Real Estate Information

Luxury Real Estate Information


Rancho Palos Verdes, California Homes
Palos Verdes, California Homes
South Bay, California Homes
Luxury Mexican Beachfront Homes

Featured Properties


Oceanfront Estate Near Trump National

Related Information


Loan Information
Real Estate Information
Mortgage Refinance Information

Real Estate Investing Myths That Steal Profits From Your Pocket


One of the things that distresses us about our industry is the amount of wrong or incomplete information available to investors. Some myths block what otherwise would be a great deal, while others would have you believe that a bad deal is actually great. For example, we encourage purchasing homes "subject-to" the existing mortgage as an option to finance the purchase of an investment property. This means that title to the property is transferred to the purchaser, but the loan remains in the original borrower's name with payments made by the purchaser. Unfortunately, many myths exist around this method which could rob you of your profits. Let's take this opportunity to dispel 5 of the most common.

Myth #1: Buying A House "Subject-To" The Existing Mortgage Is Illegal.

Absolutely not true! Most mortgages have a "due-on-sale" clause which states that if the house is sold without paying off the mortgage, the lender has the "right" to call the entire loan due. The key here is that they have a "right" - not an "obligation". In other words, it's their choice. We asked several attorneys in town who represent lenders to see if they had ever heard of a bank call a loan due because of a sale. In every instance they said not as long as the payments were made timely. Why? Because banks are in the money business - not in the real estate business. If they call the loan due, and it goes into foreclosure, they have a poor performing loan on the books (for which they have to increase their reserves), they incur additional costs, and they inherit a property. Or, they can just accept the timely payments from the new owner. Which makes more sense?

Myth #2: Buying "Subject-To" Is Complicated And Requires A Ton Of Paperwork.

The truth is that all you have to do is write it into the Purchase and Sales Agreement (PSA). We write it in right next to the Purchase Price. Here's an example using our PSA:

Total Purchase Price to be paid by Buyer is $80,000.00, payable as follows: "subject-to" existing first mortgage with a balance of approximately $77,500, and monthly PITI payments of $695; remainder of Sellers equity to be paid in cash at closing.

That's it. You and the Seller have now agreed that you'll purchase the home subject-to their mortgage. As a precaution, we have the Seller sign a disclaimer that they know that the loan has a due-on-sale clause, and that we make no promise as to when the loan will be paid in full, or how long it will remain in their name. We also prepare a letter from the borrower informing the bank that all future correspondence should be forwarded to us, and we have the right to act for the Seller in every way regarding the loan so they'll disclose loan information to us in the future.

It really is that easy. After closing, you just start making the payments. We don't hide our identity. We send in our own checks, and the house insurance is in our name.

Myth #3: No Homeowner Will Ever Sell Me Their House And Leave The Loan In Their Name.

If you're dealing with a seller who has no problems with his house, this may be true. But when you deal with motivated sellers - ones that either have financial, personal, or house issues - this will not be an issue. Motivated sellers need a way out - quickly! Often, they're already behind in their payments, and facing foreclosure. When you tell them that their worries are over, and you'll catch up their back payments, and make all the subsequent payments on time they'll jump at the opportunity. As a bonus, their credit will even improve.

The key to successful negotiating lies in your confidence. Realize that you're providing a viable alternative solution which allows the highest price to be paid, with the quickest closing, and immediate relief for the Seller's situation.

Myth #4: Kitchen Table Closings Are Perfect For These Transactions

Investors love to say that they "got the deed" at the kitchen table while they presented their offer. The concern is you have no validation of what you purchased. Without a title exam, there's no guarantee the correct owner even signed the deed, nor whether any other loans or liens exist on the property. You also have no title insurance to protect you from any unanticipated title problems. Finally, the actual payoff on the loan must be validated with the lender by requesting a statement of account. Do not use the principal balance payoff shown on the monthly statement because it does not include past due payments, other interest accrued, fees and penalties, and any prepayment penalties. We've seen actual payoffs tens of thousands of dollars greater than the principal payoff.

