All Forum Posts by: Keith Goodwine

 In the manufacturing world, there is an adage - "Speed, Quality, Cost:  Pick 2"

If the seller's concerns are a high speed bid, as they say, they can only choose to offer a high quality property, or waiting for a higher cost bid.

From the sounds of it, they have a low quality property.  So they must choose either low cost or low speed.  These are mutually exclusive.  They can't have both.

Have you checked the comps in the area to see what similar homes are selling for? That will determine your ARV.

Your bid should be at LEAST 30% below ARV, minus repair costs, and also minus your wholesale fee and transactional funding costs (2% of purchase price). Tell them you cannot sell fast if they are not willing to meet this price.

If the true concern is speed, as they say, you can't offer any higher than your calculated bid.

If the true concern is cost, you can't offer to close in one week.

Offer those options to them and see what they say.

If they are truly motivated, they'll find a way to make it happen.  

If not, they're likely just kicking tires to see if they can get someone to overpay quickly for the low quality they are offering.

 Changing the locks is unauthorized in an eviction scenario.  It is considered landlord harassment.  See this link for more information:  Illegal Evictions Can Get You In Trouble for Landlord Harassment

Have you served notice to quit?  I think three days is allowable in this situation.

If the unauthorized tenants remained after doing so, you can get a real estate attorney to write a legal but threatening letter for a three-day notice to quit.  This letter can be served by a process server for a fee, or by you if you feel it is safe.  This will likely cost one billable hour, plus retainer, plus process server fees.  The letter escalates situation, and the unauthorized tenants may move out to avoid being charged in court.

A real estate attorney can also guide you in filing for eviction.  They can file the same day as the letter if you don't feel the letter will change the situation.  This will likely cost significantly more.  But they will keep you legal, and have the experience to know exactly what to do in this situation.  The attorney will help you recover their costs in addition to any rent costs.  (Whether or not the people can pay is a different story, but a court ordered judgment in your favor significantly helps the matter.)

A consultation with a real estate attorney is free of charge.  You can call as many as you like until you find one that you feel comfortable with, and feel is most experienced in evicting unauthorized tenants in your state.

Please go back and give the unauthorized tenants the key to the new lock, or restore the old lock which they have the key to.  You are in violation of the law until you do so.

I got a unique lead today for a junkyard property in a metro area.  I am a wholesaler, and the seller responded to a postcard mailer I sent out.  The seller insists the value of the property is in the zoning, as the metro council does not approve new junkyard zoning.  This seems like a difficult property to value.  Any suggestions?

If you're interested in acquiring a junkyard property in Metro Nashville, TN, please let me know!

 Near Haywood and Nolensville intersection

 Excellent context.  Thanks Jim

 Very helpful information.  I sent a repair estimate to them highlighting the most expensive items.   My estimate is about $30,000, and I agree with you that even that is probably too low.

The largest seems to be a recent self-done roof replacement with buckling shingles only months after the fact. It is visually apparent that the entire roof was poorly done.  I can only guess that it was done by the sellers or by an unskilled family member / friend.  There is no doubt in my mind that rainwater intrusion is already causing damage and fungus growth in the attic as a result.

The code violations are going to require moving the laundry area. Currently the washer drain sewer pipe is protruding from the home. It connects around the outside of the house, and back inside, to a toilet sewer pipe (I'd hate to see that washer after the toilet is plunged). There is no crawl space to properly install anything that would satisfy code.  The washer and dryer do not properly fit flush in this area anyways.  A licensed plumber will have to install proper water and drainage elsewhere, where there is a crawlspace and enough room for the machines to fit. A licensed electrician will have to run the GFCI / 220V connections to the new area as well.

There are also some other sections of the house that are no doubt attracting water intrusion.  Where craftsmanship was lacking, a visibly large amount of caulking was used.  Self-installed windows are likely to be leaking (even if it's not visible), as are the boarded-up windows and doors.  The self-installed tiling in the bathroom is visibly crooked, and the joint between the wall and floor is not flush.  The self-installed garage is likely not structurally sound.  It has been built with several different types of materials, and seems to be held together by caulking.  I am recommending destruction until a home inspector or structural engineer says otherwise.

All that to say - if the seller does not accept the as-is cash offer, I am not sure what other options I can reasonably give them that would be acceptable to a buyer.  Subject-To is something I will offer in addition to short sale as a last resort. 

Although short sales are uncommon here due to the very hot housing market, the unskilled repairs and additions have significantly de-valued the home. I doubt any conventional buyer would or should buy this off the MLS. A home inspector will likely point out several significant code violations and inadequate construction that should stop a conventional sale anyways.

 A good real estate education now will pay dividends later!

 It is in a hot area, which might get a buyer interested more in the potential profit than the ratio.

I will make my best cash offer, and if that's not accepted, we'll look at short sale options.

I'm really looking for my first wholesale. I don't feel comfortable trying to negotiate and wholesale a short sale. Maybe one day when I get more advanced, or if I had a local mentor that could show me how to configure the paperwork. I will probably JV this with someone for a finder's fee.

Should I agree to a higher price repair, as in, "Offer is $115,000 minus repair costs as estimated by a qualified contractor"?  I know the repair costs will likely be north of $20,000, but it might help take the sting out of the low offer, and provide some justification.  Is that what you were suggesting?

The sellers bought in 2005 at $115,000. If they paid with 3.5% down on an FHA mortgage, and got the loan at the then-market rate of 6%, and made no extra payments, they would still have a remaining balance of $92k. They said their mortgage balance was still pretty high, but did not share an exact number.

I estimated ARV to be at $180k. Using the 70% Rule, my ceiling is at $126k, and with a wholesale fee and transactional funding, my ceiling is at $116k.

That leaves us only $24k to cover repair costs, and I estimate repair costs to be above this.  Items needed include:  new HVAC (current was installed in 2003), new water heater (the house has two, one is new, and the other was made in 1998), significant bathroom repairs/remodels in both bathrooms to re-do unskilled labor, window replacement to re-do unskilled labor, destruction of the garage and rebuilding the roof to be without the garage, destruction of a cinder block wall that was supposed to be used with the garage, finishing the driveway that was half-completed, fixing plumbing violations, new flooring and paint in the entire 2000 sq ft house, updating tax records with number of rooms and bedrooms, and some cosmetic updates.

I initially offered $90-95k range, and said I would present a final offer upon review of the repairs.  That number seemed to be uncomfortably close to their current mortgage balance, based on their reactions.  They wouldn't be able to sell and then move to a new place at that price, basically.

Looks like the best play would advise them to hang on to the home until they have more equity.  They could short-sell, but that would only make sense if the payments are too much.  They unfortunately have a sick family member, and that is likely a growing cost for them.  But not sure of their exact financial situation, because they didn't feel comfortable sharing any more details than what I have.