Archive for the ‘closing’ Category

Do This Before You Sign the Closing Documents!

Friday, August 29th, 2008

In the fixer upper house business sometimes we need to anticipate the unanticipatable!

What’s the most important thing that you should do before signing the closing documents to buy a house?

Check out my ezinearticles.com piece entitled Don’t Go to Closing Before Doing This, Or You May Really Regret It!.

The article recounts my ill-fated effort to purchase a house last month, and the valuable lesson that I learned.

Info on Terry’s Book

Press and Media

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Time is a great teacher, but unfortunately it kills all of it’s pupils

Monday, July 21st, 2008

There are always great lessons to be learned in the fixer upper house business.

In this case I learned another lesson when the recent townhouse purchase fell through.

Everything started off pretty well. The closing for the townhouse purchase was Friday afternoon. I signed for both my wife and I since she was out of town. It was the fastest closing I had ever done. We were finished in 20 minutes.

The real estate agent gave me the keys and my boys and I went over to see the townhouse and plan out exactly we would start fixing it up the next day. This is when things took a turn for the worse.

When I opened the door I was hit in the face with a suffocating musty smell. As we walked in we heard a splashing sound and could feel our feet getting wet. We looked down to see that there was a lake inside the townhouse and the air was as humid as a greenhouse. I looked in the washroom and saw that the flood was caused by water spraying out of the hot water heater. I tried to turn off the valve but it was broken, so I went outside and turned off the water at the main valve.

After opening all doors and windows, we walked through both rooms and both bathrooms. They were all flooded, and, they all had mold on the walls and ceilings.

My first reaction was “we can still make this work!”. I thought we could mop up the water and wipe the mold off the walls without too much trouble. So we drove over to¬†ACE Hardware and bought a wet shop vacuum, buckets, mops and paper towels.

When we got back to the townhouse and started cleaning up it soon dawned on us that we were not making a dent in the standing water and the mold wouldn’t come off as easily as we thought.

So, I called the realtor and told her the situation. She immediately came over to see the house and and agreed with me that we should cancel the contract. She contacted the title company and the loan company. Today, Monday, I got my money back from the title company, all but $350 that went towards the appraisal.

It was a good thing I checked the place out right after the signing, and that it was late in the afternoon. If they had recorded the title before I saw the flooded property, it would have been a different story.

I could have waited for the owner to remedy the problem, but with that much flooding there might be hidden damage that isn’t easily detected, and I didn’t want to wind up waiting and re-negotiating the terms.

What lesson did I learn? In the future, I will always walk through the property one last time before signing the closing papers.

It was a good lesson to learn, and I was reminded of Hector Berlioz’s humorous quote that I put in the title to this article.

It would have been a nice rental property, but my philosophy is that rental properties are like taxi cabs. If you miss one, there’s another one coming right behind it.

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

How I got started in the fixer uppers

Monday, July 14th, 2008

Buying fixer upper houses and converting them into rental houses is a great business. And anyone can do it. You don’t need a certificate, you don’t need a degree, and you don’t need anyone’s permission. You just do it!

To view a condensed version of how I got started in the fixer-upper business, check out my article at ezinearticles.com. This is the version with no bells or whistles, and no accompanying three-part harmony.

The townhouse closing may or may not happen today. If not, Angy has to catch a flight out of town tomorrow. In that case, we will have to sign power of attorney over to me so that I can sign for both of us at closing.

Just like the recipe for my famous extra-chewy chocolate chip cookies, the plot thickens!

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Delay on Townhouse Closing

Saturday, July 12th, 2008


We were not able to close on the fixer-upper townhouse on Friday. The underwriter for the loan requested some more documentation. They asked for a monthly utility bill to verify our current residence, a copy of my wife’s driver license to verify her complete legal name, and copies of our social security cards.

If all goes well, we will now close on Monday or Tuesday.

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Closing day approaches on fixer-upper townhouse

Monday, July 7th, 2008


The purchase process is winding its way toward a conclusion for the fixer-upper townhouse that I am purchasing. I had the inspection done last Wednesday (naturally, I followed the inspector around so I could see the problems that he saw), the appraisal should have come in today, and we are closing Friday.

The good faith estimate from the mortgage company came in at around $650/month PITI. I plan to charge $775 for the base rent on the new townhouse. We put 20% down on the $105,000 sales price, and the seller cooperated by paying for part of the closing costs out of her proceeds at closing. (I’m going to discuss that in more detail in a future post.)

It’s a property that’s really worth a hoot because it has all the right things wrong with it. It needs paint, needs vinyl tiles replaced, needs wood putty in door holes, a few outlets are cracked, has some oil on the driveway, and it has a few leaky faucets. On the plus side, the A/C is only one year old and the roof is solid. And all the appliances work. It should take about week to get it in ship shape.

