@Malika Boudreaux
Dittos on Lydia's point. My take-aways on 2 other points:
1) Lease Option tenant buyer (TB): Curious if you are familiar with Dodd-Frank legislation on these types of transactions. If not, before you do another, you should get very familiar with them. Use a real estate attorney on at least one of these to protect yourself and learn. In a hot market, which we are and have been in, depending on the terms of your lease option deal, if prices back up and your tenant buyer cannot qualify in, say 2-3 years, and their is any equity in the deal for the TB and especially if they have paid you 2-5% as a "deposit" or "down-payment", this is a red flag, which could result in a lawsuit. Also, did the TB have the property inspected and appraised? If not, two more red flags. Did you file the appropriate paperwork with the county of record? If not, between the recorder and assessor's offices, two more red flags.
2) Buyer's Agent Realtor: Assuming you used the Realtor mentioned as your Buyer's Agent (formal Buyer Agency Agreement between you and him or her), did they not strongly suggest that you have the property professionally inspected to learn about the need for a new roof? If not, as you now know, this is a massive oops! In Colorado, regardless of age of property, we always hire pros to do general inspections, separate roof inspection, separate HVAC inspection, separate Radon inspection and separate sewer scope inspection. This way, during the inspection period of the contract, we can re-negotiate as needed to account for the big items and any safety-related issues that turn up.
Food for thought. Best of luck.
@Alan Daniels Understood on all. As a licensee, depending on laws in your state, you "hang your license" under an employing or managing broker for at least 2 years, after which you may make application to become an employing (responsible) broker, or an independent, non-employing broker (some states allow independent status, while others do not). Nice thing about being an independent is you are beholding to no on except the Real Estate Commission and the Board of Realtors, assuming you are a Realtor to begin with.
The other wrinkle in your sub-to (or contract for deed, if you change to it) is with your employing broker. If you value this relationship, spend a few minutes with him/her and explain what you are doing to be sure they are OK with it. Why, because if he finds out later, it may create issues, because pretty much everything you do in real estate, so long as you hold a real estate license, can and will reflect on them and potentially create issues if something goes south with the deal down the road.
Again, tread carefully! These deals, though not suggested by many real estate attorneys, can be done very safely and per the law. You just have to look at them from the standpoint of someone suing you down the road and that potential alone will modify how you conduct the transaction. When in doubt, disclose, disclose, but get some ink on the disclosure to be sure it isn't verbal, or your word against theirs.
Best of luck!
@Alan Daniels I thought it easier to answer by first copying your post, then answering each point in turn, in CAPS (not "yelling," just want to separate your question/concern from my answer):
I wanted to get everyone's thoughts on being a Realtor and what the "status quo" (for a lack of a better word) is regarding buying a property "subject to", using an LLC as the Buyer, as well as giving the Seller a Promissory Note paid out over 5 years. MOST ANY COMPETENT REAL ESTATE ATTORNEY WOULD LIKELY & STRONGLY ENCOURAGE YOU TO NOT PURCHASE A PROPERTY "SUB TO" BECAUSE OF THE GOTCHAS THAT CAN OCCUR, NOT THE LEAST OF WHICH IS VIOLATING THE TERMS OF THE SELLER'S MORTGAGE OR DEED OF TRUST. AS COMPARED TO A CONTRACT FOR DEED / LAND TRUST, SUB-TO'S PASS LEGAL TITLE, WHEREAS THE LATTER HOLDS TITLE IN ESCROW VIA A QUALIFIED INTERMEDIARY. I want to make sure I do the right thing, as I've received some advise that seems a bit "sketchy". I know that to some extent, this is a Broker to Broker policy, but wanted to get more educated and tenured perspectives and if there are any considerations that I am likely not accounting for, as this is my first subject to transaction. NOT SURE WHAT YOU MEAN BY "BROKER TO BROKER POLICY?" THE LAWS IN YOUR STATE WILL DICTATE AND GOVERN HOW SUCH A TRANSACTION IS DONE, FROM START TO FINISH. AS A LICENSED AGENT, YOU AND/OR YOUR BROKER, SHOULD CHECK/VERIFY COMMISSION RULES ON SUCH A TRANSACTION TO MAKE SURE THERE ARE NO LICENSE LAW VIOLATIONS AS A RESULT. Also, I live in GA and realize that this is a variable in this equation. I am buying this property thru an LLC I already have established, but does not hold any other properties under it. The seller is fully aware of all of these variables and is 110% cool with it all. I plan to keep this as a rental. AS WITH ANY OTHER REAL ESTATE TRANSACTION, THE BUYER'S FORM CAN BE ANYTHING LEGAL, WHETHER A CORP, LLC, INDIVIDUAL, ETC.
To be more specific...
THERE IS ALWAYS MORE TO IT, BUT THE SHORT STORY IS TO USE AN ATTORNEY AND/OR TITLE COMPANY, ENGAGED AND PAID FOR BY YOU, WHO HAS DONE LOTS OF THESE TYPES OF TRANSACTIONS AND DO NOT SHORT-CUT THE PROCESS FOR ANY REASON.
GOOD LUCK WITH IT.
@Tina Gordon. If you are sourcing leads, properties and already have buyers and just need someone to verify the property, what exactly do you mean by, "we need a person with to physically check out the properties and meet with sellers face to face."?
If this means you want someone to inspect the property and get more info from a seller, it may make more sense to hire a Home Inspector, who also has knowledge of HVAC and can also inspect roofs and be able to give an opinion on the structural integrity of the building (water drainage, cracks in foundation walls, heaved concrete flatwork), plus can also take a look at plumbing and electrical to look for issues and code compliance issues.
Unless you need a BPO/CMA to confirm market value, not sure a local agent will be a value-add to you. If you question value, because as you know, value can be very different from one sub to another and value can be very much a block by block sort of question, then in addition to a Home Inspector, I would definitely solicit a local agent for a CMA, but you may want to offer them a stipend for their time. You and they can sort out what that means to you both.
Best of luck in Corpus!
@Neil Rafol Absent use of agents on one or both sides, or a real estate attorney (who should be fiduciary for the buyer), what comes to mind is protection for you (and your buyer) in the event something goes south, or turns out differently than anticipated after close of escrow.
The appraisal mentioned by @Brian Phillips, is one way to establish value by a 3rd party in order to ensure your buyer doesn't pay too much and you don't sell too low. The issue though, is that your buyer is the one who should hire the independent appraiser to perform a market appraisal. This way, it isn't you, or someone you hired who produced the value for the buyer's offer. This responsibility is theirs, where it should be. Based on market value, they offer and you accept formally, using legal and commonly-accepted contracts and addenda. BTW - the comments on appraisal assume you will be doing something creative, as you sort of alluded in your opening post, which does not involve a lender. If a lender is part of the equation, as you may know, they will engage their own appraiser to handle this on their (and the buyer's) behalf.
Beyond the above, to keep yourself out of trouble and to satisfy any lender involved and to provide the closing agent with what they need, if not using agents or an attorney, just pick a suitable title company to handle all the paper and the closing based on your completed/signed purchase contract. As @Brian Phillips pointed out, you can obtain what you need from your state's Real Estate Commission. Most publish fillable, blank PDF forms online.
Just make sure to use the standard CBS (contract to buy/sell), with the various addenda required by your Real Estate Commission to get things started. Addenda normally include Square Footage, Source of Water, Lead-Based Paint, Mold, Termite and other disclosures and addenda required by law to require your buyer to protect themselves.
Make certain to read and understand these docs carefully, then follow the usual requirements for the various stages of the contract, which normally include deadlines for preliminary title, inspection, appraisal, insurance, loan conditions, etc.
Even if your tenant / buyer decides to bypass the above steps and just "trust you," do yourself a favor and don't skip the steps. Your buyer needs to go into the transaction knowing what they need to know to purchase your property. If they decide to pass on some of the steps, then find out later there were inspection issues that will cost them thousands, or that they paid $30K too much, or a number of other gotchas, you will find out quickly how their attitude will change.
Don't rely on the "cheap real estate agent" that was proposed above. Re-create the process like a pro would, or get some help. Best of luck to you.
If the property is listed, you have to know that the agent's primary interest is in how he gets paid. If he/she has done the legwork to get the listing posted, including media, etc., then they deserve a paycheck, the amount of which will come out of whatever down-payment is paid. The balance not used for selling costs, will represent the only skin you have in the game to the seller. These deals are solely dependent upon seller motivation. If the property has been on the market for too long, time can help with this motivation. If the property is vacant, unanswered by a sale, or rent, then this too helps the seller's motivation to consider creative financing.
In order to "calibrate" your offer, you should understand the seller's pain points if possible. As Michael Lee mentioned, the presence of a mortgage, or not, will be a good start. Looking at public records for unpaid taxes, liens, or other encumbrances, etc., should be investigated (open prelim title with a title co and have them run prelim title report for about $10 to find out).
Will you offer on your own, or are you represented by a buyer's agent? If you are represented, this certainly provides you some protection, but also could cost the seller more commission that might otherwise be negotiated out of the deal between seller and listing agent.
