It is very important to know if a short sale is the best answer for your situation. A short sale becomes a viable option when you cannot get what you are owed on the property because of changes in the market. You may be thinking why would the lender allow a short sale and why would the seller want to do a short sale? Both answers to those questions depend on the market and economics. Why economics, you say?
Well, let’s examine. If the homeowner has a mortgage and the pays off of the mortgage is $100,000, but in the present condition of the home; the home is only worth $87,900. The homeowner still owes $12,100, true enough; however, if the homeowner allows the home to go into foreclosure, then they stand to lose more. Why? One reason is it will take 7 to 10 years to recover credit wise and/or financially from the credit damage of a foreclosure. Another reason for the homeowner to consider a short sale over a foreclosure is the homeowner may not have a deficiency judgment or if they do have a deficiency judgment it will be less than what they would have if they allowed the home to go into foreclosure. Still yet another reason to avoid foreclosure is the homeowner keeps their integrity and avoids the embarrassment of the public sale. The best reason of all to avoid the foreclosure is the smaller tax liability on the homeowner. With the latter statement being made the homeowner needs to consult a tax advisor about the tax liability if any from the short sale or foreclosure. And remember, that if you are insolvent file form 982 with the IRS.
In the above scenario, we discuss the homeowner has a deficiency of only $12,100 instead of $100,000 making a short sale a viable option for their situation.
Let’s examine what would happen if the property went into foreclosure. First, let’s examine the cost for the lender. Once again, the home is worth $100,000, but the mortgage this time is $110,000. It will take nine months to foreclose and resale a home. There is a minimum cost in legal fees of $1,500, lost of interest to the lender of $4,500, not to mention the lost of taxes, insurance, maintenance, utilities of the property in the amount of $3,000, then the additional cost of the commission and closing costs of the sale nine months later of $8,000 for a total loss to the lender of $27,000. The latter cost is call holding cost. This cost is the amount that the lender has to pay out before it receives anything on the sale of the home after the foreclosure.
As you can see for the lender and homeowner a short sale is a better option.
During a short sale, the lender for the same home in the previous scenario gets a win scenario instead of a lose scenario. Let’s examine. The lender lists the home with an agent for $100,000 and sells the home for the same amount. After commission and closing the lender is left with a gain of $92,000 to satisfy the mortgage whereas under a foreclosure they have nothing to satisfy the mortgage for nine months, and the lender has additional holding cost of $27,000. The lender has another advantage by allowing the short sale they get their money sooner, and they only discount the mortgage by $18,000.
The homeowner once again wins as well because they can buy another home in as little as two years whereas with the foreclosure they will not be able to do anything for seven to ten years.
Please contact Serena at 219 803 4489 or email me at www.taylorbrownrealestate.com if you are in trouble with your mortgage there are options besides the ones discussed here, please visit www.freedomforeclosure.com/taylorbrown You also can present a package to the lender to renegotiate your mortgage. We will discuss that option next time.
Thursday, February 28, 2008
I am a first time home buyer. What next?
As a first time home buyer, there are things that are important to your successful ownership of your first home. The most important things that will make you successful in homeownership understand your market, understanding your mortgage, and knowing what you can and cannot handle.
Why is understanding your market important? Understanding your market is important because it is important to understand your leverage. By leverage, I mean, knowing whether it is a buyer’s market or a seller’s market. Knowing the difference can mean money in your pocket or money left on the table. Let’s examine.
In a buyer’s market, the buyer must be aware that being in a buyer’s market doesn’t make the buyer’s job any easier. It just gives the buyer more flexibility. Remember in a buyer’s market, there may be several buyers for one property or only one buyer for a property. If there are no other buyers for a property by virtue of the length of time the property has been on the market then a low offer may come in to the seller. Sorry sellers. However, sellers that do not mean that you have to give your properties away, but it may mean that you may have to settle for less than you anticipated selling your home.
Another thing that makes a buyer’s market advantageous to the buyer and not to the seller is that there are a lot of homes to choice from that may meet the buyer’s criteria.