The best part about the deal is that my other unit, 3 doors down, rents like hotcakes. As soon as we put the For Rent sign up, we have people knocking on the door. I’ve been waiting for another one these units to open up at a decent price.

On another note,

There’s a good aritcle comparing oil vs. latex paints over at fliprent.com.

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Due Diligence and Property Inspection, Part 9: Qualifying the Inspectors

Friday, May 16th, 2008

,
Buying fixer-upper houses, repairing them, and renting them out is a safe way to generate short-term income and long-term wealth. But, how can you be sure that a house is worth what you are offering to pay for it? Based on experience, we can eyeball the property and probably be able to make a pretty accurate estimate of its worth 90% of the time.

However, that’s not good enough. We need more information than our educated eyeball can provide. In order to:
1.) avoid any surprise defects after its too late, and
2.) negotiate a lower selling price for the house,
we hire a professional inspector to do a physical and structural inspection.

For the last post related to due diligence see Due Diligence Property Inspection, Part 8 – pest control and property damage.

Most purchase agreements require the seller to deliver the property in good physical condition with all basic systems in good shape, unless the seller discloses otherwise. Generally, the inspection process reveals deficiencies that need to be corrected, whether they were disclosed or not.

So with inspection reports in hand, you are armed to arrange for the seller to correct the noted items at his/her expense. The seller is trapped in a corner. He reads the report and sees the photos showing the inescapable evidence that repairs are needed. He either makes the repairs or you walk.

Inspect the inspectors before you hire one.

Most investors hire a property inspector based on the advice of a real estate agent, which is not necessarily a bad way to go. But, you will be spending a tidy sum to hire an inspector, so its best to interview a few before deciding. You may see a big differences in experience, qualifications, and ethical standards. I would never hire an inspector who would not allow me to accompany him during the inspection.

Tagging along with the inspector presents a great opportunity to learn about your property, and will arm you with knowledge that will be invaluable throughout your entire ownership of the house. You’re the one paying for the inspection. How can the inspector say no?

If you want a true professional, hire a full-time inspector who perform 100 inspections a year and who carries “errors and omissions” insurance. This coverage tells you that the person is working full time in the field and is participating in ongoing continuing education.

To locate certified inspectors and find out more about the inspection process see the American Society of Home Inspectors web page.

Ask for a sample of one of the inspector’s recent inspection reports prepared for a comparable property. And, require your finalists to provide you contact information for 3 people who have used their service in the last 6 months.

Price should be a secondary concern because like other professional services, they often pay for themselves. An internet estimate of inspection costs indicates that prices range from $215 to $750, with an average price of $260 (in the southwest where I live).

Earlier articles in this series:

Due Diligence Part 7, Physical and Structural Inspection

Due Diligence Part 6, Tricks Sellers Use to Avoid Inspections

Due Diligence and Fixer Upper Properties Part 5 – the “as-is” sale

Due Diligence, Part 4 — Disclosure Requirements

Due Diligence, Part 3 — Inspecting the Property

Conducting Due Diligence, Part 2 — Reviewing books and records

Conducting Formal Due Diligence

Info on Terry’s Book

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Conducting Formal Due Diligence

Wednesday, January 30th, 2008

*
I am currently reading “Real Estate Investing for Dummies” by Tyson and Griswold, a well-written and thorough book that covers the basics of what real estate investors should know. I’ve long considered “Investing in Real Estate” by McLean and Eldred as one of the best introductory texts for real estate investing. Yet after reading the “Dummies” book, I find it equally as good, and perhaps a little more accessable for the new investor.

Here is my list of Top New Real Estate Books that I posted on Amazon.

To assist those who invest in fixer upper houses, I’m incorporating key parts of the “Due Diligence” chapter from the “Dummies” book with my own real estate observations.

Once you have made an offer on a house and it had been accepted by the seller, the “due diligence” period begins and you have until the close of escrow (or completion of the sale) to check out the physical and financial condition of the property. If you discover that the property has problems, but you think the deal is still worth pursuing, the seller may be willing to correct any deficiences, or give you money to to complete the necessary work yourself.

It’s during this time frame that you must get all of your questions answered and be sure you know what you are getting. If done properly, it will require quite a bit of effort on your part. But it must be done, if you wait until after the property is in your possession, its too late to ask the seller to replace that broken furnace.

You should work closely with the seller but take his word for anything. Only trust what you have in writing.

In my case, most of the house that I buy aren’t bought from the owner. They have been reposessed by a bank, the Veteran Administration or HUD. But I still do due diligence by having my friend/handyman go through house with a fine tooth comb. He knows more about the house repair than anyone I know.

There are two key components of due diligence process:

1. review of books and records
2. the physical inspection

A thorough look at these two components should allow you to determine if the property is worthwhile, priced right, and your goals. The due diligence is your last opportunity to either complete the transaction, or cancel the escrow, have your money returned, and look for another property.

Next post: Reviewing Books and Records

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |