What to Offer

As a newbie, that to me is the most logical approach, knowing your comps first. How else would you know what the FMV is of the house your are going to make an offer on.

Just curious.......how do you go about finding your comps. I have seen through the threads of various websites such as Zillow, Cyberhomes, eppraisal, and on quite a few occasions the estimated values given for the same address differ by lots of $s from website to website.

What resource(s) are you using to determine the comps in the areas you are looking to buy in.

Thx,

Neil

neil,

try associating yourself with a realtor that is willing to help you out. Also, you gotta remember, most of those prices are asking/listing prices, not SOLD prices. The true FMV of homes are based on what they are SOLD for, not what they were listed for or asking of. So you will get a scewed FMV of homes if you go by what they are listed. If you use these websites, the best thing to do is probably average them out, so if you use 3 different websites, calculate those numbers for each website, get your final numbers, and with those numbers, average them out to come up w/ final numbers. But again, these websites should not be ur end all to comp evaluating. They should be only a ball park. You should try to find a way to use the MLS for your comps. I believe you can buy a subscription to the MLS, but not 100% sure. If not, just find a realtor that is an investor and is willing to take time to help you in your goals.

Yea, as you say, sales prices are the key. The estimates are probably based on listing prices.

I am just beginning to work with an investment minded realtor (few and far between) so that is where I will get my comp info.

Sam, if you have any other advise please chime in.

Thx,

Neil

After trying to find a working strategy for a while, I realized that HML is a good choice to be in the game since there are so many REOs and short sales in the market. I also use the amount that HM lender is willing to lend (50-60% of FMV)to make sure that my estimate of the property value is not far off( which happened to one property I wanted to put offer in, but passed).I use all three methods: zillow, PropTrend from academy and comps from realtors(just use sold not active or pending sale data). I am still learning what to do after if I bought the property with HML. There are some many possibilities, would appreciate any input.

You should be using a different HML that will pay 100% of the purchase price(not 50 to 60%). The one that is listed throughout the threads is Coastal Funding. What they do is "rent" you money to cover the entire purchase price that you have contracted with the seller.

Here is how they operate...they will "rent" you this money for ONLY 1 day because they MUST be paid back the same day that you purchase the property. This is done by having your end buyer already in place (another requirement)and then you need to do a double closing (back to back/simultaneous). This way you do 2 closings the same day. In the morning you close with your seller and Coastal will wire the funds to cover this transaction. That afternoon (just using morning and afternoon to give you ample time to close both transactions)you now sell the prop (which you now own) to your end buyer and the escrow agent/title co wires the funds back to Coastal (with their fee) and pay any other 3rd party costs (say you use a realtor) and then pay you your profit which you have obviously accounted for b4 you re-sold to your end buyer.

Therefore the keys are:

1. You MUST have an end buyer in place when you go to the closing table because Coastal will not fund the transaction until they know they are getting their money back that same day.

2. You have to use an escrow/title co that does double closings. Not everyone does, so you have to do your research and find one that does. Coastal uses a title co in Tampa, FL (Flagship) that has pre-approved title cos in all 50 states that perform double closings. The one pre-approved in my state is 300 miles away in San Diego. I needed one closer to me and have found one a couple of miles away that performs these double closings(I emailed Eric at Coastal and he just said if I have one in my area just use them).

hope this explains how to use Coastal to cover 100% of your purchase price with the original seller. I am yet to use them, but feel that I understand the process.

If you want more explanations email Eric at [email protected]

Good luck!

Neil

You know little threads like these are what this whole thing is about. Thanks to all you guys who help us little people out. Neil, I have one simple question for ya: Does the title company fill all the info out for you on all the closing papers. I'm sure I'll find out when I do my first deal but, do they ask you what all the fees and such are going to be ie agent fees, coastals fee, etc.

Thanks, Josh

As I mentioned, this is new to me too since I haven't done a deal yet with Coastal. I believe that the only fees that will be provided by the title co are their title search fees, UCC filing fees, legal fees (their lawyer)and other misc fees....I used to work for real estate developers and trying to think of other closing costs they charge on the settlement stmts. There will also be pro-rata charges for such things as prop taxes depending when taxes are due and if the owner has already paid or not...it will either be a charge or credit.

But as far as other fees, Coastal has a fee schedule on their website Coastal-funding.com I believe this is right...just google it), it is a graduated fee (the higher the purchase price the more they charge i.e. 2 pts plus $595 processing fee, etc.

And if you are working with a realtor, you will know their fee.

And you can structure these deals to make the end buyer pick up all closing costs, so it may be a moot point.

Hope I answered your questions. Now I just need to find deals so I can use Coastal myself......I'm in a very different market (I live in the east bay in CA) and in my area the majority of homes are so upside down (mtge is greater than FMV in hundreds of thousands of $s) that I have to find end buyers that want to buy and hold (because the mkt is so much lower than what homes were selling for than 2 years ago (50 to 75% drops)so it would be best to buy and hold and wait for mkt to turn . Flipping homes to end buyers can still be done but are more difficult because there are very few homes with equity left in them and REOs are having bidding wars.

I just have to think differently......chasing down pre-foreclosures/short sales is what I am focusing on.

Neil

Hey......I use all of the above to determine value.....then I cut it a bit to be sure. Add factors like AGE, LOCATION, CONDITION.....these factors are NEGATIVES or POSITIVES....depending on the situation.....you want to be fair, but in some cases you need to take away value for age or condition , or even location. Compare the subject property to others, and give reasons why you are determining that + or - value. These together with comps allow you to safely determine a value that will help to convince your HML to fund your loan because they will feel as if you have done your homework.

From what i understand, when you find a property that is bank owned, like a REO, Short Sale or a Foreclosure, they do not like the "and/or assigns" on a PC and will more than likely decline your offer. So, if i came across a great deal that i can get below FMV, with equity and such, i am probably going to have to do a simultaneous closing to get around this. So when i put a PC on the deal, do i show ME as buyer, or do i already need to have some kind of proof of funding available and in hand?

But, if i don't have Mr. End Buyer lined up, and i need time to find one, and i want to lock up the deal before i give Mr. End Buyer the address and information on the home, How do i do this? I won't want him just buying up the home from underneath me!

Mati

Look for Deals that allow TYPICAL hard money lending. If the deal allows you to get funding with a regular HML....it's a GREAT DEAL. It means you actually found something.

I realize that some allow up to 100% financing, but that is NOT a regular HML. Flash Funding isn't the same business, and they don't have the same RISKS.

True HML's Insist on GREAT DEALS in order to fund a deal. They are risking their money on YOUR deal. They have to be willing to KEEP the property themselves IF you default.

So in short......Use the NORMAL guidelines that the "average" HML uses to evaluate a FUNDABLE deal. The deal must be Better than 65% BELOW market.

The lower the better.

HML's like coastal allow you to fund ANY deal...thus they are NOT a good measure of whether or not you have a GREAT deal or not.

No Matter WHO you use to fund.....USE the basic HML average requirements to judge your deals value.....is it HML fundable?

If the answer is YES...GO FOR IT.