In a seller’s market, on the other hand, the seller has the upper hand. The seller can price their home significantly above market value and negotiate the purchase price to exact what the seller wants the purchase price to be. Sorry buyers. If the buyer really wants a home in a seller’s market, the buyer must succumb to the seller’s terms in order to get the home. As a matter of fact, in a seller’s market the inventory of homes for sale that may meet the buyer’s criteria are fewer.
Why do you need to know what you want in your home? It is important in a word to eliminate or limit competition. If the buyer knows what they desire in their new home sooner in the buying process they can narrow their search criteria and bid on the property of choice instead of witness the home being purchase by someone else. In addition, only you as the buyer know exact what features you want in your new home. You, as the buyer know if your family needs three or four bedrooms one or two bathrooms, but more importantly you know what you can afford.
Why am I talking about “what you can afford?” Well, the reason is that your pre-approval letter has a different meaning than you think. The pre-approval is determine by your income to debt ratio true enough; however, are you aware that all your debt is not considered? What debt you ask? The debt that I am referring to is the light bill, water bill, phone bill, grocery bill, cable bill, clothing bill, etc. And that may be more depending on where you live.
Now the latter statements puts the pre-approval letter into a new prospect doesn't it? Don't get discourage. Just do your homework. Buy where you are already comfortable and be patience. With the present market being a buyer's market, you will find a home that is in that comfortable range in no time. For instance, if you can enjoy life and drive the car you want, eat out when you want at $800.00 in rent, then look for a home where the mortgage payment with principal, interest, taxes, and homeowner’s insurance is at or near $800.00.
Next, you must determine what type of loan you have an adjustable rate, a fixed rate. The difference is that the adjustable rate will do what adjust and a lot of time it is not down, but up. If you choice the adjustable rate, find out what the maximum rate is and determine whether you can afford the adjustment. The mortgage and your realtor can show the difference in payment.
The fixed rate is just that fix. The rate will stay the same for the life of the loan.
Lastly, know what you can handle includes not only the mortgage payment, but the now new responsible of maintenance of the property. Therefore, I recommend having an inspection of the home to make sure you did not bite off more than you want to chew. The home inspection will tell you the condition of the home to include the condition of the roof, the condition of the plumbing, condition of the electric, etc. With the home inspection, you will get a detail report of the condition of the home, and it may include all items that may need deferred maintenance.
Deferred maintenance is important because those repairs can go before or after projected time range that the inspector gives, so it is important to be prepared financially. Because all repairs first time home buyer is on you not a landlord.
Do not get me wrong buying a home is a happy and great experience, but it can turn into disaster if you are not prepare, so I hope this helps.
Please visit www.taylorbrownrealestate.com
www.freedomforeclosure.com/taylorbrown
Why is understanding your market important? Understanding your market is important because it is important to understand your leverage. By leverage, I mean, knowing whether it is a buyer’s market or a seller’s market. Knowing the difference can mean money in your pocket or money left on the table. Let’s examine.
In a buyer’s market, the buyer must be aware that being in a buyer’s market doesn’t make the buyer’s job any easier. It just gives the buyer more flexibility. Remember in a buyer’s market, there may be several buyers for one property or only one buyer for a property. If there are no other buyers for a property by virtue of the length of time the property has been on the market then a low offer may come in to the seller. Sorry sellers. However, sellers that do not mean that you have to give your properties away, but it may mean that you may have to settle for less than you anticipated selling your home.
Another thing that makes a buyer’s market advantageous to the buyer and not to the seller is that there are a lot of homes to choice from that may meet the buyer’s criteria.
In a seller’s market, on the other hand, the seller has the upper hand. The seller can price their home significantly above market value and negotiate the purchase price to exact what the seller wants the purchase price to be. Sorry buyers. If the buyer really wants a home in a seller’s market, the buyer must succumb to the seller’s terms in order to get the home. As a matter of fact, in a seller’s market the inventory of homes for sale that may meet the buyer’s criteria are fewer.
