All Forum Posts by: Ralph S.

Not enough information. If the reason for the quick move is a pending eviction, bad news. If they are moving into the area for a job, maybe ok. You never know until you get their application and do your screening. That they flip flop on the neighborhood is more of a red flag for me. They might just see your unit as a short term "any port in a storm" solution, even if they do check out.

Oh, and you should always be suspicious!

There are good and not so good things about Section 8. Some of my best, and some of my worst tenants were S8 tenants, and I've had more than a few kicked off the program.

Posititives: Most of the rent is never late. In my experience they tend to stay longer than other low income renters because so many LL's don't accept it, and their choices are limited. Because they get assistance and you can get them booted, there is a little more incentive for them to stay on good terms with the you.
Negatives that are not so negative: Inspections, but in reality their requirements are not unrealistic. Just watch out for torn/mising window screens and flaking paint that could spark a LBP inspection.

I've found that the case workers and inspectors are reasonable when working with landlords, and when a problem arises they tended to support me. Since S8 is administered by the local municipality, and good and bad housing authorities do exist, your experience may vary, but I found they tend to want to boot bad tenants, cause they have a long list of applicants, and bad tenants give the program a bad reputation.

As with any tenant, your screening process is the most important thing. Being on S8 doesn't mean they are good tenants, only that they qualify for the program.

There are a lot of good threads, links and other information here on BP about S8. Do some searches.

Handful of states? What state doesn't have a RE transfer tax?

How about another option? Haha. Pun intended. I've never done one of these, so tell me if I'm missing something.

Record the option. His sale price is now a matter of public record, and your control of the property is established. Then when you close, the owner becomes seller, and your tenant/buyer is buyer. One close, one deed, one transfer (where all the selling costs are subracted from the sellers proceeds) and the difference between the sellers option price and your buyers purchase price is just one more reduction from the sellers proceeds on the HUD-1.

You don't have to worry about what he thinks, and he can't stiff you. You get a check from the title company at closing just like he does.

You might even skate away without a 1099 being issued to you, since you technically would not be the seller and your name is not on any deed. The 1099 to the seller will include your profit, since it would reflect the buyers purchase price, but your check would be listed as a sellers expense, so his net, if he had to pay any taxes, would be the same.

whadayathink? Am I missing something?

While I mostly agree with everyone else,

So, in the worst case, when they find your dead, lifeless body, the Police will at least have "a person of interest." :D

Mountainjoepa, you've got to improve. Not getting the depo and rent before they move in, 5 days to fix a broken pipe, sending someone over there that doesn't verify everything is working correctly, not even having your own key, using a 30 day notice with a lease instead of a 3/5/7 day pay-or-quit (whatever is customary in WV). Better tenant screening might also help. You've got a lot of room to improve. It's not their property, it's yours. I'm curious to know WHY the pipe froze, and what's being done to prevent that in the future?

When you find yourself in a hostile situation, just turn it over to someone else, like a lawyer. Seems that's an area you're little behind the curve on, too.

While bad behavior is never an answer, I think some of this is self-inflicted.

Your offer had a 90% financing contingency on a 4-unit, and it was accepted by an Asset Manager?!

:rock:

My favorite was by a friend of mine who put up an FSBO sign in the front yard for three days, then took it down and told the tenants it had been sold, and the tenants had to be out by the end of the month because the buyers wanted to live there. The tenants actually moved, too.

