too good of a deal? hard money
Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes
too good of a deal? hard money
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Terry Sutherland I love it.. here you are you can't buy it you know it will gone and its probably a smoking deal at 40k but you don't want to pay more than 5k ... cracks me up...
91 Replies
- Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes10y
Originally posted by @Account Closed:
Originally posted by @Logan Drew:
Try a different retail bank that you have a relationship with, not a credit union. Also try a small local bank. They might bite on it to get you to open other accounts. Also, ask the listing agent (or your own agent to ask the listing agent) if there has been an appraisal done within the last 12 mos. Take that appraisal and approach a few mortgage brokers that can do hard money. You'll find someone that knows someone who wants to make a small loan if the deal is good.
It is important to note that a tax assessment is not a good gauge of value. It's actually not a gauge of value at all. As a matter of fact, tax assessments are rarely within 20% of the market value of a property and can be very outdated (high or low). Never use assessed value for anything as a rule of thumb...
Your California-ness is showing. Tax assessment in some areas are way more relevant. Many get annual reassessment to market. My inlaws in OH and family in CT get reassessments annually that do reflect value, although fixed in time when the market could be going crazy. Not anything like CA where houses that haven't sold in 30 years are assessed at $100K and the same house next door is assessed at $650K. I too never use assessments for my purposes, since real valuation data is available. But lots of folks are paying taxes on assessments WAY closer to value than we are.
Further, the large discrepancy causing some homeowners' tax assessments to date back to 30 years ago is because of Prop 13 that protects older, long-time homeowners from higher tax assessments/ tax payments in CA (it limits the increase on tax assessments to a certain percentage of the previous year unless the property changes ownership, at which point the tax assessed value is updated within 12 mos of the close usually). When you buy a house in California, the property is reassessed. Thus, if you have a homeowner in CA who has owned their property for many years, they're assessed value can be WAY lower than that of their new neighbor who is a new homeowner.
- Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes10y
Originally posted by @Account Closed:
Originally posted by @Logan Drew:
Originally posted by @Account Closed:
Originally posted by @Logan Drew:
Try a different retail bank that you have a relationship with, not a credit union. Also try a small local bank. They might bite on it to get you to open other accounts. Also, ask the listing agent (or your own agent to ask the listing agent) if there has been an appraisal done within the last 12 mos. Take that appraisal and approach a few mortgage brokers that can do hard money. You'll find someone that knows someone who wants to make a small loan if the deal is good.
It is important to note that a tax assessment is not a good gauge of value. It's actually not a gauge of value at all. As a matter of fact, tax assessments are rarely within 20% of the market value of a property and can be very outdated (high or low). Never use assessed value for anything as a rule of thumb...
Your California-ness is showing. Tax assessment in some areas are way more relevant. Many get annual reassessment to market. My inlaws in OH and family in CT get reassessments annually that do reflect value, although fixed in time when the market could be going crazy. Not anything like CA where houses that haven't sold in 30 years are assessed at $100K and the same house next door is assessed at $650K. I too never use assessments for my purposes, since real valuation data is available. But lots of folks are paying taxes on assessments WAY closer to value than we are.
You are correct that some tax assessments may be 'closer' to market value, but an investor should never use tax assessed value to make decisions about a property's value. They should only use market value (run comps or get an opinion from an appraiser or local Realtor/ BPO). I am from Pennsylvania and actually am flipping houses there right now. The same goes there. You can't trust a county's valuation of a property no matter where you are at. The 5 minutes it would take to run comps on a property is time well spent. Stay away from decision-making based on tax assessed value.
My comment was directed at your opinion that assessed values are usually 20% off market. Really depends on the muni, really depends on the market. That kind of stat is just too broad for my taste. :)
It's annoying and troubling how often tax assessed value gets cited here. When anyone posts a deal here where they list tax assessed value they are either 1) a newbie and don't know how to do valuations or 2) someone posting in the Marketplace trying to sell a deal to newbies.
