Driving For Dollars...couple of questions

15 Replies

Inventory in my desired market (Denver) is extremely limited.  I decided to take it upon myself to start Driving for Dollars(tm), as they say.  My first sweep was for duplexes in my own neighborhood, as this is ground zero for where I want to be.  I biked around and took pictures of 22 properties.  I then spent 2 hours scouring the tax assessors website pulling data and came up with 16 properties that are "Residential Duplexes" i.e. not individually owned.   I have some questions, and was hoping someone with knowledge of tax assessor technicalities could chime in and shed some light.

1. I saw HUD as a Grantor on the most recent chain of title. Does this mean the current owner used some sort of low-income HUD program to finance?

2. What do the "Instrument" codes GR, WD, QC, BS (etc. etc.) mean?

3. When the Grantor/Grantee are the same, does that indicate a refinance? If there is no chain of title, does that mean the property has not changed hands/financing since they started tracking the info?

4. What does "Actual Value" really mean?  Can I make assumptions about true market value based on these? 

I plan on doing this a few more times in different neighborhoods and building a targeted list to send letters to.  I still need to devise my selling points, as I don't have the usual "quick close, cash offer, as-is" cards in my pocket. I, unfortunately, will be doing low-down conventional financing and will likely need an agent in some fashion.  Any advice here is also welcomed warmly!

Mitch: 

1. HUD probably held the mortgage or was otherwise involved in the financing of the earlier purchase and got it back during the foreclosure proceedings. Only looking at the actual recorded document will verify this. Tax assessor will generally not consider a sale from HUD to be an indication of market value, for their purposes.

2. The instrument codes are used by the assessment office to indicate the type of conveyance when the property was sold. This helps the tax assessor categorize sales into usable and non-usable indications of value. For example, WD probably indicates warranty deed and QC means quit claim deed. The tax assessor can provide you with a list of codes used, or they may be listed somewhere on the website. 

3. This probably does not indicate a sale, as the names stay the same. I would advise calling the assessment office and asking. Each tax assessment office has a unique computerized assessment system and website.

4. Actual value probably means actual sale price, but I would advise asking the assessor this question too.  An amount on a deed is an indication of value or a historical fact. Market value is an opinion, which should be supported and qualified by comparable sales. That's a long winded way of saying price isn't value, but sometimes state tax laws require the used of terms like "actual value" when they mean something else to assessors, investors, and other valuation specialists. 

Assessors are required to have public relations outreach programs that include answering questions like your's and from other investors, not just homeowners and real estate agents. As an assessor I always enjoyed talking to investors because they gave me an actual view of the real estate market from their perspective. That's worth a lot.

@Mitch H. the tax values tend to lag actual value in Denver County. I'm not sure about the other surrounding counties. For example my current assessed values (in Denver County) are based on the value set by the assessor in June of 2012. According to the Denver Assessor's web page the assessed value is based on sales between June 2010 and June 2012 of similar properties. Assuming a property has good comps the value would be based on sales in the last 6 months so between Jan and June 2012. Assuming they do a good job of selecting comparable sales (huge assumption) the values are now nearly 3 years old. Denver residential real estate (SFR) has appreciated between 7% and 10% per year for each of the past 3 years. Assessed values could easily be low by 20-30%, again if good comps were used.

The next thing to consider is that the assessor is building their comparable sales with computer models. In cookie cutter subdivisions like Green Valley Ranch these work pretty good. In older areas like Baker and Barnum they can by way high or low depending on the nature of the property and the comparables. Keep in mind the valuation is used to generate tax revenue so they are less concerned about getting the values right then they are about collecting taxes. The thinking being, if they miss the value by being too high the owner will protest. Bank foreclosures also skew values and there were many more of those 3 years ago. 

Generally, absent any data, I assume the tax value to be on the low side but I would never make an offer based solely on tax value.

Boy, @Richard Sanderson  and @Bill S.   ,you guys arent giving me much hope with the tax assessor!  However, I guess I did get a lot of useful information (owner, address, etc) otherwise.

Is there any other info I should be looking for while scouring these sites?

Originally posted by @Mitch H. :

Boy, @Richard Sanderson  and @Bill S.  ,you guys arent giving me much hope with the tax assessor!  However, I guess I did get a lot of useful information (owner, address, etc) otherwise.

Is there any other info I should be looking for while scouring these sites?

 Good to know about the tax assessor info. @Mitch H. I've actually been doing this for properties in Adams County, but we contacted the county treasurer directly and she was extremely helpful. I'd recommend contacting the Denver treasurer's office also. They can also pull lists upon lists for you if you request it. 

