bought the house for $1... what I mean is, the financing is not dependent on what the contract says they are paying, it is on the value of the house, and different loans and lenders will loan different amounts... ranging from 75% up to 95% (not sure if FHA+credits can still get you above 100% anymore or not). All of this is dependent on a lot of things, but the assignment doesn't mean much or else people could still get way the LTV out of whack with a straw assignment.

I concur with Elena. I think you creating a complex strategy with a lot of X factors and banks do not like that, particularly with short sales.

Honestly, it seems kind of weird to charge your partner for finding a deal on the front end, and then taking benefits on the back end of the deal also (cashflow or sales proceeds). Either work as a team - his money, your work and split the revenues accordingly; or do your work to find him a great property he wants to live in it, flip or rent - assign it to him, and let him take it from there. You know... otherwise he is just taking all the risk, you and you get the reward on both sides no matter what with no risk. You become like a stock broker with his money - which is great if you make him money, but it isn't a partnership by any stretch of the imagination - you are just managing his money.

Determine what you guys want to do and lay out the the whole plan and splits. If you are buying with his money, take the assignment part out of the whole plan. It is a extra step that makes it more complicated and has no purpose since the assignment step is not needed to draw cash out of the mortgage. If he wants to own rentals, then simply find properties, try to assign to someone else first at a good premium - if you can't find another buyer, offer to assign it to your friend at a friend price, or no premium at all and work out a deal to split cashflow and/or proceeds on the future sale.

Your realtor is required to submit all offers. He can't force you to offer earnest. If you are serious about the deal and have the earnest money it can help, but it is really just a token gesture since earnest can always be recovered with a couple simple contingencies. Tell your realtor you will offer what you offer and that is that... and remind them they are required to do so by law. If they don't want to work with you because you don't bid what they want you to, great, you don't want them. They are realtor that works with suckers only, so they won't be much help to you as an investor.

The fact that your realtor thinks it will be accepted makes me think it is a 100% terrible deal. If the bank is asking $179k, start you offer in the $120-130 range. Your realtor will be irritated if they only care about lining their own pockets. If they won't work with you - fine, get another. Will the bank accept? Maybe, maybe not. If they don't, they may counter somewhere close, say $150 - recounter $140. Get the property at a SERIOUS discount.

Yes, SOME banks are trying to take a stand now that they have recapitalized. Fine, don't let them force you off your hand. They only 50% of their foreclosures forsale, foreclosures are still taking place... they are pulling a short squeeze. It will enough to get asking out of people who think the market is going to be roaring any minute now, but not you. We still have time to get deep discounts.

If the bank won't budge, try another property. Try FSBO's who have a bunch of equity. If this is the first property you have considered making an offer on, then you need to get serious about another 10 or 20 before you can really look at the big picture of which would make good investments at what price.

$170k... too much. You probably couldn't assign it at that price, and if you couldn't assign it to another investor, it means it isn't a good investment at that price.

Go low, you can always make another offer, but I would suggest go low, and keep looking, come back to it in a month or so and make another offer. Nothing would be worse getting into a bad investment for your first investment, so go low and play it on the safe side until you know the margin you can operate inside of.

Ughhh... you're moving way too fast. Don't sign contracts and write checks unless you are 100% about all of it, this applies to anything, buying a car, a house, your will...

Slow down. If your realtor is pressuring you like a used car salesman drop the realtor NOW. That, or run them through the wringer and have em submit a ton of lowballs over the next week. The realtor is out drinking right now because they think they just made $6,000 off you.

Submit an addendum of sorts to throw in a bunch of money you want back at closing to make up for it. Someone here can talk about that, I've never had to do that, but someone will tell you how to fix your problem. And yes, you can simply reject the terms of the financing to get it back, but why take it take far. You can't simply say "I changed my mind", that is why they take earnest money - it is so you are penalized for getting cold feet, so use an out. I'm sure inspection was part of it. Tell them you inspected it and you want $40,000 for repairs. Whatever you do, you won't lose your $500, but still.

Consider it a lesson learned... slow down, do your research, it might can take a while to get the right first deal (then it all becomes easier and more clear), don't listen to a random realtor - they make money by getting you to buy something and they want you to buy high and buy fast, bring your questions to the forum and don't move until you either are 100% sure yourself or you've got some good feedback from people.

If this is for assignment you need to have some conditions in that contract more often than not. You don't have to worry about losing the $500. If you are covered for assignment, then what the heck, let the $500 float for however long you have it locked up for and see if anyone bites. I would guess it is too high, but who knows. If you're not covered to assign it in your contract then just abandon the deal as mentioned about (maybe they accept the lowball instead of canceling the contract and you got a great deal!).

thank you very much. not only does that clear up alot of smoke for me, but also answers my question, while giving me options to pursue. I was making it way more complicated, and i guess really the only reason i was trying to Use an IEE is so that me and my partner could get money fast to pursue another house. all while renting out the house and spliting the cash flow.

but it was realy just a un-finished idea and i had no real reason to beleive that it would even work or be worth it. thank you for clearing that up.

so ima give him a call and

"Determine what you guys want to do and lay out the the whole plan and splits. If you are buying with his money, take the assignment part out of the whole plan. It is a extra step that makes it more complicated and has no purpose since the assignment step is not needed to draw cash out of the mortgage. If he wants to own rentals, then simply find properties, try to assign to someone else first at a good premium - if you can't find another buyer, offer to assign it to your friend at a friend price, or no premium at all and work out a deal to split cashflow and/or proceeds on the future sale."

thanks again your awesome.