The poster, who is new to investing, mentioned the use of tax assessment as their gauge of value. This is exactly the reason I posted about tax assessments. I am literally telling the new investor not to pay attention to tax assessments. Your post could be construed as if assessments are a good gauge of value in some locales, which it is not. Whether the assessment is within 20% of the value or not, it is not a good gauge of market value. An investor needs to run their own analysis. That said, the point is not to use tax assessments in the market valuation conversation and nothing else. The conversation wasn't about the actual variance between market value and tax assessed value, it was to ensure tax assessed value is not used in analyzing the market value of real property and that it doesn't become a bad habit for a new investor.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
@J Scott, in principle I agree, but in practice, it's short-term 60% interest!
The poor fellow can't have his bar of soap until he pays $1.60!...
He thinks the bar of soap is worth $4.80...he should be thrilled to have the option to buy it for $1.60. He's just upset because he *wants* to buy it for $1.00.
If that's your analogy, I find it hard to feel sorry for him...
Again, in principle I agree. It's just that this same poor fellow has been told that if he wants to use borrowed money for ANYTHING for his next $25000 worth of purchases, he will be up for $1.60 for every $1.00 item, when he knows that every other borrower only ever has to pay $1.10 for those same $1.00 items.
I for one would not blame him if he wanted to shout: "extortion"!...
Originally posted by @Brent Coombs:
Again, in principle I agree. It's just that this same poor fellow has been told that if he wants to use borrowed money for ANYTHING for his next $25000 worth of purchases, he will be up for $1.60 for every $1.00 item, when he knows that every other borrower only ever has to pay $1.10 for those same $1.00 items.
Then why doesn't he just do what those other borrowers (who only have to pay $1.10) are doing?
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
Again, in principle I agree. It's just that this same poor fellow has been told that if he wants to use borrowed money for ANYTHING for his next $25000 worth of purchases, he will be up for $1.60 for every $1.00 item, when he knows that every other borrower only ever has to pay $1.10 for those same $1.00 items.
Then why doesn't he just do what those other borrowers (who only have to pay $1.10) are doing?
Exactly his thoughts. Which is why Jay's ears might still be burning...
Originally posted by @Brent Coombs:
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
Again, in principle I agree. It's just that this same poor fellow has been told that if he wants to use borrowed money for ANYTHING for his next $25000 worth of purchases, he will be up for $1.60 for every $1.00 item, when he knows that every other borrower only ever has to pay $1.10 for those same $1.00 items.
Then why doesn't he just do what those other borrowers (who only have to pay $1.10) are doing?
Exactly his thoughts. Which is why Jay's ears might still be burning...
That was a serious question -- you said that "every other borrower" has to only pay $1.10...so why doesn't the OP just do the same thing as every other borrower instead of having to get upset about Jay's offer???
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
Originally posted by @Logan Drew:
Originally posted by @Account Closed:
Originally posted by @Logan Drew:
Originally posted by @Account Closed:
Originally posted by @Logan Drew:
Try a different retail bank that you have a relationship with, not a credit union. Also try a small local bank. They might bite on it to get you to open other accounts. Also, ask the listing agent (or your own agent to ask the listing agent) if there has been an appraisal done within the last 12 mos. Take that appraisal and approach a few mortgage brokers that can do hard money. You'll find someone that knows someone who wants to make a small loan if the deal is good.
It is important to note that a tax assessment is not a good gauge of value. It's actually not a gauge of value at all. As a matter of fact, tax assessments are rarely within 20% of the market value of a property and can be very outdated (high or low). Never use assessed value for anything as a rule of thumb...
Your California-ness is showing. Tax assessment in some areas are way more relevant. Many get annual reassessment to market. My inlaws in OH and family in CT get reassessments annually that do reflect value, although fixed in time when the market could be going crazy. Not anything like CA where houses that haven't sold in 30 years are assessed at $100K and the same house next door is assessed at $650K. I too never use assessments for my purposes, since real valuation data is available. But lots of folks are paying taxes on assessments WAY closer to value than we are.
