![]() | |
![]() | |
![]() |
Real Estate 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: Exclusive | Compass in Talks to Buy Warren Buffett’s Real-Estate Brokerage Unit The Wall Street Journal Compass reportedly near a deal to acquire HomeServices Real Estate News Steve Witkoff Divesting from Eponymous Real Estate Firm The Real Deal Rocket Enters The Portal Wars Mike DelPrete Monaco’s $2 Billion Land Reclamation Project Is Fueling a Record-Breaking Real Estate Market Robb Report Exclusive-UBS considers sale of some real estate assets in asset management unit, sources say Yahoo Finance Hard Work, a Dream, and a Bay Area Apartment for Less Than $600,000 The New York Times Inked: Recent LI real estate deals Long Island Business News Keith Jackson opens real estate school at RE/MAX River Bend Alton Telegraph A Commercial Real Estate Perspective On The Countywide Comprehensive Plan Rockland County Business Journal Boston Real Estate Times Presents Outstanding Women of Commercial Real Estate in 2025 Boston Real Estate Times Washington D.C.’s Real Estate Market is Falling Fast House Beautiful Mount Pleasant, Caledonia Real Estate Roundup Racine County Eye Mid-America Real Estate Corporation closes sale of 85,880-square-foot retail center in Fitchburg REjournals.com ALTO Real Estate Funds Appoints Stephen J. Hefner as Senior Vice President, Head of Acquisitions Business Wire Emo pioneers Sunny Day Real Estate coming to Buffalo WIVB.com - News 4 Exclusive: UBS considers sale of some real estate assets in asset management unit, sources say Reuters Redfin CEO offers candid take on Rocket acquisition Real Estate News CMS Grau hires real estate team from Rubio Leguía Latin Lawyer Real Estate Transactions: March 14, 2025 The Recorder Friedman Real Estate to manage 19 properties from Craig/Steven Development in the Chicago area REjournals.com We're two of America's top real-estate agents. Here's where wealthy people are moving. Business Insider GA Group and A&G Real Estate to Auction JOANN's Retail Store Leases and Distribution Centers PR Newswire A wide-ranging interview with commercial real estate broker René Alcala Rio Grande Guardian Zenbase Partners with Cogir Real Estate to Empower Ontario Residents with Credit-Building and Flexible Rent Payments Business Wire Long-time commercial real estate broker Morton Glick dies Long Island Business News Real Estate Authority merges into Charles Rutenberg Realty South Florida Agent Magazine Local Realtors achieve national recognition The Laconia Daily Sun Real Estate Investing: 5 Ways to Get Started NerdWallet Uncertainty clouds Colorado real estate market ColoradoBiz Real Estate Minute – 03-13-2025 KFDX - Texomashomepage.com What to Know About Passive REIT ETFs Morningstar Inside Real Estate Announces Acquisition of ListAssist, AI-Powered Property Search and Marketing Technology PR Newswire A&E Real Estate Buys UES Apartment Building From Soloviev for $116M Commercial Observer Champion Homes expands board with real estate veteran Investing.com DOGE Terminating 31 Real Estate Leases in WA, UT, and ID News Radio 1310 KLIX Real Estate 03.13.25 Plant City Observer Real Estate Transfers: March 13, 2025 Suffolk Times 2025 Residential Real Estate winners announced: Part 2 The Business Journals Homes for Sale in Manhattan and Staten Island The New York Times Top residential real estate sales for Feb. 24-28 in Sarasota, Siesta Key, Palmer Ranch, Osprey, Nokomis Your Observer Andrew Cuomo’s Baggage May Curb Commercial Real Estate’s Enthusiasm Commercial Observer Compass Stock Perks Up on Berkshire Real-Estate Report The Wall Street Journal LaSalle Street office tower hits the market at a tough time Crain's Chicago Business News of public record: Muskingum County real estate transfers Zanesville Times Recorder Compass is in talks to buy Buffett’s real-estate brokerage unit, WSJ reports By Reuters Investing.com How to Invest in Digital Real Estate in 2025 Business.com Massachusetts has the fastest home sales in the country. How long are homes on the market? Worcester Telegram Single-family homes built for renters | Real Estate Newsletter The Philadelphia Inquirer Real estate scam, gas leak investigation, and harassment report among recent KB police activity Islander News.com Real estate agents discuss falling home prices in central Phoenix The Arizona Republic Class-Harlan Real Estate announces new partnership Bucks County Herald newspaper Luxurious Vanderbilt Beach property in Naples sells for record price. We have photos, video Naples Daily News Homes for Sale in Connecticut and New York The New York Times Mipim 2025: Redevco CEO says 'we have to work to demonstrate why you should invest in real estate' CoStar Group From trailers to multimillion-dollar estates: Nashville's luxury presence is here to stay The Business Journals The state of central Ohio's real estate market WOSU Public Media UK's Savills expects return-to-office real estate boost Yahoo Finance Compass is in talks to buy Buffett's real-estate brokerage unit, WSJ reports -March 13, 2025 at 04:02 pm EDT Marketscreener.com |
![]() |
![]() |
![]() |
RELATED ARTICLES
