Buying Creatively

Buying Below Market - How to Do It

When buying any property, you should always try to pay below market except when doing so creates unfavorable terms. In most cases, a buyer must sacrifice either price or terms. Whichever he sacrifices, you must ordinarily give up on the other. To get a low price, you must be willing to accept strict terms, such as all cash. To get really sweet terms, you must be willing to pay a higher price. You need to decide which is best in any given situation. We have found that it is often better to pay a high price in order to get really profitable terms (discussed later). But this does not always hold true. Each property is different. You will have to evaluate the potential of the property in order to know how you must buy it. How much you can safely pay will depend on good planning on just how to profit from the property. It is unwise to buy any property without first having determined how your profit will be made, and how much. By making these determinations first, it becomes a simple matter to determine how much you can pay under any certain set of circumstances.

When making any offer on a property, always start lower than you expect to actually get the property for, and the terms of your offer should be generous to you. In other words, try for both a low price and good terms. Your offer will likely be rejected, but the seller will probably make a counter-offer. His offer will tell you in which area(s) he is most flexible. If his offer does not change many of the terms you set forth but states a much higher price than your offer, you can figure that you can get good terms. Now, concentrate on lowering his price by making a counter-offer, or accept his price in exchange for even better terms.

Remember, always be willing to give away nickels for dimes. If he comes down $3000, then you should only raise your offer by about $1500 or even less. Let the other guy give more concessions than you do.

Now, remember all those sweet terms you put in your offer? You should have included some that you don't really need or want, to be used as negotiating chips. For example, if your terms stated that the seller needs to repair some small $500 item prior to closing, you could trade that for something more valuable, like a $1000 price reduction. Again, trade nickels for dimes.

Usually, you can get between 10-20% off the selling price. If not, you should abandon the deal and find a more flexible seller, or find a way to profit even when you pay top dollar (see next chapter). The reason you can usually talk the seller down by at least 10% is because most sellers "pad" their selling price by at least that much. They take a shot at getting more than they really expect, hoping a fool with too much money will come along. Sellers also pad the price to cover broker's fees, and to leave themselves room for negotiating. For these reasons, you probably aren't getting much of a deal if you offer 10% less than the asking price because that is likely the real value, anyway. It is in your best interests to start your offer at a price that is 20-25% below the asking price. Even if the offer is rejected, it will make your next offer more attractive in comparison. The up-side is that the seller may snap up your low offer due to his having to move quickly, or some other consideration unknown to you.

In the event the seller will not sell under equitable terms, then the price must come down. In such cases, the stiffer his terms, the lower the price must be.

Do not pay more than 85% of the market value (as opposed to the asking price) unless you are using the double escrow and have a buyer lined up. In that case, it is OK to settle on $95,000 for a $100,000 home you are reselling for $100,000. That is still a $5000 profit for you.

Here are a few tips on getting the price down:

1.) Your first offer should be 25% below the asking price
2.) Include terms that you are willing to give up, piece by piece, in exchange for a lower price.

3.) Once the buyer accepts an offer, tell him that the price is contingent upon a final inspection of the premises. Everything you find wrong during this inspection (that he did not tell you about) should be noted, a value placed on fixing it, and these costs applied to reduce the price. For example, home is in need of paint, a stained ceiling needs repair, and the 100 amp electric service needs to be upgraded to 200 amps. Total cost of repairs - $4000. Your offer should then be reduced by $4,000.

4.) After noting repair costs (and you are using a Land Contract, Option or Lease Option), advise the seller that such repairs will take a month, costing you a month's rent on the property. Another $600 can then be legitimately deducted from the price, or you can ask for a one-two month moratorium on payments.

Again, use your imagination. Look for ways to get the price down. Once the price is acceptable, try getting even better terms. If a certain term is important to you, such as the seller pays all closing costs, then be willing to raise the price a little, but not so much as to wipe out the benefits of him paying those costs. Remember two important points:

1.) Do not enter into a deal that is not profitable to you. Find another property.

2.) Remember your target property. It is a "white elephant" to the seller, and he is more anxious to sell than you are to buy. Don't give up too much just to make him happy.

Life Estate - Helping People Stay In their Homes

Life Estates

 

How would you feel about getting free land, and in the process you would be helping out elderly homeowners to lead a better, more care-free life? Put more "gold" into their golden years.

There are literally millions of retired homeowners in this country, and the number is growing each year as medical advancements allow people to live longer and the "baby boomers" begin to reach retirement age. However, for most of these folks, their "golden years" are all but golden. Social (in)Security is all that many of these folks have to live on, putting them in a very poor situation. They could lose their homes, or at least they may just scrape by.

For you, the investor, there is a lot of potential here. A potential to help these people while helping yourself. By and large, many of these homes are all paid for - free and clear. But property taxes, insurance plus a rising cost of living place the homeowner into jeopardy. But it does not have to be that way, because you have what they need, and they have what you want.

What they need is more income. What you want is the land that their home sits upon. The object is to obtain ownership of the land, while they keep their home and increase their discretionary income. Here is but one way that this can easily be accomplished.

We must first find an elderly homeowner who needs more income and owns his home free and clear. This should not be too difficult, but it will likely be the most difficult part of putting this strategy together.

For this example, we will say that the value of the property is $100,000 and that the land portion is worth $60,000. This is the part you want to own, but the last time you had $60,000 in cash lying around was never. What to do? How can you own that land and still help those people?

In many areas, property taxes and insurance on a $100,000 home will run around $3,000 per year. Assuming the couple may have around twenty years left, these expenses will cost them about $60,000 over that twenty year period. As you will notice, that is the exact same amount as the value of the land - $60,000.

Let's say that you offer to the homeowner that in exchange for ownership of the land only, you will sign an agreement to pay all property taxes and insurance on the entire property for the next twenty years. Furthermore, since they will still own the house to either pass onto their heirs or sell, as the new owner of the land you will provide them with a life estate on the land - it is theirs to use, without cost, for the rest of their lives, or until the property (house) is sold or transferred.

Let's break that down into just what the homeowner gets out of this deal:

 

1.     They still own a $40,000 house, which they can sell or pass on to their heirs  
2.     They save approximately $3000 per year for twenty years on taxes and insurance,     which is more income for their golden years.  
3.     They have the security of a life estate to the use of the land. Being a life     estate, their lease is binding even if you sell the land to someone else.     The lease cannot be broken.

Here is what you get:

 

1.     A $60,000 piece of land that only costs you around $3000 per year. You would     pay nearly this much, anyway, in taxes each year, even if you bought the     place outright, so this is a real bargain  
2.     In twenty years, you or your family no longer pays the portion of the taxes     or the insurance on the house - you pay only that which is due on the land.  
3.     When the homeowners pass on OR when they sell or transfer the property, the     life estate (free lease) ends. From this point on, you may charge a lease     for the land from whoever owns the house. In twenty years, for example, the     lease value should be at least $1000-1500/month (even in poor economies property     values tend to double every 10-20 years. A fair land lease is usually about     1% of the land value each month).

