| |
| |
|
|
Real Estate |
|
Real Estate Investing Myths That Steal Profits From Your Pocket
One of the things that distresses us about our industry is the amount of wrong or incomplete information available to investors. Some myths block what otherwise would be a great deal, while others would have you believe that a bad deal is actually great. For example, we encourage purchasing homes "subject-to" the existing mortgage as an option to finance the purchase of an investment property. This means that title to the property is transferred to the purchaser, but the loan remains in the original borrower's name with payments made by the purchaser. Unfortunately, many myths exist around this method which could rob you of your profits. Let's take this opportunity to dispel 5 of the most common. Myth #1: Buying A House "Subject-To" The Existing Mortgage Is Illegal. Absolutely not true! Most mortgages have a "due-on-sale" clause which states that if the house is sold without paying off the mortgage, the lender has the "right" to call the entire loan due. The key here is that they have a "right" - not an "obligation". In other words, it's their choice. We asked several attorneys in town who represent lenders to see if they had ever heard of a bank call a loan due because of a sale. In every instance they said not as long as the payments were made timely. Why? Because banks are in the money business - not in the real estate business. If they call the loan due, and it goes into foreclosure, they have a poor performing loan on the books (for which they have to increase their reserves), they incur additional costs, and they inherit a property. Or, they can just accept the timely payments from the new owner. Which makes more sense? Myth #2: Buying "Subject-To" Is Complicated And Requires A Ton Of Paperwork. The truth is that all you have to do is write it into the Purchase and Sales Agreement (PSA). We write it in right next to the Purchase Price. Here's an example using our PSA: Total Purchase Price to be paid by Buyer is $80,000.00, payable as follows: "subject-to" existing first mortgage with a balance of approximately $77,500, and monthly PITI payments of $695; remainder of Sellers equity to be paid in cash at closing. That's it. You and the Seller have now agreed that you'll purchase the home subject-to their mortgage. As a precaution, we have the Seller sign a disclaimer that they know that the loan has a due-on-sale clause, and that we make no promise as to when the loan will be paid in full, or how long it will remain in their name. We also prepare a letter from the borrower informing the bank that all future correspondence should be forwarded to us, and we have the right to act for the Seller in every way regarding the loan so they'll disclose loan information to us in the future. It really is that easy. After closing, you just start making the payments. We don't hide our identity. We send in our own checks, and the house insurance is in our name. Myth #3: No Homeowner Will Ever Sell Me Their House And Leave The Loan In Their Name. If you're dealing with a seller who has no problems with his house, this may be true. But when you deal with motivated sellers - ones that either have financial, personal, or house issues - this will not be an issue. Motivated sellers need a way out - quickly! Often, they're already behind in their payments, and facing foreclosure. When you tell them that their worries are over, and you'll catch up their back payments, and make all the subsequent payments on time they'll jump at the opportunity. As a bonus, their credit will even improve. The key to successful negotiating lies in your confidence. Realize that you're providing a viable alternative solution which allows the highest price to be paid, with the quickest closing, and immediate relief for the Seller's situation. Myth #4: Kitchen Table Closings Are Perfect For These Transactions Investors love to say that they "got the deed" at the kitchen table while they presented their offer. The concern is you have no validation of what you purchased. Without a title exam, there's no guarantee the correct owner even signed the deed, nor whether any other loans or liens exist on the property. You also have no title insurance to protect you from any unanticipated title problems. Finally, the actual payoff on the loan must be validated with the lender by requesting a statement of account. Do not use the principal balance payoff shown on the monthly statement because it does not include past due payments, other interest accrued, fees and penalties, and any prepayment penalties. We've seen actual payoffs tens of thousands of dollars greater than the principal payoff. You could argue that what difference does it make if the loan isn't in your name and you gave the Seller no cash. The problem is that you may not discover any of these issues until much later in the transaction - maybe not until you try to sell the property. By then, you will have invested time, energy, and money in the property only to see it all lost, when all of these problems could have been avoided by conducting a standard closing with your attorney or title company. Myth #5: I Can Always Just Walk Away If I Can't Pay The Mortgage This is technically true, but not a great strategy for the successful investor. Legally, you are not responsible for the payments. But you do have your credibility and reputation to consider - which are critical to your long term success. You definitely don't want an angry seller defaming your reputation in the community, or submitting a complaint with the Better Business Bureau. Not to mention that you probably have cash invested in the house, which will all be lost. We recommend treating "subject-to" mortgages just like any other with your name attached - make timely payments. Lou FREE! Real Estate Investing Secrets To Earning $100,000 Your 1st Year! -- 11 Overlooked Real Estate Statregies That Will Turn Your Investing Business upside Down And On The Fast Track TO Success...Guranteed! Plus A Bonus Track With A Secret So Successful It Can Double Your Investing Income Overnight! http://www.InvestorSuccessTactics.com
MORE RESOURCES:
Real-Estate - Google News |
|
|
|
RELATED ARTICLES