Why do you need to know what you want in your home? It is important in a word to eliminate or limit competition. If the buyer knows what they desire in their new home sooner in the buying process they can narrow their search criteria and bid on the property of choice instead of witness the home being purchase by someone else. In addition, only you as the buyer know exact what features you want in your new home. You, as the buyer know if your family needs three or four bedrooms one or two bathrooms, but more importantly you know what you can afford.
Why am I talking about “what you can afford?” Well, the reason is that your pre-approval letter has a different meaning than you think. The pre-approval is determine by your income to debt ratio true enough; however, are you aware that all your debt is not considered? What debt you ask? The debt that I am referring to is the light bill, water bill, phone bill, grocery bill, cable bill, clothing bill, etc. And that may be more depending on where you live.
Now the latter statements puts the pre-approval letter into a new prospect doesn't it? Don't get discourage. Just do your homework. Buy where you are already comfortable and be patience. With the present market being a buyer's market, you will find a home that is in that comfortable range in no time. For instance, if you can enjoy life and drive the car you want, eat out when you want at $800.00 in rent, then look for a home where the mortgage payment with principal, interest, taxes, and homeowner’s insurance is at or near $800.00.
Next, you must determine what type of loan you have an adjustable rate, a fixed rate. The difference is that the adjustable rate will do what adjust and a lot of time it is not down, but up. If you choice the adjustable rate, find out what the maximum rate is and determine whether you can afford the adjustment. The mortgage and your realtor can show the difference in payment.
The fixed rate is just that fix. The rate will stay the same for the life of the loan.
Lastly, know what you can handle includes not only the mortgage payment, but the now new responsible of maintenance of the property. Therefore, I recommend having an inspection of the home to make sure you did not bite off more than you want to chew. The home inspection will tell you the condition of the home to include the condition of the roof, the condition of the plumbing, condition of the electric, etc. With the home inspection, you will get a detail report of the condition of the home, and it may include all items that may need deferred maintenance.
Deferred maintenance is important because those repairs can go before or after projected time range that the inspector gives, so it is important to be prepared financially. Because all repairs first time home buyer is on you not a landlord.
Do not get me wrong buying a home is a happy and great experience, but it can turn into disaster if you are not prepare, so I hope this helps.
Please visit www.taylorbrownrealestate.com
www.freedomforeclosure.com/taylorbrown
Myths about Foreclosure
The myths that people believe will save their homes from foreclosure are ignoring it
1. investors
2.listing with a realtor
3. filing bankruptcy
4. refinancing
Ignoring the problem is definitely not the way to handle the dilemma of foreclosure. Ignoring increases the chance of the homeowner getting thrown out with no place to go. Believe it or not, the foreclosure may keep you from getting other housing, as well. Believel me, there are options. Visit www.freedomforeclosure.com/taylorbrown to discover options.
Myth 2 Investors
Relying on investors to bail the homeowner out is definitely not the answer either because some investors are asking the overburdened homeowner to sign over their deed. With doing this, the homeowner not lost the equity in their home, but this practice may cause the homeowner to be in more debt and in a worser situation than when they started. Please visit www.freedomforeclosure.com/taylorbrown for options. One option that is available through my company is assisting the homeowner with private money investors that will look out for your best interest and help you stay in your home.
Myth 3 Listing with a Realtor
Listing with a realtor does not stop foreclosure. Most realtors do not want to list your home with the threat of foreclosure. Most realtors do not want to list the home because of the cost of advertising a home that may not sell for what you owe. It takes a realtor that is familar with handling this type of situation. It also will take a homeowner who understand that the objective is to get them out from under the mortgage before the bank forecloses. This means that the homeowner must open their mail from the lender, so that the realtor would know how aggressive their marketing plan must be to get the home sold before the foreclosure. The homeowner must also realize that they may not get a profit off of the sale of the home. Profit loss or gain depends on how aggressive the lender is on the foreclosure of the property and this varies from lender to lender and state to state.
