Rehabber · Austin, TX · Member since 2008 · 23 posts · 1 vote
Hello Folks,
I am looking into flipping foreclosures in Austin, TX. I'm curious to know what are the average costs involved in the transaction. Outside of purchase price and front-end realtor commissions, what other costs should I build into my formula to ensure a profitable investment.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
18y
When you buy, comissions are paid by the seller. I use 2% as my basic guideline for purchase closing costs. Plus points if there's financing. Usually have an apprasal, inspection, and insurance that have to be paid ahead of time, often outside of closing. I've had surveys and flood certificates come up, too.
Best bet is to call a title company and talk with them about fees.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
18y
When you buy, comissions are paid by the seller. I use 2% as my basic guideline for purchase closing costs. Plus points if there's financing. Usually have an apprasal, inspection, and insurance that have to be paid ahead of time, often outside of closing. I've had surveys and flood certificates come up, too.
Best bet is to call a title company and talk with them about fees.
Rehabber · Austin, TX · Member since 2008 · 23 posts · 1 vote
18y
Thanks Wheatie,
When foreclosures are involved there are no seller's commissions, correct? Also, when I am approaching owners of preforeclosed properties, wouldn't my offer cover their costs to get the property off their hands?
Minneapolis, MN · Member since 2008 · 691 posts · 12 votes
18y
Corey, Some people in preforeclosure have their homes listed, so a realtor is involved. If you are contating the homeowner directly and it's not listed, that's better. You would find out if there are any liens and what the lender payoff would be. That would be your cost, unless you could get the seller to kick in some of the cost (back payments, penalties, etc.)
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
18y
I may have been confused by "closing costs". I lump all the various recording charges, attorney charges, title company charges, and misc. BS fees that show up on the HUD-1 into closing costs.
As Mike says, if there are no agents involved, no commissions. If the owner has signed a listing agreement, there's probably going to be a commission.
Sounds like you're really talking about pre-foreclosures, and there could be a lot of charges there. At some point, there will need to be a title search to find and clear any liens. Normally that would be part of the "closing costs", but you might want to do it ahead of closing just to be sure there are no gotchas. Normally the seller would have to clear any liens. But in a preforeclosure, they may not have the cash. Having to pay off a $5K lien might turn an OK deal into a bad one, and you wouldn't want that to come up after you already sank a bunch of money into the deal.