Are Signs Important? Signage, though quite fundamental in nature, plays an important role in the home selling process. The Yard Sign should be two-sided, easy to read, and look great (defaced or worn signs can negatively impact curb appeal). Real Estate Professional in the Palm of Your Hand GETTING THE MOST FOR THE LEASE-TRACKING YOUR REAL ESTATEIf you own rentals and/or investment properties, you know that you have to keep track of your portfolio, maintenance profiles, property managers, and related financial matters. There are a multitude of programs for the Palm-Pilot system to keep up with lease dates, lease expirations, and rent due dates. Protective Covenants - Buying A Home In addition to zoning, some properties have covenants recorded at the courthouse that "run with the land." These "protective covenants" can put a serious pinch in your plans for a piece of property. The UK has Gone Property TV Show Crazy! The UK has gone property TV crazy. There are now shows about developing, buying, doing up and selling your home on every channel nearly every day. How to Prepare Yourself for Owning a Dual Purpose Second Home If you are thinking about buying a second home, you are not alone. A 1995 survey by the American Resort Development Association found that 60 percent of households surveyed feel they have a likely chance of purchasing a recreational property in the next ten years, a figure that rose 30% from the survey in 1990. Where is the Sophisticated Property Investor Putting his Money? The Traditional FavouritesOver the last five to ten years, UK investors buying property abroad have generally stuck to the traditional favourites Spain, France and Italy. With prices a fraction of those in the UK and a guarantee of more sunshine, these markets offered plenty of scope for capital appreciation, rental return and holiday home use. Property Investing Secrets 3 Property Investing Secrets: When you Make Property Easy to Buy for People Using Vendor Finance It Is Easy To SellWhen property investing, my goal is to make it easy for people to buy my properties, that's why I offer vendor finance. You have the advantage when you buy properties from sellers when property investing. Questions Investors Should Ask When Buying and Selling Investment Property If you're a real estate investor, here are several questions to consider when looking at investment properties. Providing sound answers to these questions will greatly increase your profits:Why do homeowners sell for bargain prices?There are many factors that can prevent owners from being able to maintain their homes. Refinancing Your Home Loan? When Should You Refinance Your Home? If you have a current mortgage and are unhappy with the interest rate or the amount of the monthly payments, it is possible to refinance your home and eliminate your problems. But before you call your lender, there are some questions that you should ask yourself in order to determine whether or not it's the right time for refinancing your mortgage loan. High Tension for the Buyer and Seller of Real Estate Can Be Reduced Tensions can run high in both the selling and buying of real estate. After all, there is a lot of money and emotion involved! There are also time pressures and numerous privacy issues to deal with. Real Estate Development Feasibility Study (Income) - $1.2 Billion Developer Tells You How To Do One There are two sides to a feasibility study and in an earlier article I discussed the cost side of the format and:Now Let's Discuss The Income SideWithout the Sales Income, All You've Done Is Spend Money, And Anyone Can Do That.So that we are clear in what I am going to define for you, let me say that there are two forms of Income. The Person With The Most Money Wins! More money can mean better:- Health Care - Relaxing Vacations and Adventures - Education for your children or yourself - Better home than you have nowBest of all it can reduce stress from not having to worry about money!Many of us have problems in life that additional cash will help solve the situation. Did you know that 80% of problems in life could be simply resolved with additional cash. Using Transformation Psychology to Sell Investment Properties Satisfying and lucrative real estate investment depends upon your correct assessment of profit potential, of course, but your ultimate success depends on your ability to transform a doghouse into a dollhouse. The renovation process involves physical work and choosing the best supplies, in order to create maximum positive emotional effect and profits. Lake Havasu Real Estate Lake Havasu real estate is a hot commodity. With surrounding attractions such as the London Bridge, English Village, Mohave Desert, and Lake Havasu, it's no wonder that the place has become a popular place to live. Timing Is Everything When It Comes To Buying Homes The old adage that "timing is everything" especially applies to buying a new home. And trying to be at the right house at the right time and get it for the right price can be tricky. Do Open Houses Work? What are the odds that you'll find your dream at a Sunday open house? What is the likelihood that your home will sell at an open house? Open houses are an integral part of the home sale business. But, do they work?There are two types of open houses. The Value of Foreclosed Property The discount on a foreclosed property is not as great if the state allows deficiency judgments by lenders against borrowers. In contrast, the discount is larger if the property is being sold in a state that requires foreclosures to proceed through the judicial system. Give Your Home A Timeless Feel In the world of real estate, there is a huge difference between an old home, and a classic home. It's comparable to the idea of used clothing versus vintage clothing; only on a much grander scale. Dramatic Profits From Preconstruction Real Estate Investing The preconstruction process is an innovative real estate investment opportunity in which you buy tomorrow's property at today's price. Preconstruction investing is a boon for the investor or buyer as well as the developer or builder. Kings Bay Georgia Real Estate - An Amusing Tale About a Real Estate Agent This story is true and not meant to hurt anyone, but the more that I think about what happened, the more it makes me laugh. I hope that you not only get a chuckle from it as I did, but take your time and look for a professional real estate agent.
|
|||||||||||||||