Myth 4 Filing Bankruptcy
Filing bankruptcy may not stop foreclosure because the homeowner must make the bankruptcy payment and their mortage payment. If the homeowner does not keep up with their payment their home cn still be foreclosed on. What the lender will do if a payment is missed is file a "Stay of Relief" to continue with the foreclosure. This will cause the total arrearages to be due and the homeowner is still paying the bankruptcy payment if they can afford to. However, the reason for the bankruptcy may have been to save their home but because they missed a scheduled mortgage payment to the lender during the bankruptcy they are still being foreclosed on. If you are 3 to 4 months behind on your mortgage visit www.freedomforeclosure.com/taylorbrown to weigh all your options before filing bankruptcy.
Myth 5 Refinancing
Refinancing may be an options if the homeowner qualifies fo the loan; however, be aware that some loan officers may wait unitl the day before the sheriff's sale to tell the homeowner that they could not refinance their loan. It is important to view all options by visiting www.freedomforeclosure.com/taylorbrown.
The goal of my company is to help you - the homeowner to stay in your home if possible and to stop or avoid the foreclosure. It is important to note that my company has a 98.5% success rate of resolving homeowners problems without the homewoner having to pay th entire deliquence. Please visit www.freedomforeclosure.com/taylorbrown to request a free evaluation. We will assess your situation, and give you the best advise for your situation. Remember you are under no obligation. I look forward to hearing from you. I do hope this information was helpful.
Also visit www.taylorbrownrealestate.com
Types of Ownership Deeds
There are different types of ownership deeds you may receive as a real estate investor. The types of ownership deeds are general warranty deed, sheriff’s deed, quit claim deed, special warranty deed, tax deed, trustee deed, and certificate of title.
It is important to understand that no matter which ownership deed you receive it is best to have title insurance on it.
Title insurance is a policy that guarantees that the title for the property is clear of liens and/or judgments. It also guarantees that the owner of the property has the right to sell the property.
The title insurance protects the owner and the new owner from losses that may arise from unknown or undisclosed defects in the pas chain of title. Unlike most insurance, title insurance is paid in an one time installment at the closing. This one time fee protects your interest as the new owner and your heirs interest for as long as you own the property.
The title policy is insured by the title company. The title company will provide legal defense against any and all challenges to the title and reimburse the owner against any losses as a result of hidden or unknown defects in the owner’s rights.
Now, that we understand what the title insurance is. Let’s examine the different types of ownership deeds.
As an investor, you may come to own your property through a special warranty deed.
Let examine what happens to get you the special warranty deed. First, there is a sheriff’s deed issued by a judge.
If you are interested in listing or selling properties, please visit www.taylorbrownrealestate.com
If you are in trouble with your mortgage, please visit www.freedomforeclosure.com/taylorbrown
It is important to understand that no matter which ownership deed you receive it is best to have title insurance on it.
Title insurance is a policy that guarantees that the title for the property is clear of liens and/or judgments. It also guarantees that the owner of the property has the right to sell the property.
The title insurance protects the owner and the new owner from losses that may arise from unknown or undisclosed defects in the pas chain of title. Unlike most insurance, title insurance is paid in an one time installment at the closing. This one time fee protects your interest as the new owner and your heirs interest for as long as you own the property.
The title policy is insured by the title company. The title company will provide legal defense against any and all challenges to the title and reimburse the owner against any losses as a result of hidden or unknown defects in the owner’s rights.
Now, that we understand what the title insurance is. Let’s examine the different types of ownership deeds.
As an investor, you may come to own your property through a special warranty deed.
Let examine what happens to get you the special warranty deed. First, there is a sheriff’s deed issued by a judge.
If you are interested in listing or selling properties, please visit www.taylorbrownrealestate.com
If you are in trouble with your mortgage, please visit www.freedomforeclosure.com/taylorbrown
Thinking of Becoming Real Estate Investor
Let’s examine what you need to be concerned with if you want to invest in real estate? First, you must understand your market. There are two different types of markets. One type of market is a seller’s market, and the other type of market is the buyer’s market.