I've heard of "Dry Closings" where the funds from the bank were not wired to the title company, but these were instances where the lender was a time zone or two west of the closing, and the closing was scheduled too early in the morning. The only other item I can think of is if the closing is delayed, and the financing expires. I once ran into that wall when title issues arose on a REO I was buying. The foreclosing lender issued a quit claim deed to Freddie Mac, who we were buying from and opps, the rocket scientists they had for lawyers mixed up Grantor and Grantee, so instead of QCD from Lender to Freddie, the QCD read Freddie to Lender. Freddie was selling what it only thought it owned. We had already been delayed when they discovered this and it took another month to clear that one up, and we were bumping into the deadline on our financing.
On another REO we offered but didn't purchase, the appraisal came up just a couple thousand short. Our lender would still loan and issue a commitment letter if we wanted to make up the difference. It really was just a couple thousand, and everyone pretty much agreed the appraisal was just too low. See my comments about appraisers where repairs are needed. I think in they just conservative when the property is really distressed. It was, like Johnny's, a real fixer upper. We decided to bail, and instead of issuing a commitment letter for the reduced amount, asked the bank to decline the financing, which they did, and we got our EMD back.
On another REO, we lost our first offer when the bank accepted someone elses. The first buyer got cold feet when the termite and moisture inspection turned up water damage under one of the bathrooms (in the crawl) and estimated a $4K repair bill. They backed out, losing their EMD. I had actually gone into the crawl space before our first offer and knew that repairs had recently been made, just in a shoddy manner. I contacted our agent and told her to look at the last two sales and see who had done the repairs. This was late '07 and she found out that repairs, and a clear inspection had been done in '05. We made a second offer, and the seller required we accept up to $4K in repairs for the moisture damage. When it came time for our inspection, we used the same company that made the '05 repairs, told them quite clearly that they had made the repairs in '05, and we expected nothing less than a clear inspection. We got it. We had planned to, and have since, remodeled both baths, anyway,
After moving quickly and putting in an offer on another REO, my DD included getting a copy of the plat from the city. We noticed a difference between the plat and the street that came to the property. The plat showed a 90 degree turn, and straight streets, and property lines perpendicular to the street. Given the actual corner was not 90 degress, nor were they very straight, and the fences were not perpendicular to the street, we very quickly ordered a survey ($450) that revealed that the property line was actually on the other side of the road, the road cut across the property and the house at the end of the road did not have a recorded easement. On top of that, the surveyor was unable to verify whether the street was public or private. Yeah, we yanked that offer. After several discussions with the city, the road proved to be public, and we resolved the legalities of the road across the property, and put in another offer and bought the property.

You can't eliminate all risk. You can, in many cases, mitigate and manage the risk to protect yourself. A distressed REO carries more risk and requires greater care and at the same time, the seller doesn't want to see those pesky "get out of jail free" contingencies. You really have to do all that up front, before the offer. It sounds like Johnny, you have a lawyer on your side who is looking out for your interests and informing you of the risks. Evaluate and decide what's best for you, your own tolerance for risk, and how well equiped you feel you are to deal with the uh-ohs and oh-s__ts!.

Michael
Your specific questions are best addressed by someone very informed on Texas Real Estate Law, and the disclosures that RE Agents are bound by, which I am not. But, I think in general, some things can be said about these "Exclusive Buyer Representation Agreements."

They are not manditory. It is, IMHO, an insurance policy by your "Buyers Agent" that they will get paid if you buy a property. When someone says "it's customary" should be a clear signal that it's "not manditory." In some cases, it can provide them even more than they would get from the selling broker. In the case of 66%, a lot more, cause you might be held responsible for the difference!

Since it is only an agreement between you and your agent's broker, and has nothing to do with the seller, the commission the seller has agreed to pay, or anything at all with an actual purchase, the lack of a buyers agreement should not make any difference in actual purchase of a property. When the offer is made, there should be something else that specifies the role your agent will perform, commission they will accept, etc.

Don't worry about procuring cause, either. Just be honest about the houses you've seen, and with who you saw them with. I think technically they would be excluded properties on that Buyers Agency Agreement. Just be honest. Procuring cause is a Realtor thing, and if arguments arise, it's a squabble between Realtors.

I have never signed a buyers agreement, and when asked, have just politely said no.

Just one other thing. If your agent is sloppy enough to put down 66% and not catch it, send you a contract that you do not fully understand, and expect you to sign it, no matter how much you like her......

Can you tell I'm not a fan? But, who knows about Texas?
Just my 2c.

Hi Johnny

Not a lawyer or anything, just my opinion, so take it fwiw.

“I made an offer on a REO with 20% down and the rest is being financed.â€

If the offer stated a financing contingency, it should state the terms, yada-yada-yada. As a REO purchase, you should have also had to include a proof of funds, such as a pre-approval from your lender and/or bank statements showing you have the down payment available. If the financing contingency of the offer is correctly written, then later, if the appraisal comes up short, you will likely have options to consider and you should have sufficient grounds to back out and recover your earnest money. You need to hear this from your lawyer. There are some (HUD) where this doesn’t apply.

