I found a property in Port Jefferson Station, NY. FSBO and the guy is moving out of state next month! He's asking $115K and the house needs a ton of work. The comps for that area look to be $250 - $400K (that's at a glance).
What do I do first, second, third...etc.??
I downloaded a Purchase - Sell Contract from the BP File Place.
Do I need a REA? I'm thinking "no".
I'm thinking "seller financing" but if he has a mortgage then what? Does the bank holding the mortgage have to agree to the arrangement of "seller financing"? I'm going to need guidance with this if it comes to fruition.
Should I immediately find a Title Company and a Contractor? I'm thinking "yes"
If we can't do "seller financing" I'm thinking a 203K loan to get me started (then I need an an FHA approved contractor, correct?).
Thinking I should talk to a few banks right away so I know where to turn if need be.
Just thinking out loud. I've been looking for a good deal and now that I think I found one it's like being a "deer in the headlights!" Frozen at first but as I think it through it becomes easier to conceptualize.
Any advice would be so appreciated. I'm doing this alone. Also, if you are in my area and you would like to reach out to me and maybe even talk, that would be awesome.
if you can get a purchase agreement, with the seller to locked it up, that will give you time to get your ducks in a roll, the agreement, should have a few escapes, to protect yourself incase the due diligence, shows major issues.
You have to get the cost to renovate & ARV correct; otherwise you won't know if your offer is too high or not. And being that this is a seller's market, you want to make the whole process for the seller as "clean" as possible, with not too much going back & forth. Otherwise they might just go with another buyer. See if you can get a realtor to give you comps on what similar properties, all fixed up, sold for in that area. (to get a rough idea you can also go to Zillow or Realtor, look at the pictures of "sold properties"), and get a contractor to give you an estimate.
I'm not sure what the condition of the property is, but for a beginner, it's easy to mis-calculate the cost to renovate and the duration (especially now that it's getting colder, it'll definitely affect the duration of the project). If it needs major renovation, where you'd pretty much have to do everything new, you might want to consider putting it under contract, and assigning it, and having your buyer let you see the whole process.
In NY, you need an attorney to close. Seller's attorney will prepare the contract and you'll need an attorney as well. Title company just does the transaction.
As far as doing a wrap-around mortgage, the transaction becomes more complicated and also, it might trigger the "Due-on-Sale" clause the seller has on their mortgage. There are other things to consider, such as structuring payment to the bank, etc. You'll have to talk to an attorney about that, but honestly I wouldn't recommend this strategy for a beginner. Let me know if you have other questions.
@Francene Iaizzo I just wanted to answer your question about the 203k contractor. On my first deal I did a 203k loan and I was able to use a highly recommended contractor in town. He was not a "approved contractor" he actually had never heard of the 203k loan. I just explained to him what the loan was and how it would work and that there would probably be few hoops for him to jump through but he was fine with it and there were no issues. Let me know if you have any other specific questions about the loan or process.
@Johnny Kang Yes, I'll get the comps for that area as well as a contractor's estimate. I know the house is a 3/1.5 but I don't know the square footage.
I like the idea of assigning the purchase. If I get to the point of negotiating the sale, do I tell the seller that I want to assign the purchase to another investor? I love this suggestion and am going to seriously look into doing that. THANK YOU
@Christopher Rutherford Interesting, I thought I would have to use an "approved contractor". I really like the idea of a 203K loan. Did you refinance after everything was done to get a less expensive mortgage?
@Francene Iaizzo the original idea was to cash out refi but my appraisal came in too low. I did manage to refi into a doctor loan to get rid of the mortgage insurance that comes with the 203k. I ended up selling the place for 100k over the appraisal 6 months later so things worked out in the longer run.
Yes, be honest about it. It's all about being able to deliver your intentions in a way it makes sense to them; so what you say and how you say it will determine their reaction. You still might get some push-back from the seller or their attorney, which is all part of the process when trying to work out a deal with any owners.
Would love to hear how this deal worked out for you, I actually live very close to Port Jeff.
Yes @Francene Iaizzo how did it go?
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