In a buyer’s market, the buyer must be aware that being in a buyer’s market doesn’t make the buyer’s job any easier. It just gives the buyer more flexibility. Remember in a buyer’s market, there may be several buyers for one property or only one buyer for a property. If there are no other buyers for a property by virtue of the length of time the property has been on the market then a low offer may come in to the seller. Sorry sellers. However, sellers that do not mean that you have to give your properties away, but it may mean that you may have to settle for less than you anticipated selling your home.
Another thing that makes a buyer’s market advantageous to the buyer and not to the seller is that there are a lot of homes to choice from that may meet the buyer’s criteria.
In a seller’s market, on the other hand, the seller has the upper hand. The seller can price their home significantly above market value and negotiate the purchase price to exact what the seller wants the purchase price to be. Sorry buyers. If the buyer really wants a home in a seller’s market, the buyer must succumb to the seller’s terms in order to get the home. As a matter of fact, in a seller’s market the inventory of homes for sale that may meet the buyer’s criteria are fewer.
Once you ascertain the type of market you are in then you are ready to buy. Now you must determine what type of properties work best for you. By that I mean do you want to purchase single family homes or multi units. With single family homes, it is very important to determine what will happen if the property is vacant. You must determine if you can pay the mortgage if there is a mortgage on top of other expenses if there is not a tenant or the tenant is not paying. In those calculation must be the upkeep of the building to include utilities and maintenance not only the mortgage, taxes, and insurance. If that is affordable then move forward. If not, then look at those options with a multi unit and determine which scenario works better for your financial situation if there are vacancy. Do not fool yourself there will be vacancy during something of your ownership, so it is best to look at that now than later.
Now, that you have determined which property type you like then move forward. Always remember it is easier to rent three plus bedrooms then two or one.
Up until now I have spoke only about the possibility of buy and hold. What is buy and hold? Well, buy and hold is when you buy the property and hold it to rent it for a pre-determine number of years. It is important to note that in order for this to be successful buy your investment property in an area that is desirable to both renters and homeowners. By doing this, it makes it easier to sell for a profit when you determine you want to sell.
There is yet another way to be a real estate investor and it is called fix and flip. Fix and flip is fixing up the property to flip or sell it to someone else. Under the fix and flip, if your buyer is acquiring financing to purchase the property then you will have to have owned the property for at least six months to be able to sell. Be aware that some lenders may require that you owned it longer. You may be wondering how the financial institution of the buyer knows how long the seller has owned the property well the lender requires a clear chain of title. The chain of title will show if there is any liens and/or judgment, but it also shows the chain of ownership. The chain of title yet again let’s the lender know if the property is marketable and free to transfer ownership. You may be wondering where the chain of title comes from? The chain of title comes from an abstract of the title. An abstract of the title is a condensed history of ownership of the property which is gathered by the abstracter through public record.
Once the Title Company and lender determine that the property is free and clear to sell. The lender needs to know that the buyer is free and clear of liens and judgments as well. The reason is that the liens and judgment that the buyer may have may attach to the property, so a search is done on the buyer by their name and social security number. If the buyer has a common name then a name affidavit can clear up most information that may come up. The name affidavit has the buyer’s name, social security number, marital status, last five years of addresses, etc. This information is used to rule out judgment that may appear as the buyer’s judgment or not.
Let’s discuss different ways to sell the property under a fix and flip scenario. The seller may consider a lease option. Under a lease option, the seller must do a judgment search on the potential buyer/tenant before attaching them to the property because the judgment and or liens on the potential buyer/tenant may attach to the property. I am sure the seller does not want to pay someone else bills, so pay to have the search done.
Once the search is complete and it is determined that the potential buyer/tenant does not have any judgment and/or liens draw up the lease/option contract. Consult an attorney when doing this to ensure all options of ownership and releasing option are examined.
Under most lease agreement, the buyer pays a non-refundable deposit. This deposit is negotiated between the parties and credited to the buyer at time of purchase. Under some agreement, the deposit is credited to the buyer only if the buyer does not default on the lease agreement and exercise their option before the expiration of the lease agreement.