You could argue that what difference does it make if the loan isn't in your name and you gave the Seller no cash. The problem is that you may not discover any of these issues until much later in the transaction - maybe not until you try to sell the property. By then, you will have invested time, energy, and money in the property only to see it all lost, when all of these problems could have been avoided by conducting a standard closing with your attorney or title company.

Myth #5: I Can Always Just Walk Away If I Can't Pay The Mortgage

This is technically true, but not a great strategy for the successful investor. Legally, you are not responsible for the payments. But you do have your credibility and reputation to consider - which are critical to your long term success. You definitely don't want an angry seller defaming your reputation in the community, or submitting a complaint with the Better Business Bureau. Not to mention that you probably have cash invested in the house, which will all be lost. We recommend treating "subject-to" mortgages just like any other with your name attached - make timely payments.

Lou

FREE! Real Estate Investing Secrets To Earning $100,000 Your 1st Year! -- 11 Overlooked Real Estate Statregies That Will Turn Your Investing Business upside Down And On The Fast Track TO Success...Guranteed! Plus A Bonus Track With A Secret So Successful It Can Double Your Investing Income Overnight!

http://www.InvestorSuccessTactics.com


MORE RESOURCES:
This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news


Wall Street Journal

The Bullies of Real Estate
Wall Street Journal
“Bullying is rampant among real-estate agents, but you see less of it among the top-performing agents. The most common form of bullying here is a passive-aggressive running of the clock, which usually happens when buyers and sellers are negotiating ...



Chron.com

Real estate briefs: MetroNational sells three office buildings
Chron.com
Houston-based MetroNational has sold three office buildings in deals brokered by Dan Miller and Trent Agnew of HFF. Houston-based S&B Engineers and Constructors, represented by Mission Asset Marketing, purchased a 155,118-square-foot building at ...



theberkshireedge.com

Welcome to Real Estate Friday!
theberkshireedge.com
What's on the Market – Fall Specials: A second installment of great properties at reduced prices! Transformations – Red House Design transforms an outdated Cape into an oasis of calm and modernity. Weekly real estate transactions for Berkshire County ...



Forbes

DJ Khaled Is All About The Real Estate
Forbes
After buying a $25.9 million dollar waterfront beach house in Miami, DJ Khaled decided to keep his fingers in the Florida real estate game a little longer by lending his name to a luxury listing in Hibiscus Island, Miami. He, not being a shy promotor ...



Forbes

Combining Traditional And Modern Real Estate Tactics To Survive Industry Evolution
Forbes
In a digitized era where agile business principles reign supreme, traditional commercial real estate principles are being tested like never before. There's no denying that technology has impacted and even disrupted all real estate asset classes ...



Reuters

China's real estate investment slows in September as caution sinks in
Reuters
BEIJING (Reuters) - Growth in China's real estate investment eased in September and home sales fell for the first time since April, as developers dialed back expansion plans amid economic uncertainties and as additional curbs on speculative investment ...

and more »


Forbes

New Investment Trap: Tapping Your Retirement Accounts For Real Estate Investing
Forbes
Lina: Yes, somewhere high on the list are bad actors promoting the purchase of rental real estate inside a tax-deferred retirement account such as a traditional IRA or 401(k). While this can be sold as a compelling strategy, it rarely ever is a good ...



Pensions & Investments

GWL acquiring Guggenheim Real Estate
Pensions & Investments
GWL Real Estate Advisors U.S. is acquiring real estate manager Guggenheim Real Estate from Guggenheim Investments, said Michele Walkau, senior vice president, corporate services for GWL Realty Advisors, in an email. Terms of the deal — which affects ...



GoDanRiver.com

Dan River Region real estate transfers
GoDanRiver.com
Recorded Sept. 17. » Wendy Ann Stone, Beverly Stone Jones (Beverly Denise Stone), Tracey Annette Stone, Barbara Allen Stone, guardian for the person and property of James Junior Stone and incapacitated adult to Buoy 10, Water Street, Old Ringgold ...



Forbes

Balancing Automation And Human Interaction In The Business Of ...
Forbes
The most successful individuals will utilize technology as a system of record and to assist with engagement, but also recognize when the human touch and ...

and more »

Google News

home | site map
© 2006 TIGER MEDIA