You are correct that some tax assessments may be 'closer' to market value, but an investor should never use tax assessed value to make decisions about a property's value. They should only use market value (run comps or get an opinion from an appraiser or local Realtor/ BPO). I am from Pennsylvania and actually am flipping houses there right now. The same goes there. You can't trust a county's valuation of a property no matter where you are at. The 5 minutes it would take to run comps on a property is time well spent. Stay away from decision-making based on tax assessed value.
My comment was directed at your opinion that assessed values are usually 20% off market. Really depends on the muni, really depends on the market. That kind of stat is just too broad for my taste. :)
It's annoying and troubling how often tax assessed value gets cited here. When anyone posts a deal here where they list tax assessed value they are either 1) a newbie and don't know how to do valuations or 2) someone posting in the Marketplace trying to sell a deal to newbies.
The poster, who is new to investing, mentioned the use of tax assessment as their gauge of value. This is exactly the reason I posted about tax assessments. I am literally telling the new investor not to pay attention to tax assessments. Your post could be construed as if assessments are a good gauge of value in some locales, which it is not. Whether the assessment is within 20% of the value or not, it is not a good gauge of market value. An investor needs to run their own analysis. That said, the point is not to use tax assessments in the market valuation conversation and nothing else. The conversation wasn't about the actual variance between market value and tax assessed value, it was to ensure tax assessed value is not used in analyzing the market value of real property and that it doesn't become a bad habit for a new investor.
Thanks @LoganDrew I do appreciate the knowledge and perspective that I hadn't really thought about. I'll definitely use this info from here on.
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
Or iginally posted by @J Scott:
Originally posted by @Brent Coombs:
@J Scott, in principle I agree, but in practice, it's short-term 60% interest!
The poor fellow can't have his bar of soap until he pays $1.60!...
He thinks the bar of soap is worth $4.80...he should be thrilled to have the option to buy it for $1.60. He's just upset because he *wants* to buy it for $1.00.
If that's your analogy, I find it hard to feel sorry for him...
I just wanted to say first: I'm not upset at anyone. @jay made a proposal and I simply said no thank you. You don't have to accept every deal offered. I appreciate him offering a way for me to get the house. My only problem with it really wasn't the amount he was trying to make but the fact that even after 120 days I would still need to find a loan which would still be considered to low of an amount for a loan. The bank said they usually have to be around 55-60,000. But that doesn't mean I'm going to pay that amount. If the offer was a way to finance the house , or partner somehow, it would be a different story. I respect him and everyone else on here. Hopefully one day I'll be in yall's position and will be able to help someone.
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
- Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes10y
There was a joke that was told to me by a veteran in the gemstone business to describe how that market works:
"A man walks into his favorite grocer to buy pork chops which are for sale at $2/lb. Across the street he notices a big sign advertising pork chops for $1.50/lb. So he approaches his grocer and asks for the same price."
"The grocer says he is not interested in selling them at that price and suggests the customer cross the street and buy them from his competitor"
"A few minutes later, the customer comes back empty handed. 'What happened?' asks the grocer. The customer tells him that they didn't have any pork chops across the street, but asked again if his grocer would match the $1.50/lb"
"The grocer responds, 'As soon as I don't have any pork chops, they will be $1.00 per pound!'"
Originally posted by @Terry Sutherland:
I just wanted to say first: I'm not upset at anyone. @jay made a proposal and I simply said no thank you. You don't have to accept every deal offered. I appreciate him offering a way for me to get the house. My only problem with it really wasn't the amount he was trying to make but the fact that even after 120 days I would still need to find a loan which would still be considered to low of an amount for a loan. The bank said they usually have to be around 55-60,000. But that doesn't mean I'm going to pay that amount. If the offer was a way to finance the house , or partner somehow, it would be a different story. I respect him and everyone else on here. Hopefully one day I'll be in yall's position and will be able to help someone.
