All Forum Posts by: Jay Thomas

It's in Lyons IL

I was exactly in your shoes last year. My best advise is to fight the appraisal as hard as you can. At this stage, I'm guessing you have already paid for inspection, earnest money, and appraisal and those are non-refunded when working with HUD as an investor. You need to turn on utilities though. Turn on utilities and have the appraiser go back to verify. With all utilities on, the appraiser can overlook the remaining stuff. Utility off is a major no no, as I had the same issue. We appealed mine twice before getting a C4 rating. Don't give up, FIGHT FIGHT, FIGHT!!!

Does any one have idea how much it will cost to replace a lead pipe main water line. I am looking to purchase a slightly distressed property and the village inspector is requesting the roof to be changed and water line to be replaced.

My first buy and hold was in forest park but I am currently looking to do a flip in the surrounding areas. Each village has different rules about contractors but most of the contractors I know are from Chicago. Looks like I can only use contractors already pre-qualified by each village.

I noticed that a lot of cities surrounding Chicago requires a contractor to be licensed with the city before doing any work within the city. This will really limit my options when finding a contractor to renovate my fix and flip project. Is there a way around this rule? The contractor I plan on using will be licensed bonded and insurance but not specifically with that city.

Originally posted by @Brie Schmidt:

Thanks Brie:

1 & 2) I am definitely shopping for a new bank. Bank said agent should have communicated the the appraiser prior to granting him access to the property....The property only need $5000 of cosmetic repair. Bank said they would finance it and would only do a "As-Is" appraisal. It became a drama when the appraisal report came back as "Subject To" utility turn on and $3000 cosmetic fix.

3) The lawyer is my lawyer. HUD uses "Buyer Select Closing Agent Pilot Program," which transfers the responsibility for many of the functions traditionally performed by the seller's attorney in Illinois, from HUD's designated counsel to the "Closing Agent."

4) Is it normal to pay agents outside of the commission? The missing signature is from both sides.

5) How will I handle this if I'm buying out of town?

I just closed on my first buy and hold deal, a HUD foreclosure. The closing process was way different from when I closed on my personal residence. I was hoping this HUD foreclosure process would be similar to that and hoping my lawyer/agent would guide me through the process, I was wrong. Below are the things that went wrong during the transaction. WHAT CAN I DO IN FUTURE TO PREVENT THESE.

1) HUD only allow 3 days for utility turn on. I told my bank and agent to notify me when appraiser is coming so I can schedule inspection, appraiser, and 3day utility turn on period at the same time. Bank and/or my agent didn't communicate with the appraiser. Utilities weren't turned on for the appraiser, thereby, costing me additional appraisal cost for re-inspection.

2) Bank said they would do "As-Is" appraisal but appraisal report came back as "Subject To". It took a month for the bank to successfully appeal the appraisal thereby extending the closing date. This cost me another $$$ because HUD charges money per day for extending closing date.

3) I was hoping the seller would pay for buyer's title insurance but I was wrong and my agent didn't educate my on HUD deal. Closing company wanted to charge $500 for lender's title and $1,500 for buyer's title on a $85k property. Title search came out clean so I told my lawyer that I don't want to buy buyer's title insurance. Lawyer spoke to title company. He said the title company wouldn't do business with me if I refuse to buy buyer's title insurance.  Since there is a single lawyer involved in a HUD deal, title insurance is how he get paid. They offered a $500 discount. Forcing me to buy an optional buyer's insurance still doesn't sound right to me. I bought both title insurance.

4) HUD doesn't accept electronic documents. They want us to mail the signed contract and all documentations within 3 days after accepting our offer. They rejected our first package because signature was missing on a page. The agent made me pay for the mailing fee for both packages costing about $100. He said his commission only cover electronic documents. Is that right?

5) HUD also doesn't care about city inspection, it is buyer's responsibility. No one took ownership of this task so I had to walk into city's office to schedule the pre-purchase inspection and final inspection. This cost me about $400. I know I have to pay the inspection fee but who is usually responsible for coordinating city inspection. How do people buying out of town handle this?

6) My agent wasn't really familiar with the particular area as we were making offers all around Chicago land area. Chicago land area is too big for a single agent to be familiar with all neighborhood and suburbs. We lost out on 5 deals in areas he was familiar with. I kind of felt bad for the agent for all the work he had done so I stuck with him in order to pay for all his troubles. Do investors have multiple agents in different areas?

I learned a lot from this transaction and I considered those additional cost as tuition  for "Real Estate Investor 101" class. However, what can I do in the future to avoid similar troubles?

Thanks all for your responses. Looks like Lima One and Renovo are top candidates are my top candidates

Can someone recommend a good HML/Private Lender/Bank in Chicago area that is willing to work with a new investor. I have one rental property and looking to do a flip next year.

Originally posted by @Jonathan Klemm:

@Jay Thomas - I think the best option would be find someone to partner with or finance a small part of the house so you have enough money for the renovations.  Also sounds like if you pay cash you will not have any reserves and I highly recommend having some cash reserves for the unexpected and unforeseen costs.

Thanks Jonathan, the renovations estimate already include contingency reserve.