All Forum Posts by: Christian Malesic

Illegal is certainly the wrong word. It is not ‘illegal’ as that means 'criminal'. There is no law in any of the 50 states that codifies you can not deal directly with a seller if you are a potential buyer. Since there is no law, it can not be illegal.

'Unethical' then? No... I would say not even unethical. You, as the potential buyer, have no loyalty to the listing agent or to them receiving a commission check, unless it was through their marketing efforts that you found the property. This could be a flyer, mailer, yard sign, listing in the MLS, etc.

How about: 'poor business' or 'bad form'? Yes. An end-around is not the way to win friends and influence people.

For the seller, OTOH, it may be a contractual breech as they likely signed an agreement with the listing agent. Unless you wait for those contractual terms to expire, the seller's hands are tied - which means so are yours.

Our experience with 3 different judges (all of our properties fall in 4 districts, but we have never evicted in the 4th) are the same as all-cash explained. In fact, for a moment I had to go back and make sure he was not talking about Central PA.

That is the way it WAS. The world has changed. It may be possible to get such a deal again, but unlikely. Those of us with stellar payment histories, great credit, contacts at the bank, and experience with the bank doing multiple deals together are having trouble pulling it off. Try - yes. But do not count on the extra cash for closing costs or rehab.

The lenders are now giving their 80% LTV (or 75%) of the sale price OR appraised value WHICHEVER IS LOWER for investment properties.

My best advice is to go check with the bank first: ask these questions, get pre-approved, know your financial limits, etc.

This is getting harder, even when the property appraises high. Let us pretend it will appraise at $500k (an extremely high number for sake of conversation). A year ago, the bank would give you 75% of appraised value or $375k. Some banks would go 80% and cough up $400k. I have gone to most of my closing tables and walked away with a check as I bought the property (granted I have a bigger loan, but now have rehab cash).

My last deal, currently under way, they are willing to pay rehab (if it appraises right as per above), but I must provide receipts for rehab and they will reimburse me.

See the link in this REO forum:
http://forums.biggerpockets.com/viewtopic.php?t=18047

Mostly (as always) I see it as does Wheatie. I provide these extra comments.

In PA it is actually handled by the Sheriff (technically, by his office staff).

I have not seen a lender do as Wheatie suggests above, but the effect is the same.
Essentially the lender works with their lawyer to determine the “upset cost” of the property for the auction. This can be more or less than the amount they are due, but rarely is the same. I am not completely sure how they determine the upset cost, but this is the number to which their agent will bid. Their lawyer, or more often his assistant attends the auction, the lender is not usually present. The lawyer, serving as agent for the lender, does nothing as long as bidding is going on and one bidder is outbidding another. If they get to the “going once, going twice” part and the current bid is not at or higher than the upset cost, the agent will jump in the bidding. He will continue to bid against the other bidders until one of the other bids is at or above the upset cost. The agent prefers that if he wins, the bid it is below upset.

Let me explain that last sentence. This, by the way, is where my experience may differ from Wheatie’s. Let us assume that the bank wins the bid. There are two ways for this to happen. The first we will discuss is in the situation of the above paragraph – they out-bid the other bidders. Due to transfer taxes (a percentage of the amount for which the property sold which is paid to the government), the agent wants the price as low as possible if he has to buy it for the bank; thus keeping the taxes down. (ie. if transfer taxes are 2%. 2% of $50k sales price is $1k in tax vs. 2% of $75k sales price is $1.5k).

The second situation is the most common, that in which there are no bidders at all on the property. This will happen in a mega-percentage of the cases, though also varies per area. The last auction I was at in January in Central PA had 198 properties and only 5 had bidders. In this case, the presiding auctioneer (and staff) will work with the agent to sell the property for processing costs after it goes up on the block and no one bids. This is done fast and somewhat quietly (not necessarily in secret). Thus, the bank acquires the property for $1k or $3k or something like that and only pays transfer tax on that amount. Now remember, they also have their own loan outstanding, so this is not a ‘good deal’ for them as it might be for you.

Our outsides do not always portray our products as well as the insides. I realize curb-appeal is everything when selling, but in the buy and hold world of renting, perspective tenants care more about the inside of the apartment and the neighborhood.

To emphasize this point further, we were not even going to use outside photos, though we could be persuaded.

Weissman, I appreciate your comments. My bro considered himself an “amateur photographer” (he used that term proudly as if it meant something) a few years back. He took college classes, did darkroom stuff, the whole works. It was his real-life hobby. He has accumulated well over a thousand $ in lenses, maybe more – I do not know exactly, as this is not my world. I hate to just give up on all that stuff as it is perfectly good and hardly used. Thus, my question above.

all cash, that is an idea we had not considered. It certainly keeps him in his comfort zone as he knows how to use all that stuff. I guess it would come down to a cost comparison of new camera vs. film & Wal-mart processing.

Your state's Landlord Tenant Act is going to be specific about what MUST be included. It is usuaally not a problem to add extra.

Having said that, it probably will not do any good. If you think he is a level headed sort of fellow, try explaining it all to him in person or on the phone.

If you are right about him not paying, however, your chances are slim that you will convince him otherwise.

Interesting point about closing table payments, Wheatie...

Essentially, when you buy the property, you pay the first year's insurance at the closing table (or even ahead of time directly to the insurance company and then provide proof at the closing table) this then starts your term. 1 year later you owe it again, that is where the escrow account comes in.

Taxes are due when they are due, however. So, they are prorated at the closing table with you (the buyer) paying for however many days are left in the tax year and the seller paying however many days in the tax year that have already passed.

The money put in escrow as per PITI, described above, is to start saving for next year.

First year is paid by you at the closing table. Second year is paid by you in 12 increments starting with the very first payment.

They will not likely auction it or 'hand it over' as your question suggests, but will sell it on the open market. There is a ton of information in this REO forum on the process. I have written much as have many others.

Read the most current 20 threads or so. If you have any specific questions thereafter, repost them on this thread and we will all be happy to follow up.

BTW, it the bank owns it, the foreclosure process it over and the auction has occurred. The bank foreclosed on the homeowner, the judge granted, it went to to sheriff's sale auction, now the bank owns it.