In such a scenario, you would effectively own a nice piece of land for its taxes and insurance only. The elderly folks would have an extra $60,000 in spending money over the next twenty years, and they still have a very saleable asset - the house. And remember - when the house changes hands, you have an automatic tenant paying you a lease.

As a safety precaution, your agreement with the elderly homeowner(s) could include a "first right of refusal" clause, giving you the exclusive right to buy the house if it ever goes up for sale. You would not have to make an offer - you only need to meet the best offer they get. And, being an option, you are in no way obligated to buy the house - you simply have the exclusive right to, if you wish.

It could be argued that those elderly folks are getting the poor end of the deal. But are they? Consider this: if they simply sold the land for its $60,000, they would then be forced to pay a lease for it - around $6,000 per year. In twenty years that comes to $120,000. They have lost $60,000. In addition, they still would have to pay the portion of property taxes that apply to the house, plus their house insurance - another $30,000 over twenty years. Total losses: $90,000 over twenty years, from a "straight" honest deal. On the other hand, by entering into the life estate, they lose a $60,000 piece of land, but they gain $60,000 in savings - a wash, so to speak. What is important here is that they need the savings more than they need the land.

Of course, if they just sold the land and invested the $60,000 in CD's, they would earn about $1500/year, but that's only enough to pay the property taxes on the house and their insurance. They would still be out the $6,000 a year to lease the land back.

Any way you cut it, your life estate offers them the best deal for their needs. And you get land virtually for free. That is, provided you can afford the taxes each year. If not, then you cannot afford even free land. But if the small annual cost is too much for you, remember that you now own a $60,000 piece of land, free and clear except for the life estate encumbrance. Your net worth has increased by $60,000 - surely you can find a way to use that to increase your income? Maybe as collateral (not down payment) toward purchasing another property that provides a positive cash flow in excess of $3000 per year?

As you can see, the Life Estate can be a powerful tool for obtaining land. But it can be much more. For example, you can make a similar life estate offer based on the entire property, not just the land. Granted, your annual costs wil be more, but at the end of the term you would own both the land and the house. Such a life estate would be based on the purchase price of the house versus the rental value, times the number of years. The purchase price includes what you would normally pay in interest over the term involved. For example, if the price of the house is $100,000 and the term is 20 years, based on an interest rate of 8%, your payments would equal $836.44 per month, times 240 months for a total of $200,744.60. This is what you would pay for the property if you bought it outright over 20 years. This, then, is the amount you would pay the seller - $836.44 per month. But...

And this is a big "but": the sellers stay in the property as tenants, so they must now rent the property from you. Fair rental value for a $100,000 property is somewhere around $800 per month, so this appears to be a wash. Accordingly, it looks like you should get the entire property for free if you are going to let them live there rent-free for the rest of there lives. From a numbers point of view, that may be correct, but then there is nothing in it for the sellers except they will no longer have to pay property taxes or do the maintenance (and pay for any maintenance). This saves them no more than if they simply traded the land. So, you need to provide the seller with a reason to also give up ownership of that $40,000 house as well as the land - you have to provide him with more of what he wants - money!

If you go for the entire property under a life estate, you would then have a $100,000 property. Even if you were to get the property for free, you would have over $3000/year negative cash flow for property taxes and insurance. And you would owe Uncle Sam a huge bite on the $100,000 asset you just obtained. To avoid the tax bite, you must actually pay for the property. So your agreement might read that you agree to pay $100,000 amortized 20 years at 8% interest payable in 240 monthly installments of $836.44. A separate agreement would state that the sellers agree to pay you, say, $636.44 per month in lease payment every month for the next 20 year (an unbreakable 20 year lease). You would then owe them $200.00 per month, plus you would pay the taxes and insurance on the property each year - about $5400 per year negative cash flow. Over 20 years this costs you $108,000. But if you had simply purchased the house outright, it would have cost you over $200,000. And in twenty years the property is likely to be worth at least $200,000. So, if you can afford the negative cash flow, in twenty years you would profit with a free and clear $200,000 property, and the rents would be gravy every month.

Assuming, however, you cannot live with such a negative cash flow, there are options to consider. Choose properties that include subdividable land, and your agreement (mortgage) with your seller permits it (you can add the clause that does this), you can then subdivide the land and either build one or more additional units on it, or sell the other lots. This option must be spelled out in your sales agreement as being permissible. Remember - your seller holds your mortgage, not a bank. There is no "due-on-sale" clause, and you can add that you reserve the right to subdivide and sell (or build upon) the subdivided lots.

Or look for an elder who owns and lives in a duplex or multiplex. In exchange for the property, free and clear, you will provide him with his unit free for life, plus he would be entitled to whatever TODAY'S net rents equal. You would also agree to pay him an additional $300 per month, for life. Where would this money come from? Well, let's say today's rents are $500 per unit for 3 units (besides his own), for $1500/month. Expenses are currently $200/month (he has no mortgage), so he would get a set, non-changeable $1300/month, plus $300/month from you. Within a year or two you can usually hike the rents on the three units by $50/month, providing you with $150/month (this amount is not part of today's net). Apply this to the $300/month you owe the seller. Since the property taxes and insurance are already taken care of in the expenses prior to figuring the net rents, your only cost for the property is now $150/month. In a couple of years you can likely raise the rents again, eliminating your debt altogether. And, if you can cut monthly expenses, you earn even more. As the years pass, increasing rents provide you with even more profit, and at the end of the term, you own the building - and all rents - free and clear.

Here is what the seller gets - $1600/month for at least twenty years for a total of $384,000. No management hassles (you are the new landlord), plus his own unit at no cost. This is $72,000 more than he would receive if he kept the property - and the hassles. If this is not enough, borrow $80,000 on the property that you now own and put $40,000 into a twenty year annuity. This will provide you with an addition $2500 per year you can pay him. Take the remaining $40,000 and put it into a safe investment, such as 12 month CD's. Every year, take out what you need to pay the next 12 months payments on your mortgage. This $40,000 will last you for nearly 6 years. Before the money runs out, you refinance, as your property has likely appreciated somewhat. Pull out more cash, and use it to keep you payments going. Keep doing this until the term is over and the property - and rents - are yours. With a solid positive cash flow from rents, you will be golden.

Here is a simpler life estate. Assuming the owners want a smaller, care-free more convenient home (after all, they are getting older, the kids have gone), you can make them a deal they would find hard to refuse. For this example, the property is worth $100,000. The folks want a nice $50,000 condo closer to town. Here is what you offer:

The sellers, upon getting their $100,000 would pay $50,000 for the condo, plus an association fee of over $100/month for life. So, in order to add to their income, the remaining $50,000 must bring in more than $100/month in income. At their age, it is most prudent to invest safely, so CD's are likely the solution. Assuming they set this up as a twenty year annuity earning about 10%, they would receive approximately $5000 per year, of which at least $1200/year goes to condo fees. So, their additional income is $3800/year, or roughly $316/month. If you can match all of this, you can get their property. Here is how you can do just that.