Absolutely understood. And I didn't mean to imply that you were upset about it...sorry about that...
Brett seemed to be a little bit upset for you (at least he acknowledged you had reason to be upset), and I was simply pointing out exactly what you pointed out above -- Jay made an offer, you considered it, you decided it wasn't a good offer for you, and you moved on. Nothing wrong with that whatsoever.
Again, I didn't mean to imply I knew how you felt...was just playing through an analogy with Brett who thought you might be more bothered by it...
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
Originally posted by @J Scott:
Originally posted by @Terry Sutherland:
I just wanted to say first: I'm not upset at anyone. @jay made a proposal and I simply said no thank you. You don't have to accept every deal offered. I appreciate him offering a way for me to get the house. My only problem with it really wasn't the amount he was trying to make but the fact that even after 120 days I would still need to find a loan which would still be considered to low of an amount for a loan. The bank said they usually have to be around 55-60,000. But that doesn't mean I'm going to pay that amount. If the offer was a way to finance the house , or partner somehow, it would be a different story. I respect him and everyone else on here. Hopefully one day I'll be in yall's position and will be able to help someone.
Absolutely understood. And I didn't mean to imply that you were upset about it...sorry about that...
Brett seemed to be a little bit upset for you (at least he acknowledged you had reason to be upset), and I was simply pointing out exactly what you pointed out above -- Jay made an offer, you considered it, you decided it wasn't a good offer for you, and you moved on. Nothing wrong with that whatsoever.
Again, I didn't mean to imply I knew how you felt...was just playing through an analogy with Brett who thought you might be more bothered by it...
No worries at all. I'm enjoy both sides of the debate lol. Thank you for your feedback. And thanks Brett for your understanding.
- Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes10y
@Terry Sutherland I would recommend looking at permits and doing an inspection if you haven't done this already. There must be a reason why this home was dropped to this price. Also find out if there were multiple offers on the home or whether or not it has been under contract and how many times. Have you also reviewed any disclosures that should be available to you? something about this home doesn't seem right. I would do more digging to unearth any potential problems.
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes10y
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
Originally posted by @Wayne Brooks:
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
Sold in 2004 as a smaller house. I think 900 Sq ft. 1000 ft. Added with 2nd story then home sold for 143,000 then forclosed in mar.2015 at 100,359 then up for sale at 69,900 by bank
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
just spoke to realtor. Says nothing is wrong with home. Only disclosure is lead base paint because was built before 1978 (old portion of home only) . But no lead that he is aware of. Just went out of pending status due to financial reasons only so seller dropped price again just to unload it. He said another investor was coming to see it today.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
Originally posted by @Terry Sutherland:
Or iginally posted by @J Scott:
Originally posted by @Brent Coombs:
@J Scott, in principle I agree, but in practice, it's short-term 60% interest!
The poor fellow can't have his bar of soap until he pays $1.60!...
He thinks the bar of soap is worth $4.80...he should be thrilled to have the option to buy it for $1.60. He's just upset because he *wants* to buy it for $1.00.
If that's your analogy, I find it hard to feel sorry for him...
I just wanted to say first: I'm not upset at anyone. @jay made a proposal and I simply said no thank you. You don't have to accept every deal offered. I appreciate him offering a way for me to get the house. My only problem with it really wasn't the amount he was trying to make but the fact that even after 120 days I would still need to find a loan which would still be considered to low of an amount for a loan. The bank said they usually have to be around 55-60,000. But that doesn't mean I'm going to pay that amount. If the offer was a way to finance the house , or partner somehow, it would be a different story. I respect him and everyone else on here. Hopefully one day I'll be in yall's position and will be able to help someone.
