All Forum Posts by: Sean OToole

I think Wayne nailed it. On any question like this, unless there is a specific law, I always try to use the "Reasonable Person Standard". This was the recommendation of retired Oregon Supreme Court Judge that I had as a law professor (b-school not law school). As humans we are good at justifying just about anything to ourselves, and the reasonable person test is a good way to step out of our own heads and think about how someone else might see it. See: https://en.wikipedia.org/wiki/Reasonable_person.

Some above suggest just holding longer. If you want to be a successful flipper that is not a good plan. Getting the best returns require that you turn your inventory quickly - just like a grocery store. The faster you can turn property the more profitable - AND COMPETITIVE - you can be in the market.

On this particular issue, I recommend a few things:

1. Find an awesome local lender that knows these rules inside out, and who has access to alternative sources that can fund. It isn't the buyers job to know, it's yours.

2. Encourage the buyer and buyers agent to use your lender. Have this conversation before accepting their offer. You either want them to use your lender, or know for sure their lender has the ability to get it done.

3. Clearly state in the listing that FHA financing is not available for this property. You might even consider suggesting that buyers should either make a cash offer or contact your lender for alternatives.

4. Finally, I usually require buyers to use my escrow company. They can also help catch these things.

Hi @Nick Reaves unfortunately we are not yet in Colorado. Geographic expansion is definitely something I'd like to get back to soon. Thanks for checking.

@Carlos O. the comps we offer come from the county recorder and are the official records for your area.

@Christophe Soldat yes some MLS's, do offer official public records access in addition to MLS records (real estate agent entered data), but you don't need a license for public records. I actually think both have value, but there are differences. For sales comps the biggest advantage of public records is that they will include non-MLS transactions.

Everyone should keep in mind that value estimates like ours or the Zillow Zestimate (known in the industry as automated valuation models, or AVM's) are based on public records data and therefore don't take into account things like curb appeal, view, home condition, landscaping, etc. Most can't even tell the difference between oceanfront homes, and the homes on the other side of the street.

Despite these shortcomings estimated values are still a super helpful starting point. Just realize they will work better in subdivisions of identical homes with lots of recent sales then they will in highly mixed neighborhoods with big differences between homes.

In terms of determining ARV for a property, here is my process:

1. Start with the estimate - is it even in a ballpark that works for me?

2. Next move to comps - sales comps are the most important, that is what appraisers and the market in general uses. But I also look at listing comps (the competition and/or what's not selling if high days on market), foreclosure comps (any foreclosures nearby that could have an impact), and neighbor comps (is this property overbuilt or underbuilt for the area).

3. Get in my car and go look at both the subject property and the sales comps I selected in step 2. Lots of people want to skip this step, but public records data, and even MLS data, just don't replace seeing property, and what's around it, in person. You just can't rely on pictures these days, especially with all the amazing wide angle lenses that are now available cheap. :-)

Gold is more of an insurance policy then it is an investment. It's value as a currency is based on the fact that supply and demand are inherently self regulated. As the demand and price rise more gets mined, as demand and price fall, less gets mined.

That is the reason every major central bank holds gold - it is the universal currency of last resort, and is an insurance policy against a loss of faith in their fiat currencies. That statement only applies to gold, not silver, nor any other precious metal. Anyone who lumps gold in with the others, doesn't understand its role. Central banks typically have around 5% of their holdings in gold. As you accumulate wealth, following the example of the world's top bankers, and holding 5% of your own wealth in physical gold is a smart insurance policy. Keep in mind the value of a fiat currency, like the dollar, is only what people "believe it to be". If that belief changes it becomes worthless quite quickly. The US holds the most gold (not only our own, but others which we can easily confiscate), and that is one of the reasons the U.S. remains the worlds reserve currency, and safe haven of choice.

To the degree that you hold gold as an insurance policy, it should be your sincere hope that it never increases dramatically in value. Much like it should be your sincere hope your investment in fire insurance never pays off.

