Currently I am working on getting my marketing plan/effort into full swing. I am building my own website, getting ready to order bandit signs, and begin regularly emailing / calling the contact list I have built up.
My first question is how do I present an offer to a owner, without getting stuck with an potential pitfall. I see websites, and ads advertising on the spot offers etc. This to mean seems like it could be harmful for ex, what if you get stuck with a property that has back taxes and the seller signed the contract on the spot, or the house has liens, termites etc. What are they doing that I am not aware of?
What if someone is representing the seller, and does not disclose this to me or claims to be the owner, but is not.
What else should I be careful of when trying to purchase properties from distressed sellers.
Obviously due as much diligent research as possible, but what else can I do to protect myself?
Learn how to do your own due diligence, including effective home inspections. This way you’ll know before making your offer the most likely pitfalls you’ll encounter. However, there will always be some surprises.
Since I usually buy CASH, no mortgage, the only escape clause I put in my contracts is the buyer must provide clear title. I always buy title incurance and have settlement at a title company.
Make sure your offers are low enough that you don’t get hurt WHEN you uncover some previously undiscovered pitfall.
Just a thought, but If you are making an offer on the spot, can’t you make it contingent on passing an inspection? This way they can accept the offer and then you can inspect the property for major issues.
You don’t hand them the cash on the spot, phatman. You give them the price that you will pay if they provide clear title and your inspection doesn’t reveal any huge repairs that need to be done.
Also, any offer should be contingient upon passing septic and well inspections, if those apply to the property.
If you are going to go around offering cash for real estate, it is your job to know before you look at the property what it should be worth in that neigborhood, and a good idea of what it will cost to repair it.
I try to do some due diligence before I meet with the owner. I check out who the actual owner is, mortgage amounts and dates, and any foreclosure or tax certificate filings against the property. I also know my target area like the back of my hand. I know what has sold at what price, what condition it was in, and what is still on the market. I bring a ladder, and some tools with me and if the owner is really interested in selling, do a home inspection on the spot.
Regarding the well and septic inspections, they’re a couple of hundred dollars each around here so I usually skip them and simply assume they will need work and include that assumption in the price I offer.
I usually make a written offer without any earnest money but include $100 cash upon signing agreements of sale with settlement in around 10 business days, or as fast as the title company can settle. If the owners insist on more deposit, I will deposit it into an escrow account THAT I CONTROL with my local bank and provide them a copy of the account papers. It makes them feel better but if things don’t work out, I close down the account and get my money back.
ALWAYS use 3rd party attorney or escrow. Place your offer with contingencies up the wazoo. This is a buyer’s market and you rule the day. Don’t fall in love with your deals and be ready to move on if your contingencies aren’t met. Get friendly with a good home inspector.
Having a buyer’s realtor working for you is also not a bad idea. You don’t have to pay them a commission as that is most often paid by the seller. Think of it like plaintiff and defendants in court. You wouldn’t want 1 lawyer representing both parties, would you? Have a trusted person on your side, whose fiduciary obligation is to represent your interest may save you tons of money in a deal.