The seller will also credit the buyer a certain portion of the monthly lease payment that the buyer/tenant makes in a timely manner to the buyer at time of closing. However, the buyer/tenant shall not receive any credit for monthly payment made after the due date specified in the contract.
Incidentally, it is important to note that the buyer/tenant can only exercise their right to purchase in writing. It is also important to note that the option to purchase is not transferable.
It is important to work with the potential tenant/buyer to help them clear their credit issue by referring them to a professional that will help the tenant/buyer determine what need to be corrected on their credit and keep up with the tenant/buyer progress on doing what is required to correct the tenant/buyer’s credit. The reason this is important for the life of the lease you can not sell the property without proper notice to the tenant/buyer.
Now, that we have discussed your investment option let’s get back to some basics. Let’s say you are buying a fixer upper. With a fixer upper, there are not many insurance options or so you may think. Because you can one company and they tell you that they can not insure your new purchase under after repair, and you move on with the purchase, but do not have your interest in the property insured. Well, there are companies that offer the insurance you need. You just need to know what companies offer it and what that type of insurance is called. It is called builder’s risk or a vacancy policy. The companies that offer these policies are Allstate, American Family, and Farmers Insurance. Allstate’s policy covers the property for a year, but it does not cover you once you have a tenant in the property. Once a tenant is in the property you must have a landlord policy.
American Family’s policy covers the property for three months, and then at the end of the three month you either buy another three month policy because it is not ready for occupancy or get a landlord policy.
Once your insurance is in place or even before purchase find out about permits for the jobs needed for the fixer upper. You need to do this so that jobs will not be stop by the city inspector and you lose money as a results. This is very important in a fix and flip scenario because you stand to have to pay expense that you did not calculate for. This is also called holding cost, so do research that can not be spoke to enough research, research, research.
If you are looking for investment properties, please visit www.taylorbrownrealestate.com.
If you are in trouble with your mortgage, please visit www.freedomforeclosure.com/taylorbrown
In a buyer’s market, the buyer must be aware that being in a buyer’s market doesn’t make the buyer’s job any easier. It just gives the buyer more flexibility. Remember in a buyer’s market, there may be several buyers for one property or only one buyer for a property. If there are no other buyers for a property by virtue of the length of time the property has been on the market then a low offer may come in to the seller. Sorry sellers. However, sellers that do not mean that you have to give your properties away, but it may mean that you may have to settle for less than you anticipated selling your home.
Another thing that makes a buyer’s market advantageous to the buyer and not to the seller is that there are a lot of homes to choice from that may meet the buyer’s criteria.
In a seller’s market, on the other hand, the seller has the upper hand. The seller can price their home significantly above market value and negotiate the purchase price to exact what the seller wants the purchase price to be. Sorry buyers. If the buyer really wants a home in a seller’s market, the buyer must succumb to the seller’s terms in order to get the home. As a matter of fact, in a seller’s market the inventory of homes for sale that may meet the buyer’s criteria are fewer.
Once you ascertain the type of market you are in then you are ready to buy. Now you must determine what type of properties work best for you. By that I mean do you want to purchase single family homes or multi units. With single family homes, it is very important to determine what will happen if the property is vacant. You must determine if you can pay the mortgage if there is a mortgage on top of other expenses if there is not a tenant or the tenant is not paying. In those calculation must be the upkeep of the building to include utilities and maintenance not only the mortgage, taxes, and insurance. If that is affordable then move forward. If not, then look at those options with a multi unit and determine which scenario works better for your financial situation if there are vacancy. Do not fool yourself there will be vacancy during something of your ownership, so it is best to look at that now than later.
Now, that you have determined which property type you like then move forward. Always remember it is easier to rent three plus bedrooms then two or one.
Up until now I have spoke only about the possibility of buy and hold. What is buy and hold? Well, buy and hold is when you buy the property and hold it to rent it for a pre-determine number of years. It is important to note that in order for this to be successful buy your investment property in an area that is desirable to both renters and homeowners. By doing this, it makes it easier to sell for a profit when you determine you want to sell.
