With the new housing bill that just passed on Wednesday and goes in to effect on October 1, how are home buyers with out a down payment going to find financing to purchase your investment?  

The new bill eliminates seller-funded down payment assistant programs for FHA loans. Many investors and sellers are now faced with finding new creative ways to selling their properties.  Investors need to quickly go on the offensive to find borrower that have a down payment.   Finding these individuals is easier than you think.   For the last three and half years first time home buyers have paused on their home buying because housing was unaffordable and then the market began to free fall. As we near the bottom these buyers are starting to consider buying again.  Since 2003 housing prices soared across the nation and these buyers not only can afford a home, but they have been saving money for 3.5 years.  This could be just enough to put 3% to 5%  down on your investment property that you are selling. 

 Where do we find these individuals?  This is the million dollar question.   We can first start with the internet.  Websites like www.biggerpockets.com have hundreds of potential buyers that come to them seeking information on the home buying process as well as looking for a great deal.   But really the only way to selling any thing to them is to become involved with the sites, create a profile, share your expertise, and then give these customers an opportunity to buy your home(s).   Does this sound like a work?  It is, but this is the new real estate age, nothing comes for free and one must work smarter not harder.  Use the web to benefit you, even beginner investors can create a niche in their community by being online.  Trust me the next generation of home buyers are coming of age and they now have their computers in their front pocket, its called a PDA.

Next week we will talk about the loans that will replace FHA loans now that the down payment cant not be seller funded.

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Tags: biggerpockets, investors, real estate networks, real estate social network, sellers, social networks

Doom and gloom is everywhere. Foreclosures are at record highs, builders are swimming in inventory, the mortgage market is in a shambles and there seems to be no end in sight. Buyers are afraid to buy because the market might go lower. Sellers are in a panic because there seems to be no hope of selling before the next millennium. Through it all the media is having a field day with all of the negative news.

There is no doubt that this is a difficult market for sellers. If it’s bad for sellers doesn’t that make it good for buyers? While there are many challenges for both sides due to the unsettled credit markets, deals can still be done. What has really happened is that people haven’t adjusted to the new reality. It seems that everyone is waiting for the market to return to the way it was, but waiting may prove to be an exercise in futility. What we experienced for several years was a speculative blow-off in an overheated market. The gains that were occurring were unsustainable, it was a classic case of “irrational exuberance.”

How Do We Make Money In This Market?

So how do we make money? The short answer is that we need to return to value investing. Gone are the days of buy high and sell higher, the music has definitely stopped in that game. A value investor will make his money when he buys, he doesn’t acquire property in the expectation that the price is going to appreciate. Making your money when you buy simply means that you buy a property that has a lot of potential equity. To do this you need to locate a motivated seller, someone trying to dispose of a distressed property will usually be highly motivated in this market.

When the markets are soaring into the stratosphere the only thing that sellers are motivated to do is get a ridiculously high price for any piece of garbage. Now that the pendulum has swung in the other direction they are feeling the heat. If it’s hard to sell a house in good condition imagine how difficult selling a fixer must be. The good news for the investor is that he can be the hero while earning a nice profit. You need to make the purchase at a price that will allow you to make the necessary repairs and still sell the completed project at a price low enough to attract buyers.

The Rehabber’s Advantage

The advantage that a rehabber has is that he has a very good idea of how much money he is going to make when he buys a property. If there is any appreciation at all it is just gravy. Of course that assumes that he has done his homework correctly. That homework includes properly evaluating the house to determine the scope of work required, carefully estimating the cost of renovations, determining what the sale price will be and allowing for unexpected problems. Easy, right?

If it was easy everyone would do it and we’d all be gazillionaires. The “flip and grow rich” TV shows make it seem so simple. The fact is that many novice rehabbers get into to trouble because they pay too much, underestimate time and repairs, expect to sell for more than is possible and do not take the time to learn how to do things the right way. There are no short cuts in this business. You need to pay your dues and learn from your mistakes and do it better the next time.