The one thing that comes to my mind you should be mindful of when looking at these properties are any liens or code violations against them.

Just my two cents. Instead of spending an exorbitant amount of time evaluating properties you may never own, why not just send letters to all the properties you like? Who knows, one of them may unsuspectingly be up for sale. I like your approach because it doesn't waste time blanketing entire neighborhoods with letters, you are narrowing it down to properties you might want to own. If someone pops up with interest, you can then do the digging. 

Originally posted by @Mitch H. :

Inventory in my desired market (Denver) is extremely limited.  I decided to take it upon myself to start Driving for Dollars(tm), as they say.  My first sweep was for duplexes in my own neighborhood, as this is ground zero for where I want to be.  I biked around and took pictures of 22 properties.  I then spent 2 hours scouring the tax assessors website pulling data and came up with 16 properties that are "Residential Duplexes" i.e. not individually owned.   I have some questions, and was hoping someone with knowledge of tax assessor technicalities could chime in and shed some light.

1. I saw HUD as a Grantor on the most recent chain of title. Does this mean the current owner used some sort of low-income HUD program to finance?

2. What do the "Instrument" codes GR, WD, QC, BS (etc. etc.) mean?

3. When the Grantor/Grantee are the same, does that indicate a refinance? If there is no chain of title, does that mean the property has not changed hands/financing since they started tracking the info?

4. What does "Actual Value" really mean?  Can I make assumptions about true market value based on these? 

I plan on doing this a few more times in different neighborhoods and building a targeted list to send letters to.  I still need to devise my selling points, as I don't have the usual "quick close, cash offer, as-is" cards in my pocket. I, unfortunately, will be doing low-down conventional financing and will likely need an agent in some fashion.  Any advice here is also welcomed warmly!

1. Likely bank owned, HUD owned it and sold it to another party.

2. Instrument is HOW title was changed over.  QC = quit claim, WD = warranty deed, BS = bargain and sale deed, etc etc

3. I do believe this is the case.

4. See Bill's answers.

You basically have no advantages to the homeowner vs going straight on the market.  Financing, agent who needs to be paid, appraisal, etc.  Those are the reasons why a direct mail lead would call me, because I have none of those hassles.  Its going to be a very tough sell for sure.  Not trying to be a negative nancy, but in the direct mail game you arent offering any incentive for a seller to go through you vs me or directly on the market.

Originally posted by @Anson Young :
You basically have no advantages to the homeowner vs going straight on the market.  Financing, agent who needs to be paid, appraisal, etc.  Those are the reasons why a direct mail lead would call me, because I have none of those hassles.  Its going to be a very tough sell for sure.  Not trying to be a negative nancy, but in the direct mail game you arent offering any incentive for a seller to go through you vs me or directly on the market.

Absolutely agree. However, ya do what ya gotta do. Given my interest in going this route (and not wanting to continue to rent, or settle for a SFR personal residence purchase) I had to give it a whirl. Maybe I can get to someone by iterating I am a young lad looking to invest in the neighborhood, and not a scummy RE Investor like all the rest! Haha, I kid. I like you guys.

Tha being said...can't I save them on Agent Commission?  If I were to go Dual Agent, or Transactional Agent, I would assume those fees are lower (or at least more negotiable) than conventional 2 Agent deal.  Further, I could offer to split that fee, rather than it all being on the Seller, saving them more money.

Good Idea/Bad Idea?

Originally posted by @Mitch H. :

Tha being said...can't I save them on Agent Commission?  If I were to go Dual Agent, or Transactional Agent, I would assume those fees are lower (or at least more negotiable) than conventional 2 Agent deal.  Further, I could offer to split that fee, rather than it all being on the Seller, saving them more money.

Good Idea/Bad Idea?

 Usually its just double the one side cost, so 6% instead of 3%.  Could you find an agent to do it for less?  Yes, you probably could.  You could either raise the purchase price to cover those fees, or split it with them, or cover it all yourself.

Originally posted by @Mitch H. :
.... Maybe I can get to someone by iterating I am a young lad looking to invest in the neighborhood, and not a scummy RE Investor like all the rest! Haha, I kid.  I like you guys.

 Don't totally discount that approach.  I know some folks who had multiple bids on their house in Boulder recently. They went with a lower offer, put in by a "nice young couple" who wrote a letter about how they were trying to get started and having a hard time finding a place for their young family, over a considerably higher offer from someone else. Now, they had been given a great deal several years ago from a "nice old guy" when they bought the place, so they had a desire to pay back in a way.  Something like that is not likely to get you anywhere with a professional investor, of course, but a little rapport can go a long way. 