Selling Houses: The Basics of Design Psychology I'm often asked about the basics of Design Psychology, which offers innovative interior and exterior design ideas for increasing profit and shortening market time. In reply, I begin by saying that Design Psychology's strategies go well beyond normal cleaning, painting, and repair. Buying and Selling Real Estate in Florida Florida is known as the "Sun Shine" state, and the reason is clear. People move to Florida for many reasons, but most that move there stay there. First Impressions Will Sell Property Fast! First impressions count, buyers will have already formed an impression before they step into your property. A well-kept garden, pathway and fence, plus a freshly painted front door are immediately appealing, whereas a scruffy outdoor space with a litter bin outside the front door may turn many prospective buyers away. Encouraging Debt Most of us don't talk about money, finances, credit, debt.. What To Expect From Your House Appraisal Having your house appraised can be a scary step in the moving process, especially if you don't know what to expect. Will your house pass muster or will they find some hidden defects and problems lurking in the basement and attic? Should you scrub the house clean?Don't worry - this isn't a test of how clean you keep your house or even if your house has problems (that will be for the home inspector to find out). Where is Florida Investment Property Florida Investment Property - Why Investing is a Wise DecisionThere are many reasons to purchase investment property in Florida, the foremost being value appreciation. Property values generally rise while debt decreases; making real estate purchases a good investment. Product Review of Carelton Sheets No Money Down Course Real estate continues to be a very important part of any financial wealth building strategy. Most wealthy individuals have real estate investments as a portion of their overall net worth. New Housing Starts Do Not Guarantee Aftermarket Sales We have been studying a trend of new home buyers in the US in light of this latest housing boom. And how we should adjust our strategies to deal with it. A Possible Bargain: Foreclosed Properties In the superheated San Francisco Bay Area property market, foreclosed properties are available at as much as 40% below market value, writes Srini Saripalli.The last few months of a calendar year are considered sluggish for transacting real estate, but Silicon Valley seems to be an exception to this. Apartment Financing Explained So you're interested in entering the world of property management? Have you thought about how you're going to get into this potentially lucrative market? Let's face it; unless you've just inherited a large sum of money or are otherwise independently wealthy you're going to have to borrow. This is where apartment financing comes in. Buying a Newly-Built Home? Ten Benefits of Using a Real Estate Professional It might not seem necessary to involve a real estate professional in a transaction where a buyer can deal directly with a builder. However, by using a real estate professional, you have someone to protect your interests and guide you along the right path. Purchasing Florida Investment Property And Various Considerations Purchasing Florida Investment PropertyConsidering researching the purchase of Florida Investment Property or properties for sale in central Florida? Do you find yourself wishing you didn't have that lawn to mow and the constant upkeep on a home? Purchasing Florida Investment Property can relieve you of all those household chores but purchasing a Florida Investment Property requires you do some homework. You need to know what you are looking for in a Florida Investment Property. Real Estate Appraisal - Rental Properties Real estate appraisal for rental properties isn't the same as for single family homes. If you were looking at a 24-unit building, it would be difficult to find similar ones nearby that have recently sold. Escalation Clauses - A Home Buyers Secret Weapon Today we discuss escalation clauses because much of the country is experiencing an extreme "sellers' market." By that, I mean there are more buyers than there are sellers, and that results in sellers' getting more than one offer to buy their property. Follow-Up - The Key To Successful Closings If everyone always did everything they said they'd do, we'd all be a lot richer. Unfortunately, tasks are overlooked, and the ball is often dropped. Whats This about a Housing Bubble? In his recent testimony, Alan Greenspan warned against the possiblity that we have seen home prices plateau. The bursting of the "bubble" could cause a big hit to the U. Home Selling: Making It Easy On Yourself! It's a dream for many to buy and take ownership of a home. It's something one aspires for in their lifetime. How Much Home Can You Afford In Todays Market? If you haven't figured your credit worthiness and borrowing power lately, you might be surprised at how much home you can afford to buy in today's market! Mortgage Lenders are very optimistic about the future of the real estate market and as a result they are willing to loan more on properties than you might expect! And, lenders are making loans at rates not seen since the late 1960s.We,as your Realtor, will be most willing to align you with one of our favored lenders for a private and complete analysis of your borrowing power. Property Investing Secrets 9 Property Investing: Here Are Two Important Tactics You Must Do When Buying Real Estate Off The InternetYou can purchase property off the internet. The off line fundamentals of property investing apply on line. Equity Equity is the value of your home minus what you owe on your mortgage. For example, If Joe's home is worth $200,000 and Joe still owes $170,000, then Joe's Equity is $30,000. ![]() |
home | site map |
© 2006 TIGER MEDIA |