How To Get Started

You should begin by learning your market, look at dozens of houses to get a feel for things. Join one or more real estate investment clubs in order to network with other investors. Seek out people who have already done what you are looking to do and learn from them. There is no magic bullet and you can’t learn everything that you need to know by taking some guru’s over-priced course. However you can learn by doing and improving you techniques as you go along.

Rehabbing is a great way to make money under the current market conditions. If you buy it right it doesn’t matter if the market stays flat. You can also feel good about the fact that you help a distressed seller get rid of his problem. You make a lot of friends among the neighbors when you turn an ugly duckling into a swan. You are not just helping yourself, you are helping the whole neighborhood.

Money is better than poverty, if only for financial reasons. – Woody Allen

Tags: buyers, flip property, real estate, real estate investing, rehab, repair property, sellers

Background of Property Disclosure Laws
In the wake of the consumer-rights movement and the increasing influence of realtor organizations around the country, many states began to draft and implement property disclosure laws in the 1980’s that were designed to protect buyers of residential properties. The goal was to protect uninformed and inexperienced buyers in an era where typically only sellers had agents leaving buyers to fend for themselves.

Around the country, state real estate commissions were called upon by the legislature to draft property disclosure statements that satisfied the requirements of the law in that state. The focus at that time, and still to this day, is to protect home buyers from material defects existing on the property, which are known to the seller. In most cases, “material defects” are problems with the property or any portion of the property that would have a significant adverse impact on its value or that involves an unreasonable safety risk to people on the property including the land.

In jurisdictions such as Pennsylvania, the Real Estate Seller Disclosure Law mandates that the seller “deliver” a signed and dated copy of the property disclosure form to the buyer prior to the execution of an agreement of sale. As the term is used in the statute, “deliver” means to give to the buyer by personal delivery, first-class mail, certified mail/return-receipt requested or facsimile to buyer or buyer’s agent. In practical application, a seller’s agent usually leaves several copies of the disclosure form at the property for potential buyers to take with them upon looking through the house for the first time.

Although each state typically utilizes a standard disclosure form for properties sold in that state, the disclosure laws vary from one state to another—so, buyers, sellers and agents should familiarize themselves with the disclosure requirements in their particular state.

Examples of the types of issues covered by disclosure forms include:

1. When the property was last occupied by seller;
2. Condition of the roof;
3. Structural problems;
4. Water and sewage systems or service;
5. Electrical system;
6. Heating and air conditioning;
7. Plumbing system;
8. Presence of hazardous substances;
9. Municipal violations against the property;
10. Presence of mold

What Should Sellers Do About these Disclosures?

It is imperative that both the seller and seller’s agent take a significant amount of time to go through each item on the disclosure form and provide as complete and accurate a response as possible based on the information at hand. Generally, a seller will not be held liable for an error or inaccuracy on the disclosure form, so long as the seller did not have knowledge of the error or inaccuracy. Further, most states do not require a seller to spend money to conduct various tests and investigate the current condition of the property. However, sellers (and possibly their agents) will be held liable for negligently or recklessly reporting/failing to report information or perpetrating a fraud by intentionally misrepresenting the condition of the property.

The judgments that have been awarded in cases involving violations of the seller disclosure laws include: 1.) Monetary damages to the buyer so that the misrepresented condition can be repaired; 2.) Payment of buyer’s attorney’s fees; 3.) Rescission of the contract (thereby allowing the buyer to void the transaction). I can assure you that cases involving alleged misrepresentations by sellers and overzealous agents who are trying to make a sale are on the rise. Attorneys representing buyers in these matters are becoming very aggressive in order to protect their clients’ investments. Many are seeking punitive damages against both the seller and the agent, and more and more agents are being held accountable for failing to instruct their client to disclose a known material defect of the property.

At one time we were a nation governed by the famous doctrine of “Caveat Emptor”. As times have changed, especially in the world of real estate, the consumer has become king. The laws have changed and the playing field in a lot more level—maybe, it’s time for the seller to beware.

Tags: disclosure law, property disclosure, property law, Real Estate Law, sellers