There is yet another way to be a real estate investor and it is called fix and flip. Fix and flip is fixing up the property to flip or sell it to someone else. Under the fix and flip, if your buyer is acquiring financing to purchase the property then you will have to have owned the property for at least six months to be able to sell. Be aware that some lenders may require that you owned it longer. You may be wondering how the financial institution of the buyer knows how long the seller has owned the property well the lender requires a clear chain of title. The chain of title will show if there is any liens and/or judgment, but it also shows the chain of ownership. The chain of title yet again let’s the lender know if the property is marketable and free to transfer ownership. You may be wondering where the chain of title comes from? The chain of title comes from an abstract of the title. An abstract of the title is a condensed history of ownership of the property which is gathered by the abstracter through public record.
Once the Title Company and lender determine that the property is free and clear to sell. The lender needs to know that the buyer is free and clear of liens and judgments as well. The reason is that the liens and judgment that the buyer may have may attach to the property, so a search is done on the buyer by their name and social security number. If the buyer has a common name then a name affidavit can clear up most information that may come up. The name affidavit has the buyer’s name, social security number, marital status, last five years of addresses, etc. This information is used to rule out judgment that may appear as the buyer’s judgment or not.
Let’s discuss different ways to sell the property under a fix and flip scenario. The seller may consider a lease option. Under a lease option, the seller must do a judgment search on the potential buyer/tenant before attaching them to the property because the judgment and or liens on the potential buyer/tenant may attach to the property. I am sure the seller does not want to pay someone else bills, so pay to have the search done.
Once the search is complete and it is determined that the potential buyer/tenant does not have any judgment and/or liens draw up the lease/option contract. Consult an attorney when doing this to ensure all options of ownership and releasing option are examined.
Under most lease agreement, the buyer pays a non-refundable deposit. This deposit is negotiated between the parties and credited to the buyer at time of purchase. Under some agreement, the deposit is credited to the buyer only if the buyer does not default on the lease agreement and exercise their option before the expiration of the lease agreement.
The seller will also credit the buyer a certain portion of the monthly lease payment that the buyer/tenant makes in a timely manner to the buyer at time of closing. However, the buyer/tenant shall not receive any credit for monthly payment made after the due date specified in the contract.
Incidentally, it is important to note that the buyer/tenant can only exercise their right to purchase in writing. It is also important to note that the option to purchase is not transferable.
It is important to work with the potential tenant/buyer to help them clear their credit issue by referring them to a professional that will help the tenant/buyer determine what need to be corrected on their credit and keep up with the tenant/buyer progress on doing what is required to correct the tenant/buyer’s credit. The reason this is important for the life of the lease you can not sell the property without proper notice to the tenant/buyer.
Now, that we have discussed your investment option let’s get back to some basics. Let’s say you are buying a fixer upper. With a fixer upper, there are not many insurance options or so you may think. Because you can one company and they tell you that they can not insure your new purchase under after repair, and you move on with the purchase, but do not have your interest in the property insured. Well, there are companies that offer the insurance you need. You just need to know what companies offer it and what that type of insurance is called. It is called builder’s risk or a vacancy policy. The companies that offer these policies are Allstate, American Family, and Farmers Insurance. Allstate’s policy covers the property for a year, but it does not cover you once you have a tenant in the property. Once a tenant is in the property you must have a landlord policy.
American Family’s policy covers the property for three months, and then at the end of the three month you either buy another three month policy because it is not ready for occupancy or get a landlord policy.
Once your insurance is in place or even before purchase find out about permits for the jobs needed for the fixer upper. You need to do this so that jobs will not be stop by the city inspector and you lose money as a results. This is very important in a fix and flip scenario because you stand to have to pay expense that you did not calculate for. This is also called holding cost, so do research that can not be spoke to enough research, research, research.
If you are looking for investment properties, please visit www.taylorbrownrealestate.com.
If you are in trouble with your mortgage, please visit www.freedomforeclosure.com/taylorbrown
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