All Forum Posts by: Brandy Griffin

Delays like this happen more often than not with foreclosed properties. Our contract clearly allowed us to get a full refund of earnest money if the seller was not able to get the title insured, so we had very little risk.

HUD and the banks are usually pretty slow at cleaning up title issues. There are usually many other offers on foreclosed properties by investors, so HUD (or the bank) can find another purchaser quickly. In other words they don't have a lot of incentive for pushing the title cleanup through on their side...unless someone becomes a squeaky wheel.

We had a rare opportunity to test this theory out when we bought 2 sets of triplexes, one via auction and the other via REO. The triplexes are identical and each had the same kinds of title issues -- but we cleaned it up in 3 weeks and the bank took 3 months to get the title insurable. This video explains exactly what happened with those two properties: http://www.youtube.com/watch?v=xx-zj6vxVOU&feature=g-upl

At each extension, make sure to weigh out your opportunity costs and verify that the contract you're in is still the best way to use your money.

Generally speaking, banks that are selling REOs are receiving numerous offers and so they have most of the leverage in the sale. The last REO we bought had 12 other offers on it.

The banks also are interested in moving the property off their books as quickly, easily, and cheaply as possible. That typically means they're looking for offers that:

* are all cash
* are AS-IS contracts
* have no other contingencies
* have a closing date that's sooner than later

Unfortunately, sometimes the banks put the property out on the market and get into a contract when the title is not quite marketable yet. When this happens, they'll ask for extension after extension until the issues -- like code violations, municipal or utility liens -- are cleaned up enough so they can close.

The banks are usually pretty slow at cleaning up title issues, compared to doing it yourself. We just bought 2 sets of triplexes, one via auction and the other via REO. They each had the same kinds of title issues -- we cleaned it up in 3 weeks, but the bank took 3 months to clear the same types of issues. This video explains exactly what happened with those two properties: http://www.youtube.com/watch?v=xx-zj6vxVOU&feature=g-upl

The moral of the story is... if you have a pretty flexible financial scenario set up for the REO deal, you'll be fine. If not, make a backup plan in case your closing gets delayed by weeks or even months.

The Federal Trade Commission (FTC) has a great, quick article outlining a landlord's responsibilities when evaluating an application for a lease, and exactly what info you have to provide (and the info you don't have to provide):

http://business.ftc.gov/documents/bus49-using-consumer-reports-what-landlords-need-know

Nice job, Yan :) Looking forward to the next entry in your list of successes...

For us, it usually comes down to a math problem that keeps us focused on profit. It's basically this:

* How much of our rehab budget is allocated as cushion?
* For the contractor(s) working (or running) that rehab project, if they work independently, how much of that cushion will they eat up by making "costly" decisions?

Subtract one from the other, and if you're still in the positive, you're probably alright to let them work on it more independently...

A costly decision tends to be any decision that is not in line with your vision... and your vision is likely (hopefully?) one that is focused on the amount of profit that is made when all is said and done at the end of the deal.

The obvious costly decisions that a contractor might make are spending too much on materials, or making a decision in how to actually do the project that increases the labor costs or decreases the value of the rehab work that he/she is doing. There are many other examples of a costly decision, I'm sure everyone can chime in with at least 3 or 4 :)

For our crew of contractors, we have worked with many of them long enough to know how much they will cost us in profit if we let them run the show completely on their own (whether through actual dollars or by delaying a project's completion date). For new ones, we have a basic figure that we assume they will cost us in the beginning if left alone as they get to know our style.

And like most others here on BP, I have a rough idea about how much my time is worth per hour, largely based on opportunity cost. If it takes me 10 hours to work an auction deal that nets around $35k (like this one we chronicled in one of our youtube videos http://www.youtube.com/watch?v=iD8t-9HqD4I&feature=plcp, then my time is usually better spent looking for new deals.

That's just one of many ways to look at it though...

Hi Mike,

Great choice and great timing :) I'm sure you'll receive plenty of help/links/info from BP, it's a very active network.

Arizona is one of the best states to jump into real estate with your type of investment strategy. According to RealtyTrac's latest (free) reports, 1 out of every 346 homes in AZ are in some stage of foreclosure, and for your investment strategy goals, you probably want to spend some time digging into the foreclosure scene.

That's pretty bad news, hopefully everyone is OK though.

Most insurance companies like to move claims like these along pretty quick, so like Joe said, just stick close to your adjuster and things should go smoothly.

I'm curious though, what are your plans for the property now that it needs some major work? It could be an opportunity in disguise...

Everything else aside, I think it's nice to see the both the public and private sectors trying to be creative to solve the housing crisis.

It definitely bad news for the private sector to know that the government may, in essence, nullify contracts that were made as a part of normal business, but then again, it's the private sector that is offering to loan funds to the government to pay fair market value to the homeowner, so they get at least a small piece of the pie.

Plus, later the investors can buy the seized property sooner than if it went the REO route, and at a cheap price.

It is definitely a little complicated to understand though, I think this video explains it really well http://bit.ly/MlSTgE