Originally posted by @Kelly Sennholz :

Just my two cents. Instead of spending an exorbitant amount of time evaluating properties you may never own, why not just send letters to all the properties you like? Who knows, one of them may unsuspectingly be up for sale. I like your approach because it doesn't waste time blanketing entire neighborhoods with letters, you are narrowing it down to properties you might want to own. If someone pops up with interest, you can then do the digging. 

Kelly, this is my plan right now.  I may do some back-of-the napkin on a few, but I will not be fully analyzing a deal until I get interest.   I think my approach may be more work on the front end, weeding through everything, but then reduced work on the mid and back end, should I get any takers.  Also, I am not looking to wholesale, so blanketing an entire neighborhood (or three) would be sending a letter to a lot of properties I am not interested in at all.

Originally posted by @Jean Bolger :
Originally posted by @Mitch H.:
.... Maybe I can get to someone by iterating I am a young lad looking to invest in the neighborhood, and not a scummy RE Investor like all the rest! Haha, I kid.  I like you guys.

 Don't totally discount that approach.  I know some folks who had multiple bids on their house in Boulder recently. They went with a lower offer, put in by a "nice young couple" who wrote a letter about how they were trying to get started and having a hard time finding a place for their young family, over a considerably higher offer from someone else. Now, they had been given a great deal several years ago from a "nice old guy" when they bought the place, so they had a desire to pay back in a way.  Something like that is not likely to get you anywhere with a professional investor, of course, but a little rapport can go a long way. 

Yup, worth a shot, IMHO.  Plus I really like looking at properties so at this point I dont view it as "work". Just enjoying the diverse architecture of my city.

@Mitch H.  I would not discount your approach either. In my direct mail marketing I get a number of offers to sell that are around 10% under value but there is not enough room and the seller won't come down for a whole sale deal. I think you should play around with listsource a bit. I think you might be able to select all MF properties in your target area and do some direct mail to them. Certainly I would play up your desire to live in the unit for your primary residence. I think if there are 500 units in your target area you should be able to find a slightly discounted deal in the next 6-12 months.

Hi @Mitch H. 

Someone once told me that before I invested, I should be knowledgeable enough about my target neighborhood to know the going rate vs the list rate of the price per square foot when I see any given home for sale.  What will you say when someone calls you up in 4 months from a letter you sent?  How will you demonstrate the knowledge that your numbers are more accurate than what they've proposed?

In your quest to get to know the neighborhood, consider starting a spreadsheet that you can save comps that you find on Redfin: list price, sale price, price per sq.ft, bed/bath counts, age of home.  Once you get an idea of what things are selling for, you'll be able to have an off-the-cuff conversation with that potential seller and convince them to accept your terms. 

While you're at it, I also keep a list of CL rents in the area so that when I see a deal, I generally know what it can rent for.  Pretty soon, you'll have all those numbers in your head and will be able to do quick math to analyze a deal.

Keep at the letters and add a little personal touch like @Jean Bolger  said and soon enough, someone will remember that nice young man that wanted to buy their home.  Good luck!

Originally posted by @Theresa Worsham:

Hi @Mitch H. 

Someone once told me that before I invested, I should be knowledgeable enough about my target neighborhood to know the going rate vs the list rate of the price per square foot when I see any given home for sale.  What will you say when someone calls you up in 4 months from a letter you sent?  How will you demonstrate the knowledge that your numbers are more accurate than what they've proposed?

In your quest to get to know the neighborhood, consider starting a spreadsheet that you can save comps that you find on Redfin: list price, sale price, price per sq.ft, bed/bath counts, age of home.  Once you get an idea of what things are selling for, you'll be able to have an off-the-cuff conversation with that potential seller and convince them to accept your terms. 

While you're at it, I also keep a list of CL rents in the area so that when I see a deal, I generally know what it can rent for.  Pretty soon, you'll have all those numbers in your head and will be able to do quick math to analyze a deal.

Keep at the letters and add a little personal touch like @Jean Bolger  said and soon enough, someone will remember that nice young man that wanted to buy their home.  Good luck!

 Some great things to think about, thanks!  

I think I have a pretty good feel for my hood.  I have lived here for ~4 years, and have been pretty active in the rental side of things the whole time, and the sale side of things for about a year.  Keeping a Comps database on sold properties is a good idea regardless, though, never bad to have data points at your disposal.

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