“I was told that no inspection would be possible after accepted offer. “

REO, or any other property being sold “as-is†will normally not allow an “inspection contingency†where the buyer can back out and recover their earnest money if there are surprises on an inspection. This does not prohibit an inspection after the offer is accepted, it simply means the buyer cannot use that inspection to bail out and recover the earnest money deposited. Any inspection then, is simply for your information only.

“My loan officer qualified me for a renovation loan to fix whatever is not in HUD minimum property standards. The loan officer told us to bring a home depot person (because they won't charge for their inspection) to see how much work needs to be done and she would qualify me for additional renovation funds for the home. “

This should have been done prior to the offer being written. Know all the costs and get adequate financing approved prior to writing an offer on a REO. As you should already realize, “as-is†means just that, as it is, no fixes or re-negotiating price due to any defects later found in the property. Don’t offer to buy if you don’t know what it’s going to take. Remember, your "price" isn't the contract price, it's the cost of acquiring plus renovation. How can you make an offer without knowing all the costs?

She also told us not to get an inspection because we don't have an accepted offer, it would be wasting our money if our offer was not accepted. However the listing agency specifies that no inspection is possible after accepted offer. We only estimated the cost of repairing the house, however the house has no water/electricity/heating. We plan for the worse case scenario for fixes and qualify for renovation funding from bank."

Jeez-louise. Where do I start? Mind you, this is my opinion only, but, find a new loan officer. She’s clearly put her loan commission ahead of your interests. If you’re looking at a REO property with no water/electricity/heating and she’s saying don’t get an inspection, she must think you’re an all day sucker. Again, as-is means just that. Caveat emptor means buyer beware. Are you really considering such a major purchase without knowing what could be wrong? Paying for an inspection isn’t a waste of time or money if that $300 or so keeps you from buying an over priced financial nightmare.

“The contract was sent to our lawyer. “

Your lawyer, or the banks? Might be good advice to get one just for you, as opposed to “sharing†the banks lawyer.

“A friend of mine told me because we don't have an accurate figure for fixing the home, the appraisal might come up short. He said that if the appraisal comes up short after formal contract is signed we are going to lose our down payment unless we can come up with all cash to purchase the home. “

Depends upon how the offer is written. With a properly written financing contingency you will have options. See the financing contingency notes above. It’s always a risk today. Make sure the contingency protects you for this. Talk to your lawyer. Oh, did I suggest “your†lawyer?

“Is there anyway to protect myself from losing my down payment if I go through with the contract?â€

This doesn’t make sense. If you go through with the contract, your earnest money (not down payment) will become part of the down payment on the closing statement. If you back out, it will depend upon whether you have sufficient reason to, per the contract. If it is because of a contingency in the contract, you should get it back, if you back out simply because you got buyers remorse or cold feet, then no.

“I thought contracts were contingent upon the buyer being able to obtain financing.
I also thought in a renovation loan the bank will appraise the house as is, and appraise it after the renovations are done.â€

Pretty much correct. So, my question to you is, how will the appraiser know what it will need or cost to fix the place unless someone tells them. An appraiser is not a home inspector or contractor, and not particularly skilled in estimating repair costs, especially if the defect is hard to detect. My suggestion is to get that inspection, get a couple contractors to bid on repairs, get the financing approved, make the offer and when the appraiser shows up, make sure they get a copy of the inspection and bids. Seem like a reasonable, logical, safe approach, doesn’t it?

“Any help would be greatly appreciated. “

Hope this helps. Don’t take anyone else’s advice. Get your own lawyer. Listen to what everryone says, question, learn, understand, get a second opinion if you are unsure, and make up your own mind. I think you got bad advice on the inspection. Bad advice to make an offer without better knowing what is wrong with the property and cost to make repairs.

If the offer has actually been submitted to the seller, and you now want to get that inspection, talk to your lawyer or Realtor real quick. You should be able to rescind the offer without penalty (get your EMD back) up until the time the seller actually accepts. Again, don't know where you are, or what the law is where you are. Ummmm. See your lawyer.

Good Luck.

Lesson #4. Find a new CPA.....