Offer 1) to buy them the condo and 2) pay the association fees for life. In addition, you will provide them with $320/month for life, no matter how long they may live. In exchange, you get their property worth $100,000 free and clear.

First, buy the condo, and give them a life estate to it. $2500 down on a $50,000 condo negotiated down to $45,000 leaves you a $42,500 mortgage. At 8% amortized thirty years, your payments are $311.85. Add the condo fee, it comes to somewhere around $450/month. Add the $320 per month you are paying the sellers and your total debt is just $770/month. And you can afford it because you own their old home free and clear, renting it out for $800/month. You have just added a $100,000 property to your net worth, minus your mortgage on the condo, so net increase to net worth - at no cost to you - is around $60,000. But that's not all - since they hold a life estate in your condo, once they are no longer with us, the condo is also yours to rent out or sell. Add that to your net worth.

You can do the same thing if the folks want to move to Florida or Arizona. The magic of this lies in providing these people with what they need most, and receiving real estate as payment for your services to them. You are solving their problems, and allowing them to live out their years in greater comfort and security. And, they save thousands each year by not having any more property tax payments to make! They are truly "golden", thanks to you.

How do you find such homeowners? Advertise for them. Fliers, business cards, ads in the newspapers. A well-placed flier that says something like,

"Attention Retired Homeowners - Put more GOLD in your Golden Years. Live better, with greater security and increased income. Put an end to property taxes and expensive maintenance forever. For more info without obligation, call XXX-XXXX."

People will call, you can count on it. The rest is up to you and your ability to give them what they need.

Glossary Of Real Estate Terms - Basic

GLOSSARY OF REAL ESTATE TERMS

Affidavit: A written statement or declaration sworn to or affirmed before an authorized person.
Agreement of Sale: A written agreement in which the purchaser agrees to buy and the seller agrees to sell. Terms and conditions are included in the agreement.
Alienation Clause: Also known as a "due-on-sale" clause. This is a provision that allows a lender to demand payment of the balance of a loan in full if the collateral is sold.
Amortization Mortgage: A debt for which the periodic repayments are used to reduce the principal outstanding as well as to payoff the current interest charges.
Apportionment: The adjustment of the income, expenses, or carrying charges of real estate that is usually computed to the date of closing of title so that the seller pays all expenses to that date. The buyer assumes all expenses from the date on which the deed is conveyed to the buyer.
Appraisal: An estimate of a property's value made by an appraiser who is usually presumed to be an expert in this work.
Appraisal by Comparison: An estimate of value made by comparing the sale prices of other similar properties.
Assignment: The method or manner by which a right or contract is transferred from one person (the assignor) to another (the assignee).
Assumption of Mortgage: This occurs when a person takes title to property and assumes the payment of an existing note or deed of trust.

Balloon Payment: A final installment payment, larger than previous installments, that pays off a debt.
Beneficiary: The person who receives or is to receive the benefits of a certain act.
Bird Dog/Bird Dogger: A person who looks for houses that potentially fit the guidelines of the properties that you prefer to purchase. Bird doggers will bring the information that you require and you will reimburse them for their efforts on whatever basis you have agreed upon.
Bona Fide: In good faith; without fraud.

Capital Gain or Loss: The difference between the basis price (cost plus purchase expenses) of a capital asset and its sales prIce.
Caveat Emptor: Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk.
Chain of Title: A history of the conveyances and encumbrances affecting a title from the time the original patent was granted or as far back as records are available.
Client: The principal: the one who employs a broker and who compensates a broker.
Closing Date: The date on which the buyer takes over the property.
Cloud on the Title: An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title.
Codicil: An addition to or amendment of a will.
Collateral: Additional security pledged for the payment of a debt.
Commission: A fee charged for brokerage services.
Commitment: A pledge; a promise; an affirmation agreement.
Complaint: 1. In civil law, the initial statement of the facts on which a complaint is based. 2. In criminal law, the preliminary charge made against the accused.
Comps: See Appraisal by Comparison.
Condemnation: The acquisition of private property for public use with fair compensation to the owner. See also Eminent Domain.
Conditional Sales Contract: A contract for the sale of property stating that although delivery is to be made to the buyer, the title is to remain vested in the seller until the conditions of the contract have been fulfilled.
Consideration: Anything given as an inducement to enter into a contract, such as money or personal services. Any contract, lease, obligation, or mortgage may subsequently be modified without consideration provided that the change is made in writing and signed.
Contract: A legally enforceable agreement.
Covenants: Agreements written into deeds and other instruments promising performance or non-performance of certain facts or stipulating certain uses or restrictions on the property.
Debt Service: Annual amount to be paid by a debtor for money borrowed.
Deed: An instrument in writing, duly executed and delivered, that conveys title to real property.
Deed Restriction: A restriction imposed in a deed to limit the use of the land. A deed might include clauses preventing the sale of liquor or defining the size, type, value, or placement of improvements.

Default: Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform an act. In property foreclosure, usually the failure to pay loan installment repayments when they become due.
Defeasance Clause: The clause in a mortgage that permits the mortgagor to redeem his or her property upon payment of the obligations to the mortgagee.
Defendant: The party sued or called to answer in any lawsuit, civil or criminal.
Deficiency Judgment: When the security for a loan is sold for less than the amount of the loan, the unpaid amount (the deficiency) is held by law (the judgment) to be the liability of the borrower unless the new owner has assumed the debt.
Due-on-Sale: See Alienation Clause.

Earnest Money: Down payment made by a purchaser of real estate as evidence of good faith.
Easement: A right that may be exercised by the public or individuals on, over, or through the property of others.
Eminent Domain: A right of the government to acquire property for public use. The owner must be fairly compensated.
Encroachment: A building, part of a building, or obstruction that intrudes on the property of another.
Encumbrance: Any right to or interest in property interfering with its use or transfer or subjecting it to an obligation. In connection with foreclosure property, the most likely encumbrances are mortgages and claims for unpaid taxes.
Equity: In real estate, the difference between the value of a property and the amount owed on it. Also called the owner's interest.
Equity Loan: Junior (subordinate) loan based on a percentage of the equity.
Escrow:A written agreement between two or more parties providing that certain instruments or property be entrusted to a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.
Estate: The degree, quantity, nature and extent of interest (ownership) that a person has in real property.
Estoppel Certificate: An instrument executed by the mortgagor setting forth the status of and the balance due on the mortgage as of the date of the execution of the certificate.
Eviction: A legal proceeding by a landlord to recover possession of real property.
Exclusive Agency: An agreement to employ one broker only. If the sale is made by any other broker, both are entitled to commissions.
Exclusive Right to Sell: An agreement to give a broker the exclusive right to sell for a specified period. If a sale during the term of the agreement is made by the owner or by any other broker, the broker holding the exclusive right is, nevertheless, entitled to compensation.
Executor: A person or a corporate entity or any other type of organization named in a will to carry out its provisions.