@Jeff Zamora has got it exactly right.

Key points in the process (varies by state).

1. Homeowner misses tax payment - delinquent. This data is available from the county assessor. Many counties sell a list all you have to do is walk in and ask, others you might have to do a FOIA request, and for some it is online.

2. After five years (typically), the assessor files a Notice of Tax Sale with the county recorder. Often this is done months before the actual auction list is available from the assessor, so watching for them isn't a bad idea as you'll get a head start on what's going to auction vs. those that wait for the list.

3. Assessor starts to advertise the auction, and makes the list available. County may have a partnership with an online auction company - typically **********. Or they may just publish a list on their website, or if its really old school you pick up a paper list at the assessor office.

4. Tax sale is held. 

Super common scam to find listings in Zillow and then post in Craigslist to try to sucker people in with "too good to be true deals". Fortunately most of these scam artists don't do their homework, so its easy to catch them up, and you'll be safe so long as you demand escrow, and don't hand them cash, ever.

At the same time, I personally wouldn't walk away just because it made no sense. Some of my better deals have made no sense, and were with total crackpot whacked out sellers. That's a reason to dig in, not run.

As @Jeff Zamora said, I'd look up the name of the owner using public records, and then use skip trace tools to try to find a way to contact them. If you do that and its the same guy then proceed. If its some nice folks who have no idea what you are talking about, then mystery solved.

@Micki M. nailed it. It all depends on what is happening in your area. I've had a few great deals where there was a valuation discrepancy between current use and allowed use. The key is to discover each possible use for the property, and then get a rough idea of what value that use would bring on the open market minus the cost to convert from the current use to that use. This is called finding the "highest and best use". At times there can be huge discrepancies that no one is aware of allowing you to make big profits through what I consider "information arbitrage".

How you play it can also depend on the market and the buyer. Sometimes you just need to acquire the property and point out the discrepancy to the right buyer, who then buys it at a premium and does all the work to convert the use. Other times you may need to acquire the property and get it entitled (approved by the city / county) at which time the the buyer will step in, pay you are premium and do the work. And sometimes you need to do the conversion and sell it fully converted to realize the value.

Sounds like an interesting deal and I definitely think it would be worth taking the time to research.

This is actually one of the trickier parts of using any of these services, our's, Listsource, others.

Two issues you need to understand when trying to tackle a new search and looking for a data source:

1. County issues - there are 3144 different counties in the US, and data varies from county to county. Services like ours do our best to standardize it, but you need to expect variations. What works for your friend 30 miles away in another county, may not work for you. Some counties simply don't have certain fields. In this example "Units" can be hit or miss. You may also find that the data is really good for building built in the last 5 or 10 years, but terrible before that. 

2. Normalization issues - each service has its own take on trying to "normalize" certain fields to a standard set across all the counties. Property type is a good example. Every county has different property types, so we build a big table and try to map each counties property types, to a set of standard property types. This works pretty good most of the time. But there can be variations.

Based on that here is what I strongly recommend for anyone who wants to be sure they are pulling the best lists:

1. Start at the county assessor and get to know the data. Go in and ask them questions around which data they collect and for how long. While services like ours have to try to figure out lots of counties and generalize across them in order to cost effectively provide service, you can become the local expert and gain an advantage over those that don't take the time to learn the details.

2. Compare what you find at the county to the best service you can find for your area. Look for differences between the county and the service. Try to reverse engineer the mapping I talked about above. Ask the service providers questions around discrepancies. They may not be able to resolve it for you, but you'll learn exactly what you can rely on and what you can't. No service is perfect, mine included. Just recently there was something I needed that the county had, but that our service didn't. It happens even to me. :-)

Best,
Sean

Hi Kevin,

One key item that I'd add to what Kyle said. Certain non-profits have first dibs on these properties, and a lot of investors pre-work the list trying to buy them before the sale. As such the tax sale lists tend to dwindle quickly as the sale approaches.

Best,

Sean