One of the CONDEMNED properties I’m looking at for my first deal has an ARV of around 120K.
The owner owes around 45K in mortgage and taxes and though I haven’t made an offer, I’m sure he’d give it to me for what he owes.
I haven’t been in the property yet, but the owner tells me there was a fire in the kitchen about 3 years ago. He hasn’t paid any taxes or mortgage payments since.
So at the very least it needs a new kitchen. I’m sure it has plenty of weather related problems since it’s been 3 years without care and maybe a homeless person or two living in it. I’m also sure it’s looking at new windows, a new roof and new siding. So I’m wanting to estimate 20-25K in repairs.
So to me, the numbers are still good. The property is in PA. I’m in NY. Although I want to rehab properties in the future, it’s probably smartest not to do so long-distance. So I want to wholesale the property at 55K.
The major questions in my mind are a) is there anything that should make this a no-go - like the price or, more importantly, the fact that it’s condemned? b) Are the liens on the property and/or the condemnation going to make it an impossible deal to close? I would think that the closing agent would be able to take the buyer’s money and deal with any liens before releasing the money to everyone else. c) Not really a question, but I’m a little worried that my buyer would buy the house and then irony would have the city come and bulldoze it. I have requested information from the city on the status of the property - like why it’s condemned and if it’s scheduled to be razed, but it can take them up to a month to get back to me.
Any thoughts on any/all of the questions above?
All of these questions are GREAT questions… except for one thing: They’re pointless. What I mean is, if you intend on wholesaling the property, then all those questions will need to be asked and answered by your buyer. Forget trying to figure it all out… just get the deal signed up, making sure to give yourself a clear “out” and then market the thing like crazy and let your buyers deal with all the complexities and if they want to move on it or not. Hope that helps…
:biggrin AGREED! As I sat cowering in the corner from all of the big nasty questions that I was allowing to beat me, I realized I’m wasting an insane amount of time. I think at MOST I need to have a lawyer in PA check out my agreement and that should take a matter of hours. But it should stop me from calling my sellers and saying “listen, your house is condemned. I will TRY to buy it off of you. But I promise nothing. If I don’t end up buying it, my apologies. If I do, you’ll be much better off. I’ll send the agreement to you ASAP.”
As I was conveying your point to my girlfriend/biz partner I realized a few things.
As beginners, we tend to multiply things. We make things much bigger deals than they are. We feel that things need to be perfect but we don’t think about how impossible perfection is or how long near-perfection takes.
In reality, I probably don’t need to have my purchase and sales agreement checked by an attorney right this second. It’s a “good idea” but if it would take me a week to talk to an attorney, I shouldn’t do it right now because it’s just another expense in terms of time.
The purpose of the purchase and sales agreement is to get the seller and buyers locked in. It’s unlikely that the legality would be questioned. ESPECIALLY if someone is desparate to unload their property and they want you to solve their problem.
The importance of legality probably comes in at the closing when wholesaling. As long as the closing was done properly, the deal is done and there’s nothing to worry about because the purchase and sales agreement doesn’t matter anymore.
Random forces aren’t going to step in and arrest me for some crazy clause in the purchase and sales agreement. Probably in the worst case, the buyer or seller would try to find loopholes if they suddenly wanted out of the deal.
Actually, in the worst case, they’d find something that is illegal to have in the agreement in that state and then they’d sue.
BUT, the question is whether the true worst case could possibly happen on the first deal. And I think the answer is “it’s unlikely, but you should beware of Murphey’s Law.” More importantly though, than Murphey’s Law is my law for myself: “Get off your a$$ or I will kick you in the a$$.” And so, without furhter adeu, I will make my first deals promptly.