Fee (fee simple, fee absolute): The absolute ownership of real property. This type of estate gives the owner and his or her heirs unconditional power of disposition.
FHA: Federal Housing Administration. See FHA Mortgage Loan.
FHA Mortgage Loan: Mortgage loan insured by the Federal Housing Administration.
Fiduciary: A person who transacts business or handles money or property on behalf of another. The relationship implies great confidence and trust.
First Mortgage: Mortgage that has priority as a lien over all other mortgages. In cases of foreclosure, the first mortgage will be satisfied before other mortgages are paid off.
Foreclosure: A procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default in payments or terms.

Grace Period: Additional time allowed to perform an act or make a payment before a default occurs.
Grantee: The party to whom the title to real property is conveyed; the buyer
Grantor: The person who conveys real estate by deed; the seller.

Habendum Clause: The "to have and to hold" clause that defines or limits the quantity of the estate granted in the deed.
HUD: Department of Housing and Urban Development. This agency has a broad mission in the entire housing industry. The specific area of interest to you, as an investor, is its involvement in subsidizing rents for low-income housing and the marketing of repossessed houses. Many of the HUD repos provide EXCELLENT investment opportunities.
Hypothecate: To use something as security without giving up possession of it.

Installments: Parts of the same debt, payable at successive periods as agreed; payments made to reduce a mortgage.
Intestate: A person who dies before making a will, or whose will is defective in form.
Irrevocable: Incapable of being recalled or revoked; unchangeable; unalterable.

Joint Tenancy: Ownership of property by two or more persons, each of whom has an undivided interest with or without the right of survivorship.

Judgment: Decree of a court declaring that one individual is indebted to another, and fixing the amount of such indebtedness.
Junior Mortgage: A mortgage second in lien (subordinate) to a previous mortgage.

Landlord: One who rents property to another.
Land Contract: In reality, a land contract is a promise to pay. In other words, if you buy a house under a land contract, you promise to pay an agreed-upon amount on or before a specific date. Once the terms have been fulfilled, the seller will then deed the property to you.
Land Trust: A means of taking control of a property anonymously. The only name that will appear on public records will be the name of the trust and, usually, the name of the trustee. The land trust provides some asset protection in that it requires a good deal of digging via legal channels to discover if a person is the beneficiary of a trust.
Lease: A contract whereby, for a consideration, usually termed rent, one who is entitled to the possession of real property transfers such rights to another for life, for a term of years, or at will.
Leasehold: The interest given to a lessee of real estate by a lease.
Lessee: A person to whom property is rented under a lease.
Lessor: One who rents property to another under a lease.
Lien: A legal right or claim on a specific property that attaches to the property until a debt is satisfied.
Life Estate: The conveyance of title to property for the duration of the life of the grantee.
Lis Pendens: A legal document filed in the office of the county clerk giving notice that an action or proceeding, affecting the title to a property, is pending in the courts.
LTV (Loan-to-Value Ratio): Refers to the amount of money loaned on a property relative to its actual value. For example, a loan of $20,000 on a $40,000 house would be a 50% LTVratio.

Marketable Title: A title that the court considers to be so free from defect that it will enforce its acceptance by a purchaser.
Mechanic's Lien: A claim made to secure the price of labor done upon and materials furnished for uncompensated improvement.
Moratorium: An emergency act by a legislative body to suspend the legal enforcement of contractual obligations.
Mortgage: An instrument in writing, duly executed and delivered, that creates a lien on real estate as security for the payment of a specified debt, which is usually in the form of a bond.
Mortgage Broker: One who is paid to match borrowers with lenders.
Mortgagee: The party who lends money and takes a mortgage to secure their payment.
Mortgagor: A person who borrows money and gives a mortgage on his or her property as security for the payment of the debt.
Multiple Listing: An arrangement among members of the Board of REALTORS® whereby brokers bring their listings to the attention of the other members. If a sale results, the commission is divided between the broker providing the listing and the broker making the sale.

Non-Qualifying Assumption: A mortgage or deed of trust that does not contain a due-on-sale clause, thereby allowing transfer of title freely without permission from the lender.

Obsolescence: Loss in value due to reduced desirability and usefulness of a structure because its design and construction has become obsolete.
Open Listing: A listing given to any number of brokers with commissions payable only to the broker who secures the sale.
Open Mortgage: A mortgage that has matured or is overdue and, therefore, is "open" to foreclosure at any time.
Option: A right given for a consideration to purchase or lease a property upon specific terms within a specified time. If the right is not exercised, the option holder is not subject to liability for damages. If exercised, the grantor of option must perform.

Pay-off Letter: A letter from a lender stating the current balance due on an account; also referred to as an estoppel letter or certificate.
Performance Bond: A bond used to guarantee the specific completion of an endeavor in accordance with a contract.
Personal Property: Any property which is not real property.
Plat Book:A public record containing maps of land showing the division into streets, blocks, and lots and indicating the measurements of the individual parcels.
Points: Discount charges imposed by lenders to raise the yields on their loans. One (1) point equals one (1%) percent of the loan amount. 
Prepayment Clause: A clause in a mortgage that gives a mortgagor the privilege of paying the mortgage indebtedness before it becomes due, either with or without prepayment penalty.
Proration: Allocation of closing costs and credits to buyers and sellers.
Purchase Money Mortgage: A mortgage given by a grantee or any other lender in partial payment of the purchase price of real estate.

Quiet Title Suit: A suit in court to ascertain the legal rights of an owner to a certain parcel of real property.
Quitclaim Deed: A deed that conveys simply the grantor's rights or interest, if any, in real estate; generally considered inadequate except when interests are being passed from one spouse to the other.

Real Estate Board: An organization whose members consist primarily of real estate brokers and salespersons.
REO (Real Estate Owned): Property acquired by a lender through foreclosure and held in inventory.
Real Estate Syndicate: A partnership formed for a real estate venture. Partners may be limited or unlimited in their liability.
Real Property: Land and generally whatever is erected upon or affixed thereto.
REALTOR®:A term used to identify active members of the National Association of REALTORS® (NAR®), This term is commonly used to refer to anyone licensed to sell real estate.  However, the term "REALTOR®"only applies to those duespaying members of NAR.
Recording: The act of writing or entering, in a book of public record, instruments affecting the title to real property.
Recourse: The right to claim against an owner of a property or note.
Red Lining: The refusal to lend money within a specific area for various reasons. This practice is illegal because it discriminates against creditworthy people who happen to live there.
Release Clause: A clause found in a blanket mortgage which gives the owner of the property the privilege to payoff part of the debt, and thus free part of the property from the mortgage.
Repo:A shortened or slang version of repossession.
Repossession: Repossession occurs when a lender takes possession of the collateral which was security for a loan.
Right of Redemption: Right to recover property transferred by a mortgage or other lien by paying off the debt either before or after foreclosure; also called equity of redemption.
Right of Survivorship: Right of the surviving joint owner to succeed to the interests of the deceased joint owner. This right is a distinguishing feature of a joint tenancy or tenancy by the entirety.
RTC (Resolution Trust Corporation): An organization set up by the government to market houses from the inventory of federally insured, defunct banks and other lending institutions.

