I have a question…can a seller ask for information about you to review you’re credit?
I have found a one family home in my area…it is in need of repair. This house is being rented out by one tenant above and one tenant in the basement. This owner will be taken to court soon due to the conditions in the house itself. I think landlord will be very motivated to get rid of this house. How do these events affect my deal? If I purchase the property…will these then become my problems?
I plan to get the seller to sign a purchase contract so I can do a comp on the property and either rehabb it myself to sell or assign it to a rehabber/investor.
I have heard that in order to get them to sign the contract and hold the property for 30 days one has to put up earnest money(anywhere from $10 to $500 or more). I also understand that the seller/bank may insist I have a pre-approval letter from hard money/private investor.
My question is besides this earnest money…can they insist on checking my credit? ( I have bad credit.) Just how much information DO I have to give to a seller in order to convince them I am trustworthy, serious about buying their home and get them to sign this purchase contract? ???
Sellers may ask for credit info. They usually do not if they are not owner financing. A person has the right to run a credit report if they are thinking of any sort of business transaction. Pretty broad set of rules. Most sellers do not even know how to go about checking credit reports unless they are a banker etc.
Offer a low amount of earnest money. I usually try $100. Just did a deal where the only counter was to raise the em to $500. Some folks suggest $10 is the right amount but I think it is way too low. Most Realtors will put $500 in the contracts if they are filling out the forms but they will do what you ask too.
You are right about the pre approval letter being required. I even had to get my lender to accept the exceptions on the survey before the offer was accepted by the seller on a recent deal. This is to avoid banks thinking they have a deal and then finding out they are selling to someone who is trying just to flip and could have never closed. Even your average Joe is catching on to this and asking for pre approved buyers.
Any conditions at the property will be your conditions when you buy the property. These include substandard building code violations, notices to board and secure, court orders to demolish the building, health code violations, and the list goes on. All will affect the property and some will even be recorded at the courthouse and a title search will reveal them. The tenants should know if the city inspectors have been called out and what actions have been taken if any.
But what if I was just planning to assess the property to sell the contract to another investor? Do I still need to do all this just to get her to sign a purchase contract?
Usually the seller or Realtor will tell you right up front that they require the buyer to be prequalified and submit the proof of funds letter with the offer. If it is not stated then do not ask? If they ask how your credit is or ask about prequalification then you must tell the truth and explain your credit history at least a little.
In the past I bought 20 or 30 sub2 they call them now and was not once asked about credit or prequalification or nothing at all. Times have changed a bit but you still may be able to get it under contract to flip without too much trouble.
Hard lenders are a good source if you can not get conventional financing or do not have the cash. You may want to work with one of them to get preapproved for this deal or another deal down the road. Then if you can not flip it you may want to buy and rehab yourself. I would not keep as a rental unless you expect better credit soon or have really strong cash flow from the property. The loans are usually for a year or less. Credit is not near as important as the loan to value.
