All Forum Posts by: Hattie Dizmond

@Lombosco Dixon

What you've said in your posts is a little confusing and ambiguous. For instance, "comps are above" $300k. Well, there is a lot of leeway "above" $300k. It leads me to believe you don't know or have an accurate ARV on this property.

Also, you noted $42k as "min" for repairs.  Does that mean the minimum amount for repairs is $42k?  Again, that statement doesn't lend itself to having confidence you truly know the rehab costs, particularly when you then mention a "

transactional funding...not transitional

I read the title of your post and immediately thought you had found a body! This isn't creepy. It sounds like a SFR that was converted to a duplex.

What is required is governed by your state and/or local building codes and rental requirements.  In some areas all units must have fire doors and other separation.  In other areas older units are grandfathered in, unless you open things up and start making changes. 

Here in Dallas, we have a historic district with a lot of huge old houses that have been converted to 4-plexes. There is no fire separation in those units, including no fire doors. So, check with your local code enforcement division. 

Yep...what J Scott said! 

For the seller...Fraud requires intent. 

For the inspector...liability would  probably require proof of willful negligence, meaning they knew what they should do or report and willingly chose not to do it. 

I'm not an attorney, but the burden of proof on things like this is pretty heavy. 

If you like the numbers in the property, buy it, after you get it properly inspected. If you have concerns about the plumbing, include a licensed plumber in the inspection process. If there is no system wide defect with the plumbing, then leave it alone. However, make sure you include a reasonable monthly CapEx reserve, in case you do have to repipe or make other large repairs. (I don't think you can repipe a concrete block house for $2 - $3k.)

As usual, Ben hit the nail on the head, regardless of what the nail was named!

I just want to summarize a bit, because there are 4 distinct and different documents someone could present to a seller to show some level of ability to purchase. Each of them is saying something completely different and each carries different levels of commitment and ability. I'm going to start with the golden POF.

POF - Proof of Funds is the golden egg. This is a bank or other financial institution actually telling the world how much CASH you have available as of the time the POF was written. This is not a document saying you're prequalified for anything. They are saying you have cash. Do you see how a letter saying you have $500k in available cash is stronger than any other commitment letter?

LOL - Letter of Credit from a financial institution tells people you have access to a certain amount of funding. There is no qualification needed for you or the asset being purchased. It's the next best thing to having cash in your account. You can't write a check, but you can draw against the LOC and have a wire transfer out in a couple of hours. Very powerful.

Pre-approval  -  Next would be a pre-approval letter from a lender. This document generally has 2 important pieces of information. First, it lists the maximum amount you are pre-approved to borrow. Second, it contains an expiration date. Banks don't give open ended pre-approvals, because a person's financial situation can change quickly, particularly if they go out and take on other debt. It's usually not more than 60 days. But, this is a commitment to lend. The underwriting on the borrower has been completed. The only thing that would have to be investigated is the asset being used as collateral. These are very powerful documents, because it is a lending COMMITMENT.

Pre-qualification  -  the least powerful of all the documents used to show ability to purchase. All a pre-qual letter is saying is that, based on the information the potential borrower has provided, they should be able to borrow up to $x. At this point, the lender has not verified anything. They haven't completed the underwriting activities on the borrower. You may have told them you make $240k a year, when the reality is you can only show proof of $40k.  These are not really worth the paper they are written on to a seller. They are generally used to give a borrower an idea of the price point they should stay under, when searching for a propery. 

It's important to understand the documents and what they mean to a seller. Some are golden and some are basically meaningless, particularly to a sofisticated seller. 

Ok...so, the thing to know is the real time consuming part comes on the front end of getting the bank to agree to allow a short sale. If I'm reading your post correctly, you've located a property that is already approved for a short sale. That's a different animal. 

Now, some banks still take longer than an investor will believe is reasonable to respond to an offer, but most of them have gotten it down to 2 weeks or less. What you always have to remember is that the decision isn't being made by Bob and Sally sitting in their living room.

The lender knows what they need to make them whole on the loan. They have probably identified a certain tolerance, where an offer in that range will be accepted. Anything below that likely has to go to a committee. (Banks, particularly in the lending space, love committees!!)  

So, if this property is already approved for a short sale, there really isn't much you have to do other than submit an offer that follows the lender's submission guidelines, which generally is to be submitted with a POF.

Dang it Mike...yours got posted before mine!!

 Mr Quarels owns YellowLetters.com, so you could kind of say he's affiliated with a printing company. ;-)

So...the equation you have to run is whether the HML money cost are more or less than paying for a contractor, because the government is always going to win the battle, when they are holding the checkbook!