Sales Contract: A contract by which the buyer and seller agree to terms of sale.
Second Mortgage: A mortgage made by a home buyer in addition to an existing first mortgage. The order of recording determines the seniority of the lien.
Seller Financing: Refers to the owner of a property who agrees to carry a mortgage on the property that he or she is selling, so that the buyer doesn't have to obtain any or all of the financing from another source or lending institution.
Specific Performance: A remedy in a court of equity compelling a defendant to carry out the terms of an agreement or contract.
Split Funding: A technique whereby an investor offers a small amount of cash to close the deal with the balance due at a later date in a form other than extended monthly payments.
Statute of Frauds: Law requiring certain contracts to be made in writing or partially complied with in order to be legally enforceable.
Subdivision: A tract of land divided into lots or plots.
Subordination: See Subordination Clause.
Subordination Clause: A clause in a mortgage that gives priority to a mortgage taken out at a later date. The seller agrees to go into a second, third or fourth position allowing you to obtain new financing senior to their lien without paying them off from the proceeds.
Substitution of Collateral: Taking an existing mortgage on one property and transferring it to another.
Survey: The process by which a parcel of land is measured and its area ascertained; also the blueprint showing the measurements, boundaries, and area.

Tax Sale: Sale of real property after a period of non-payment of real estate taxes.
Tenancy in Common: An ownership of realty by two or more persons, each of whom has an undivided interest, without the right of survivorship.
Tenancy by the Entirety: An estate that exists only between husband and wife with equal right of possession and enjoyment during their joint lives and with the right of survivorship.
Tenancy at Will: A license to use or occupy lands and tenements at the will of the owner.
Testate: Condition when a person dies leaving a valid will.
TPA (Third Party Administrator): One who is approved to administer funds from a retirement program.  You must use a TPA to access money from your retirement accounts for self-directed activities.
Title Company: A firm that examines title to real estate and/or issues title insurance.

Without Recourse: Words used in endorsing a note or bill to denote that the future holder is not to look to the endorser in case of nonpayment.
Wrap (Wraparound Loan): A new loan encompassing any existing loans. 

Subject To: What It Is & What It Isn't

             

By: William Tingle

Go Back

 

There are so many different ways that are taught to buy Sub2. It is really amazing listening to some of the ways the GURUs are teaching these days.

I cringe when I hear of the latest carnival barker on the speaking circuit telling newbies "no equity, no problem" or "some will cash flow, some won’t. The ones that do will balance out the ones that don't"

What a bunch of Bull Chips!

You make your money when you BUY real estate. That doesn't matter if you buy for cash or sub2.

For some reason, it seems that people believe that because you are getting the deed or buying subject to, all the regular definitions of what makes a good deal a good deal go out the window. It is as though when you use this method to buy, it waves some sort of magical wand over a deal that under any other circumstances would be a no go. Because the financing is already in place and in someone else's name, it is all of a sudden good to go.

Let's see if we can really clarify some of the confusion on this purchase technique..................................

Let's start with what "Subject To" (I call it Sub2) IS:

When you buy a property “subject to,” you are purchasing it subject to the existing financing. Put simply, this means that the loan(s) and any other liens or encumbrances already on the property stay there without any formal assumption on your part. The owner deeds the property to you, and you take the payment book and start sending in the payments just as the former owner did. Simple, huh?

Now..........Is It Legal?

Well, don’t let one of those attorneys or real estate agents you sort through before you find the right one convince you that there is anything illegal about getting the deed. If anyone tries to pull that one on you, ask them about line 203 on the standard HUD-1 form where it says “Existing Loans Taken Subject To.”

Why Does It Work?

“But why would any seller go along with this?” you ask. Good question. In the beginning, I thought this was the biggest bunch of malarkey in the world.

Sellers will GIVE you their house?? Yeah, right!

I’ll say there are as many reasons as there are houses, of which I have had somewhere around 200 deeded to me from sellers in a wide variety of situations.

For example, there was the seller with perfect credit who was being downsized and wanted to stay, as he put it, “ahead of the 8 ball.” He deeded me a beautiful 3 bedroom, 2 bath, 2-story home which was only 7 years old and had well over 25k in equity. He just needed a fast sale.

Then there was the lady who deeded me her house for the loan balance of $14,000. She had owned the house for 25 years but her mother had recently died and left her another house free and clear. Although the house she deeded me needed $10,000 in repairs, it was still worth $70,000 or so after repairs. When I asked what she wanted for it, she said she just wanted to be rid of it.

Many sellers have deeded me properties days and even hours away from the auction block - some with substantial equity, some with little equity but low-interest, 5% loans.

Not all sellers who deed you their property are “unsophisticated” or “down and out.” Some just realize that they have a problem that needs an immediate solution. You just need to know how to provide it.

Sub2 is a great way to build a portfolio of income producing real estate. There are no limits because the loans are not in your name, you never have to qualify so you can buy as many as you want. It is powerful stuff.

Because of this lack of "policing" by banks or lenders, it is crucial that the investor using this technique be well educated and "know his limits" so to speak. As with anything where there are no limits or controls put in place, self-control and common sense are especially important.

So now we know what Sub2 is. Let's talk about what it isn't.

Buying Sub2 is not a cure all for bad deals. Buying Sub2 does not license you to go out and sign up no equity deals that put your assets and the seller's credit at risk. Bad deals are bad deals. Just because you can get a deed doesn't make the deal good.

 

Buying Sub2 does not give you the right to walk away if the deal goes bad. Some "teachers" teach this as one of the benefits of buying using this method. I say those "teachers" should be drawn & quartered. When you buy Sub2, you make a commitment to stay in the deal until the loan is retired. The seller entrusts his credit to you and you shouldn't take that lightly.

No matter what shape the seller let his credit get into, your responsibility here as in the rest of life, is to leave things better when you leave than they were when you found them. This includes your seller's credit. Walking away from the deal is NOT an option.

Sub2 is a powerful, awesome technique for buying real estate. It can make you very wealthy and I credit it for a large part of my success.

Use it with care and responsibility and know it's limitations and it will do wonders for your balance sheet.

 

William Tingle

http://www.Sub2Deals.com  

 

(c) Copyright 2007, All Rights Reserved.

