Real Estate Quotes
If you'll be using bank financing for the purchase, be proactive and include a copy of your pre-approval letter with your offer It's one thing to tell the seller that you can qualify, but it's another for them to physically hold the pre-approval letter in their hands so they know that the sale will go through. [2015] - Brandon Turner
An escalation clause can be included in an offer and is used when a property might have multiple bidders. It essentially says, "If someone else bids higher than me, this offer will automatically increase to $X above theirs, up to a certain point." The danger of an escalation clause, of course, is that it tells the seller exactly how high you will go! Therefore, only use an escalation clause if you know there will be multiple offers, and never make your maximum price higher than what you should pay. [2015] - Brandon Turner
You can negotiate for any of the following: price, close date, closing location, contingencies, financing, closing costs, home warranty, repairs, credits, possession date, items left in the property, etc. [2015] - Brandon Turner
You can help your negotiation by making it a little more uncomfortable by instituting a penalty whenever the other party asks for a concession. A penalty could be as simple as not responding for several days or requiring your lawyer to look over the issue. This will train the other party to stop asking for concessions, because they'll quickly realize it hurts them every time they do. [2015] - Brandon Turner
When negotiating in person with a motivated seller, one tactic that works almost every time is simple: ask the seller what their lowest price is. They'll usually tell you a number, but this is never their real lowest price--this is their starting price! Then, ask them a follow up question like "Okay, but what if I could pay all cash and close next week?" They will almost always go a little lower. If you wanted to push it one more time, you could say something like "So, if I were to offer you $X and get you the cash you need in the next ten days, that would be unreasonable?" No one likes to appear unreasonable, and there is a good chance they'll respond with "Yeah, I could do that." [2015] - Brandon Turner
When investing in real estate, there is a very good chance that someday, someone will try to sue you. When you own a property free and clear, this is typically evident on the public record, because there is no bank lien on the property. Therefore, you are essentially holding up a sign that says, "I have lots of money that you can try to take!!" Lawyers (especially those paid on the outcome of a lawsuit, as most lawyers of this type are) are reluctant to pursue rental owners who have a lot of leverage. [2015] - Brandon Turner
Investment loans are usually .5 to 1 point higher than owner-occupied loans. [2015] - Brandon Turner
Conventional lenders are not very fond of loaning on properties owned by an entity, such as an LLC or corporation, especially for residential loans. You could, as many investors do, buy the property in your personal name and then transfer it to your LLC, but you put yourself at risk of having the "due on sale" clause called by the bank. Be sure to talk to a lawyer and CAP who can help you sort these types of issues out, or speak with your bank and get permission, in writing, to transfer your properties to an LLC after buying them (this is the only way you'll be truly protected from that dreaded "due on sale" clause). [2015] - Brandon Turner
Portfolio loans may be slightly higher in rate and shorter in term, or they may involve a balloon payment (most likely through a refinance). None of the "big banks" will do portfolio lending. Instead, you'll want to focus your search on small, local community banks. Look for banks that have a maximum of 20 different branches. Credit unions might also be a good source of portfolio lending. Portfolio lenders will not be labeled as such. You'll simply need to call them up and find out. Ask to speak with the loan officer, because the teller will likely have no idea how to help you. [2015] - Brandon Turner
Hard money lenders are professionals who lend out their own money, or other peoples' money, for a living. They have a set way of doing things, a predefined interest rate, a predefined set of fees (points), and a very short term (usually less than one year). Private lenders are lending their own money but don't typically do so for a living. The rates, fees, and terms are usually lower and much more negotiable. The most common private money rates I see fall between 6% and 12%, depending on the relationship. [2015] - Brandon Turner
A home equity loan and a home equity line of credit are similar but have a few major differences. The loan is typically taken out all at one time and paid back in installments until it is paid off, much like a typical mortgage or car loan. The interest rate and payment are generally fixed for the life of the loan (but they don't have to be). A home equity line of credit is a revolving account that works much like a credit card. You can borrow as much as you want, up to the limit, pay it back, and then borrow again These lines of credit generally have lower interest rates than home equity loans, but those rates are generally variable and so can rise or fall. [2015] - Brandon Turner
Front-end DTI (Debt-to-Income Ratio) is the relationship between how much your total housing payment will be and how much income you have each month. Back-end DTI is the relationship between how much total debt you have and how much income you make. Typically, you probably want your front-end DTI to be less than 28% and your back-end DTI to be less than 36%. When checking with a lender on their DTI requirements, you will typically see these numbers in the following format: (28,36). [2015] - Brandon Turner
LTV (Loan-to-Value Ratio) = Total Loan Amount(s)/Fair Market Value. Lenders typically have different requirements for maximum LTV based on the property type. For example, for an owner-occupied property with an FHA loan, the lender will go up to 96.5% LTV. However, on a commercial property, a lender may not want to lend above 50% LTV. If you are an investor, you are likely to find 70%-80% LTV the norm for investment properties. [2015] - Brandon Turner
If your credit score is below 600, understand that obtaining any kind of loan could be difficult. To check your credit score, I recommend visiting CreditKarma.com, which allows you to see your score for free. [2015] - Brandon Turner
If you are a property investor, the lender will also look at your rental income and may be able to use that income to offset your debt. However, most lenders will not give you any credit for this rental income unless you have been a landlord for more than two years. In addition, no matter how long you've been a landlord, you likely will never get 100% of the rental income counted toward you. They will likely give you 70%-80% just to be safe on their end. [2015] - Brandon Turner
A lender wants to know that not only is the property going to be stable but that you will also be, especially with regard to your credit decisions. For this reason, it's important not to do anything crazy with your credit while you're trying to obtain a loan, such as opening up new credit accounts or adding on new debt. [2015] - Brandon Turner
Other documents can get recorded on the chain of title in addition to the deed and that give people certain rights to the property. The most common examples would be easements, covenants, or liens. Easements (a legal right given by the property owner to another party to allow them to use or cross the property) and covenants (a legal document that explains how a property can be used) are fairly common and not a big deal, but a lien can make or break a sale. Your goal when buying real estate is to only buy properties that have a "clear title". This means a title that has been researched and found to be complete and free of liens or other issues. [2015] - Brandon Turner
When you're working with a real estate agent, your agent will likely recommend an attorney or title company if you don't already have a favorite. If you are buying the property without an agent, through a private sale, you will need to contact the title company yourself to get the title process rolling. [2015] - Brandon Turner
The following is a list of documents you may receive from the seller: seller disclosures (most states require that the seller disclose any known defects in a property before selling it), seller's tax returns (to get these - simply ask them), current leases, current rent roll, tenant estoppel certificates, current year's tax bill, recent utility bills (either ask for specific bills or call up the local utility companies and get the information directly from the source. Also verify who pays for which utility, and always check to make sure the utility bills have all been paid), security deposit (make sure you are given the correct cash at closing), HOA documents. [2015] - Brandon Turner
Unless you are a licensed and experienced contractor, do not do your own inspection. Yes, you should walk through the property and make sure there are no major red flags before spending the money on an inspector, but your official inspection should be done by a real, licensed property inspector. Try to get the inspector onto the property within four days of mutual acceptance. If possible, make sure the power, water, and all other utilities for the property are turned on before the inspection. I recommend you are present for the inspection. The report that the inspector provides you several days after the inspection will likely be scary. Your job is to decide which issues are important and which aren't. Being present for the inspection makes this process much easier. [2015] - Brandon Turner