Terry, I didn't think you were upset with Jay, or J, or me (hopefully) - I just like guessing between the lines. I also have no problem with Jay setting out terms of that get him either $15k in interest payments OR a smokin' property for 25k!
But I enjoyed writing about your obvious frustration, that is similar to HUNDREDS of threads I have read this year! That policy by the Banks to not lend LESS than $50k could be the single GREATEST reason why the mid-west (for example) can't seem to get out of their "$30k Pigs" status! (And yet, as soon as Turn-Key companies snap them up for the same $25k as this one, put say $5k into the rehab, then offer a years rental guarantee to Californians or Australians at a sale price of a "mere" $70k - those same banks fall over each other to lend 80%)!!!
Isn't there something basically WRONG with that scenario?
Wow! From your pics, that DOES look smokin'! But Jay shouldn't mind if I recommend: find some (cheaper) private money QUICK!
Originally posted by @Brent Coombs:
Terry, I didn't think you were upset with Jay - I just like making up stories. I also have no problem with Jay setting out terms of that get him either $15k in interest payments OR a smokin' property for 25k!
If Jay were to buy the property for $25K and then wholesale it to Terry for $40K, would you still call Jay's profit "interest?" That's essentially what would be happening, especially given that Terry has no obligation to buy the property from Jay (i.e., no obligation to pay any interest).
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
Terry, I didn't think you were upset with Jay - I just like making up stories. I also have no problem with Jay setting out terms of that get him either $15k in interest payments OR a smokin' property for 25k!
If Jay were to buy the property for $25K and then wholesale it to Terry for $40K, would you still call Jay's profit "interest?" That's essentially what would be happening, especially given that Terry has no obligation to buy the property from Jay (i.e., no obligation to pay any interest).
As far as I can see, calling it 60% interest OR $15k assignment fee makes no difference. It's a very good day at the office for Jay either way.
Originally posted by @Brent Coombs:
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
Terry, I didn't think you were upset with Jay - I just like making up stories. I also have no problem with Jay setting out terms of that get him either $15k in interest payments OR a smokin' property for 25k!
If Jay were to buy the property for $25K and then wholesale it to Terry for $40K, would you still call Jay's profit "interest?" That's essentially what would be happening, especially given that Terry has no obligation to buy the property from Jay (i.e., no obligation to pay any interest).
As far as I can see, calling it 60% interest OR $15k assignment fee makes no difference. It's a very good day at the office for Jay either way.
Except that the $15K isn't guaranteed. Unlike a loan, Terry would have no obligation to pay Jay anything, and if he didn't go through with the purchase, Jay would have the risk associated with having a property and having to find a buyer. That $15K factors in Jay's risk in the deal, as well as his minimum 4-month hold time (the time he gave Terry to find financing).
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@J Scott, I am fairly certain, based on those pics especially, Jay would be hoping that @Terry Sutherland WOULDN'T come back with the $40k!
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes10y
The house has been for sale at $30k for 2 1/2 months(months before that at higher prices). It hasn't sold, so it worth less than that, period. Maybe there were no permits for the addition?
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes10y
Originally posted by @Wayne Brooks:
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
And appears to have big honking loan on it as well, at about $130K. So it's either a short sale or the seller is bringing cash to closing.
The comps, while all over the place, show no shortage of nearby $30-$50K props. Hopewell appears to has problems, as many areas near military bases do. There's crime and low income tenant pool. And likely a rental vacancy problem.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes10y
Originally posted by @Terry Sutherland:
Originally posted by @Wayne Brooks:
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
Sold in 2004 as a smaller house. I think 900 Sq ft. 1000 ft. Added with 2nd story then home sold for 143,000 then forclosed in mar.2015 at 100,359 then up for sale at 69,900 by bank
So it's an REO being sold by the bank? I can't see that in my data. I still see the borrower as the owner. I can see that it was on the market over a year ago, during the foreclosure period, obviously as a short sale with no takers.
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