Wholesale Flipping

 Date: Thursday, May 06, 2004 @ 08:00 AM EDT
Topic: Selling

       

Below is an outline to follow when working wholesale and flips in the real estate investment community. It is assumed that you already have some knowledge about doing these sort of deals and or you are at least familiar with the concept. Because I am not familiar with all the laws governing real estate transactions in each state some of these steps may not work for you directly or the closing process may be different for you. Please consult a Real Estate Attorney when drawing up a contract.

There, I gave my legal disclaimer.

Any comments, questions or concerns

    please contact me directly I always welcome other people’s opinions. If you have a question about a flip and need some guidance then contact me and I will assist you with it the best I can.

1) Introduction

a) What is flipping? The true definition of flipping is finding a property, putting it under contract, and then selling the property to another investor.

b) There are many ways to accomplish the flipping of a contract.

i) Double contracting – This approach is taken when you come across a property that has a large enough spread in it and you would like to protect your interest in it. If the assignment fee is greater than $5,000 then take this approach so the deal is not “stolen” from you and or also Hard Money Lenders do not like to fund flip fees in excess of this amount. Remember don’t get greedy; it still has to fit into our formula if you want to flip the deal

(Arv x 65% - repairs - c/c/cost - af = mao).

ii) Assignment of Contract – Use this approach if all you want to do is flip the property to another investor and you are not profiting in excess of $5,000.

2) Understanding the contract.

a) Reviewing the contract – section by section

i) Special provisions (These are in accordance with Texas state laws and may not apply to where you are at check with a local real estate attorney in your area for more accurate information):

(1) Seller to leave house in broom clean condition, if house is left with contents in it, seller will leave in escrow $500 for clean up fee, with an invoice to be submitted to title company for clean up.

(2) This is a cash offer to the seller, buyer will need access for inspections and appraisal for buyers purpose only.

(3) This offer is subject to buyers partners approval within 10 days of executed contract.

3) Work the formula. Arv x 65% - Repairs - C/C/Cost - AF = MAO

a) Arv = after repaired value

b) Note that if an investor is using a Hard Money Lender for the first time then the Loan to Value(LTV) will be 50% and not 65% as projected in the above formula

c) Repairs – use the evaluation sheet

d) C/C/Cost= carrying and closing cost

e) AF= assignment fee

f) MAO= Max. Allowable offer

g) Even if you decide not to wholesale or flip properties this formula should still be considered when reviewing all your potential deals.

4) Evaluating the comps.

a) Review the comparable sheet.

b) Drive by a couple of your comps to determine accurate value

c) Review the tax record

5) Property Inspection and Bid Form

a) Condition - Assess the condition of the house and take pictures if possible

b) Repair estimates – is a separate 3 page form that I use when making my initial walk through so that I can determine the repair costs. Contact me and I will send it to you if you do not have it already.

c) Exit Strategy – When doing repair estimates keep this in the back of you mind. What you think needs to be fixed/repaired another investor may have another opinion or idea of what needs fixing so try to be conservative here.

6) Carrying and Closing Cost

a) Cost of financing

b) Closing Cost – review of HUD 1

i) Title policy

ii) Escrow fee

(1) Locate an investor friendly title company who is willing to process a flipable contract, not all title companies are willing to work these sort of transaction. Call around or find out this information through your local Real Estate Investment Club.

iii) Other charges

c) As a general rule of thumb I always request the HUD1 statement 24 to 48 hours before closing so that I may look over it myself to make sure the Buyer and Seller fees are correct and my flip fee is indicated correctly

7) Assignment Fee – The investor needs to know:

a) Complete address with zip code

b) Photos of front and back of house as Hard Money Lenders require this when lending generally

c) What does the property need to reach max re-sale?

d) What amenities does the property have?

e) What is the projected cost to get max re-sale?

f) Why is seller selling?

g) What is your position in the deal?

h) Is title work working or complete?

i) Are there disclosures the buyer needs to know?

j) How long has property been on the market?

k) You (anyone) should not expect to make a profit if you don’t provide something we, the Investors need to make an intelligent decision.

l) EARN IT, AND YOU WILL RECEIVE IT!

8) Looking for properties

a) Drive-by

b) Newspapers

c) Referrals

d) Rentals

9) Finding owners

a) Tax record

b) Mail a letter to the home owner

c) Online services – KnowX.com and Anywho.com are good to start with

d) www.deadleads.com - Could not resist the free plug

10) What to say to the owners.

a) Be up front and honest

b) Determine what it is the buyer is wanting from the sale, learn this skill and you will be very successful as a real estate investor

c) Creative real estate needs creative thinking in order to be successful. Think out side of the box and you will be successful

    Larry works for Deadleads.com which is a owner and tenant tracing service provider that has partnered with TCI.

Buying bank owned properties

There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know the secret formula.  The fact is that there are no secrets, and to make money does require effort.

What's an REO?
REO stands for Real Estate Owned.  These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as a property up for foreclosure auction.  When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process.  You must also be prepared to pay with cash in hand.  And on top of all that, youll receive the property 100% as is. That could include existing liens and even current occupants that need to be evicted.  A REO, by contrast, is a much cleaner and attractive transaction.  The REO property did not find a buyer during foreclosure auction.  The bank now owns it.  The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.  Do be aware that REOs may be exempt from normal disclosure requirements.  In

California,

for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.

Is it a bargain?
Its commonly assumed that any REO must be a bargain and an opportunity for easy money.  This simply isnt true.  You have to be very careful about buying a REO if your intent is to make money off of it.  While its true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it.  When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale.  The bargains with money making potential exist, and many people do very well buying foreclosures.  But there are also many REOs that are not good buys and not likely to turn a profit. 

Ready to make an offer?
Most banks have a REO department that you'll work with in buying a REO property from them.  Typically the REO department will use a listing agent to get their REO properties listed on the local MLS.  Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know about the condition of the property and what their process is for receiving offers.  Since banks almost always sell REO properties as is, you'll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it.  As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've made your offer, you can expect the bank to make a counter offer.  Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer.  Realize, you'll be dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends.  Its not unusual for the process of offers and counter offers to take days or even weeks.

News Flash!

Foreclosures experienced a 72% rise since the beginning of 2005

RISMEDIA, October 6, 2006—Foreclosures experienced a startling rise this year – up 72% since the beginning of 2005, according to RealtyTrac. The increasing foreclosure rate is unveiling a different breed of real estateee "flipper" looking to turn a profit on investtment property purchased up to 20% below market value.

"In the midst of a slowing real estateee market, rising interest rates and salaries that are not keeping pace with standard of living increases, we have seen a dramatic increase in foreclosures nationwide," said David Nilssen, CEO of Guidant Financial Group. "This is not great news; however it does create opportunities for savvy investors looking to obtain properties at below market value."

Nilssen cautioned that the foreclosure-investing process can be risky. "A great deal of research should be done to ensure that the investment is sound and clear of additional encumbrances that could affect the deal."

Information about foreclosure properties is found in many places including foreclosure Web sites, legitimate third-party foreclosure listings, educational Web sites, private banks, auction houses, and local tax-collection agencies. The number of foreclosure listings increases every day, with the rise forecasted to continue. Foreclosures are non-traditional investment options that can provide profitable rewards when proper research is conducted.

More foreclosures emerge as interest rates climb and the 30% of loans that were originated with adjustable-rate mortgages significantly increase. Those faced with increasing mortgage payments are attempting to liquidate in a market where housing inventory is increasing and the buyer pool is shrinking. The softening market and the rise in interest rates and accompanying payments may spell disaster for many people who could be forced to sell at a loss out of necessity. Yet, as with most cases in investting, one individual's loss is another's gain. As homes become available at up to 20% below market value, large profits can be realized by savvy investors.

As the real estate market shifts gears, a growing number of investors are learning that they can utilize their IRA or 401(k) funds to make these types of investments. Based on IRS law it is perfectly legal to use retirement dollars for these and many other types of investments within an IRA – all that is needed is someone to setup the structure to do so. Once the structure is established, investors can gain checkbook control of their retirement funds and begin making investments that yield higher and more secure returns than those typically yielded within the stock market.

How to Buy at or Near Wholesale

 Date: Thursday, December 07, 2006 @ 09:15 AM EST
Topic: Buying

       

    Wow! all of these TV ads to buy wholesale and make a fortune. 
Do they really work?
How much time is involved?
How to start?
I have little money but good credit, can I buy?

Answers:

1. You can do all of this yourself. If you have tons of spare time and want to compete with hundreds of others doing the same. Remember time is money. Spend it wisely.

2.Yes, you can really make a fortune.

3. Yes, you can start with little money.

*Now let me tell you the real ins and outs.

Investors know when to buy.
Down stock market is prime time.
Watch the stock market.
High, buy,
Low, sell.
(Unless you want an income property).

High stock market indicates investors are not buying Real Estate for investments. Great opportunity to buy and save distressed sellers from foreclosures.

*How to find them?
Banks now list these with R.E. agents. You must find a good R.E. Buyers agent that is not lazy.

+ The best way to find these steals is to find an agent that works with companies that have many crews making offers on forclosed, Preforclosure, bank owned, mls and fisbo properties wholesale.

You alone cannot possibly do all that they can do.

Plus, if you try to do it yourself, you will get eventually emotionally attached or tired and pay too much. They add a little and sell at 20-30% below market.

You need to buy their contract from them for cash.

First you need to make absolutely sure you get a loan guarantee first.
Do all the work with the lender first to make sure you pre-qualify (good for 2mts only).
Choose your lender carefully and shop.

This is not for the buyer with little money down. Sellers have lowered their prices so much that you would have to increase the sales price to cover the closing cost and have the cash to buy the assignment contract. The sellers will not and cannot do this. These are distressed sellers.

If you have good credit (620 or above) with little money. You must shop fisbos or Mls. To do this you need to find a Buyers agent that will show you more that a few homes and is energetic. Some are lazy.

I have the lender in hand that has so many programs to satisfy residential, investor or commercial buyers at very low rates. I have been working with all the above for 19 years.

If you want to buy in S.W. Florida, Lee County, I am a buyers’ agent that owns his own company. Go to my site and look at the wholesale properties. They sell in less than a month. These are assignments. Read about buyers’ agent on my web site. This site is only for buyers. http://www.sunnyspotrealty.net/ Joseph Beauvais

    Visit me at http://www.sunnyspotrealty.net/
Joseph Beauvais Owner/Agent

Ten Top Tips to Buying a Property Abroad

 Date: Tuesday, January 30, 2007 @ 04:37 PM EST
Topic: Buying

       

Buying a property abroad is an exciting experience, and it can also be a lucrative investment if it is done properly. Tony Roberts reveals the secrets to buying property in Spain and offers his ten top tips on making the right investment

We have always known that investing in bricks and mortar is normally the most lucrative and wisest investment you could ever make. However, with the continuing price rises in the UK many are looking abroad to buy an investment home and future nest egg. Spain has always been first choice for many, with year round sunshine and relatively cheap cost of living. Nevertheless, what do we buy and how? Tony Roberts reveals the secrets to buying property here and offer his ten top tips on making the right investment.

When we bought our first property in the Costa del Almeria, we broke every rule and guideline. We bought impulsively whilst on holiday, having done no research whatsoever. We dealt with an estate agent who we later discovered had a rather colourful history, we bought off-plan without ever visiting the site, we did not use a lawyer and so the list went on. It was very exciting and we were incredibly lucky. However, do not push your luck follow these guidelines. Get it right and you will have a wonderful asset that will give you and your family enormous enjoyment over the years as well as creating greater wealth.

1. Get the help of an Estate Agent
Your first step should be shop for a good estate agent, not shop for a property. Estate agents are necessary in the UK and in most other countries; you cannot afford to be without one. Get yourself a good one, look at the websites; a good one will seem genuinely concerned about informing homebuyers, check out the testimonials. A reputable agent will help you to find the right property and take the headache out of property searches especially if you do not speak the language. However, a warning, think hard before going it alone without the help of an estate agent. In reality, buying privately will mean months of chasing people and worrying that you have not done everything you should. However, if you do buy privately, then be very careful.

2. Nothing beats good legal advice

As with using an estate agent to look for the right property, make sure you have the right lawyer when making your final purchase. A good agent will recommend a local lawyer who speaks English, who knows the area and all its regulations. It is amazing how many people are willing to buy something abroad without the use of a reputable lawyer. It is something they would never dream of doing in the UK.

3. Location, Location, Location

Remember the words of hotelier Conrad Hilton who, when asked what were the three keys to success, famously replied, Location, location, location. Fifty years later not only is it still true for the hotel business, but also for buying a home with resale value.

As in the UK, where you buy counts just as much as what you buy. Narrow your location choices to just a few places and think of resale value when considering a property, and will it make a good rental? Make sure necessary shops and services are located nearby and try to make sure surrounding properties are of a similar standard and size. In addition, try to get something located near the town. Remember, buying the least expensive home in the best location is better than buying a beautiful home in an undesirable location.

4. Do your homework

Buying property abroad is an exciting experience; however, one of the biggest mistakes investors make when it comes to buying property in a foreign country is failing to do their homework. You cannot do too much research into an area. Spain is a big place so first settle on a region. If it is unknown to you, try to visit the area as many times as possible so you can glean more than just one impression. Looking for property online and in newspapers and magazines should always be part of your strategy as it vastly increases your chances of finding what you want. If you are looking for property online, begin by making your initial searches as broad as possible. You can always narrow your searches later. Careful local research before you commit to buying can save much heartache later.

5 Stay Focused and do not be hasty

Stay within your budget and keep focused on what you originally had in mind, it is all too easy to be tempted to buy something that is not what you really want. While you want to cast your net as wide as possible so that you do not miss your dream home, you do not want to be wasting time viewing property that is wholly inappropriate or completely unaffordable.

Therefore, you should draw up a realistic and accurate wish list. However, you must go looking for your home with an open mind. You will soon realise that it is virtually impossible to find exactly what you want, so you may need to compromise on some issues, you prioritise your requirements.

6. Know why you are buying

Make sure you know why you are buying and what it is that you are seeking to achieve with your purchase. Is it a holiday home, a residential home or an investment. Are you looking for short-term gain or regular long-term income?
If buying for investment, it is vitally important that you understand the risk factor and you are comfortable with it.

7. The bigger house is not always the better.

In any residential development, houses vary in size but if you are looking for maximum resale value do not always choose the largest house on the block. When determining market value, the homes nearest to yours are most important. If most of the nearby homes are smaller than yours then they can act as a drag on appreciation. On the other hand, if you buy a small or medium house in the development, the larger homes can pull yours up in value

Do not assume that the more bedrooms you have the better the property is. Two and three bedroom properties have the quickest sell-on value and you should try to stick with this when buying. Two bathrooms are necessary and as most will tell you, a large kitchen is the heart of the home.

8. Money, money, money

The simplest fact is can you afford it? Stay within your budget, consider what you are buying, and allow for extras. The cost of buying a property in Spain is much higher than in the UK, (VAT, lawyer's fees, and taxes), so you must budget accordingly. Consider the pros and cons of buying abroad and always factor in costs including existing commitments and future expenses.

Buying a home is a rewarding experience but remember to invest in the location of your home first. Research is key in buying abroad and you have to have patience and time when making such a huge investment. If you remember that location is the primary factor in property, your money will continue to grow through the years and earn you your share in the property world.

9. Check the transport links.

Make sure there is a choice of budget airlines, and if possible more than one airport. Check out the road infrastructure. People who rent property will want somewhere that is easy to get to and will often be attracted to those places with a nearby airport served by low cost airlines. Budget airlines have opened up huge areas of Europe, but do not assume they will always be there. What would happen should the airline close down the route?

10, Check the taxation and inheritance laws

Make sure you understand the tax implications involved should you decide to sell. In addition, if you want control over how the property is dealt with on your death and avoid any restrictive rules, then check out the inheritance laws, it is likely that you may need two wills one for any assets in Britain and one covering your property and savings in Spain.


Tony Roberts has lived in south east Spain since 2001. He is now an established estate agent in the region of Costa Calida and has written a free e-book "Buying a Property in Spain", to receive your copy contact Tony at http://www.pocomed.com

           

10 Steps to Home Ownership

 Date: Monday, April 09, 2007 @ 09:55 AM EDT
Topic: Buying

       

1. Contact a real estate agent. A professional agent can assist you with most of the following steps and knows the local market, paperwork and process to purchase a home better than anyone.

2. Contact a lender. Your real estate agent should be able to provide you with a name or several names of mortgage counselors that have a great reputation for competitive rates, timely and professional service.

3. Make a list. Now that you are comfortable about how much you can afford, make a list of what you need and want in your new home. It may be you will end up giving up a want for a need in order to stay in your price range. Give your agent the list and have them research available homes on the market for those that match or closely match your criteria.

4. View the homes. Now is the time to compare apples to apples. What is the condition of the major mechanical items of the home? Does the home need cleaned and updated? Does the neighborhood look friendly? How are the schools? Are you close to all the major shopping and services that are important to you? Take your time and view as many homes as you need to make the most informed decision.

5. Get an accepted offer from the seller. If you find the right home, now is the time to make an offer that both you and the seller can work with. Trying to low ball or steal a home will often frustrate the seller and may put you in a worse bargaining position than starting off with a fair offer. Ask you agent to show you recent competitive sold data for the area. How long has the home been on the market? Are they offering buyer concessions? Take all this into account when making your offer and you should be able to reach a mutually agreeable contract with the seller.

6. Ask the experts. You have a contract in place. Now is the time to start the process that will lead to your closing day. You need to talk and compare rates with home insurance companies. Hire a survey company to clearly define the boundaries of the home. Receive an energy efficiency report. Pay to have an appraisal done on the property to determine value for the lender. Hire a WDO and whole house inspection company to make sure that there are no repair issues that need addressed prior to closing. Talk with your agent about what other inspections and reports you should hire an expert to accomplish for you.

7. Dot your I’s and cross your T’s. By now your lender is deep into your loan approval process. You most likely have received forms that need initialed and signed. There are bank and tax documents that the lender has asked for from you. Move quickly to get these items take care of. A delay in providing the information requested could result in a delay in closing or an increase in your interest rate.

8. Get your ducks in a row. Ok, mortgage and inspection issues are resolved. Now you need to finish up making arrangements for the movers. Schedule utilities to be turned on in your name as of closing. Do you need new window coverings’ measured? Verify that your home warranty has been ordered and will be in place as of closing.

9. Show me the money. The closing day is upon you. Have you seen the HUD statement? Make sure to get a cashiers or certified check for the balance you need to bring to closing or have made arrangements to wire the balance into the closing companies escrow account.

10. Closing day. Your agent will give you information on where the closing will be held. Arriving a few minutes early will provide you and opportunity to exchange pleasantries with the seller. Your agent will be able to go over any last minute forms or addendums for you to review. Be sure to bring proper photo ID and balance of funds to close.

Greg Staker is a Broker Manager with Watson Realty Corp. in Central Florida. You can visit my site at www.gregstaker.com, e-mail me or call 407-681-4432.

Land Contracts

Land Contracts are also called Agreement for Deeds, or Contract for Deeds.

The benefits of an Installment Land Contract are:

For Sellers:

• Your profit will be taxed at the current maximum federal tax rate of 15 percent for capital gains, plus state tax.
• However, the depreciation deducted after May 6, 1997, is taxed at a special federal "depreciation recapture" tax rate of 25 percent.
• An installment sale spreads out your capital gain tax over the years you receive principal payments from the buyer.
• The buyer's promissory note is secured by a recorded mortgage or deed of trust on the property sold (recorded at county court house).
• If the buyer defaults, you can foreclose to either get your property back to resell for a second profit, or the high bidder at the foreclosure sale will pay off your loan in full.
• The big installment sale benefit for you, as the seller, is you will earn interest at a higher rate than you probably can obtain elsewhere with safety, currently at least 6 percent.
• However, the interest you receive is taxed as ordinary income.
• An installment sale means easy financing without  having to qualify for a mortgage loan.
• As a result, Sellers can ask top dollar for your property and get it, thanks to easy financing.
• You don't need a Realtor because you already found a buyer.

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Land Contract - When Making Payments to a Seller

Whenever you are making payment to a seller be it using a Land Contract or a Lease with Option to purchase, send a note each month along with the monthly payment saying...

"If I pay you off early, how much of a discount would you give me?"

This can save you thousands of dollars!

In the same scenario as above you could ask the seller if he would discount your payment 10%-20% if you paid 6 months in advance.