If you do not have an agent who understands these types of transactions, use a real estate attorney! Additionally, if you get under contract, just make sure you use a qualified intermediary to handle the money after closing; loan payments & pay the bills (property taxes, etc.) and make certain your closing agent, or real estate attorney files the transaction properly with the county of record (all protection for you and your deal).
@Justin Stryker. 1st: Contact your MLS customer service and just ask what the differences [with them] are to switch to non-Board Member/Non-Realtor. If they allow, the fee may go up slightly, but no big deal I suspect. If your state is similar to Colorado in terms of numbers of Realtors vs. Non, it will be around 60/40, so if your MLS allows Non-Realtors, there will be a lot of brokerages who do one or the other, or both. Both means they have one managing broker who is a Realtor and one who isn't.
2nd: The "nons" are not hard to find, but will most certainly not be any of the "big box" brokerages. Just run search on Residential to create a fairly good-sized list of active listings, then look for the Realtor designation, or lack there-of, then note the brokerage name and contact info and contact them directly.
If you are not concerned about discount CE credits, using certain features like RPR, or becoming a GRI, etc., then my guess is you will save a fair amount of money (my annual board fees were $620). This change should not impact items like your E & O, etc.
You mentioned "Supra" in your post. If your MLS requires use of Supra, with no alternative plan for combo boxes, etc., then they may have you on that item. Colorado Springs, for example, does both, but if you show another agent's listing(s), who are required to use Supra, then it will be a total pain in the arse to show get into these properties unless combo boxes are allowed.
Good luck with it.
Stephanie H: First of all, commissions for all agents, in ANY state, are always negotiable. Where things get a bit dicey is the agent's business relationship with their employing/managing broker. Some brokerages allow 100% commission to the agent, but then charge them a "desk fee." Some split 80/20, 90/10, etc.
This arrangement is sort of all over the board, so when in doubt, just table the issue with your agent, assuming your business relationship is mutual and you prefer it to continue long into the future, and thoroughly discuss it openly.
How much is closing each of those two properties worth to me as an independent agent (just me, no employing/managing broker to get in the way)? It depends...
Am I going to get the listings on both properties once you are done rehabbing them? If yes, I'd do it for FREE. If not, I'd charge you a minimum of $1,000 to represent you as your fiduciary and handle the entire transaction from the contract to inspection to appraisal to loan approval and finally through the close of escrow.
As a final thought, if you are paying your agent a full commission side of 2.5% to 3%, you are paying too much as a repeat investor/buyer. Think of it from this perspective: How easy is it for your agent to list, market and sell the product you create compared to competing listings? After you turn that lump of coal into a diamond, is it easier to sell than the one down the street which has not been remodeled for the past 30 years? Sure it is. In the case of a buy-and-hold property, how much easier is it to rent once it has been tastefully upgraded? Unless over-pricing, pretty easy I'll bet. Anyhow, the point is that the easier you make it to sell the property, the less time your agent has to spend marketing and selling it. Time is money to us both.
I will bet my next paycheck that if you search on Discount Realtor, or Discount Real Estate Agent, in your area, you will find several to many agents who will list and sell your properties for under 1.5%. Most of these agents are very good at what they do and have turned their representation into the commodity it is quickly becoming. As well, just because your pay them less, does not mean you receive sub-standard, or "limited" service. Interview a few and find out what they have to offer, then discuss this with your agent and see if there is middle ground that makes it a win-win for you both.
As well, do yourself a huge favor and make certain your listing agent does not offer the max/full commission typically paid to the buyer's agent (the co-op broker) for the same reason mentioned above. If the going rate is 3%, have your agent offer the buyer's agent 2.2%, or 2.5%. This way, the combined commission, on both sides, will be much more reasonable to you, but not so offensive that agents won't show the property. BTW - this approach works much better in a seller's market. If your area is buyer's market, this will not work as well.
I wish you well!
As others have pointed out already, the items I noticed from looking at the listing, the pics, very briefly looking at the market, etc:
1. The front elevation is a bit stark in terms of color and curb appeal.
2. The interior photos are amateur-ish: Over-exposed (especially windows), viewing angle set too wide for the camera lens (some curvature on lines that are supposed to be straight).
3. No staging; this is a really big mistake, not just in this market, but any other. Buyers have to be able to see themselves in the home with their families. This requires proper staging to provide ideas, perspective and scale.
4. No floor plans.
5. This is 2019! Why is there no 360/3D tour to REALLY show the space.
As others have mentioned, when all else is right and the house still does not sell, or draw at least an average number of showings, it's about the buyer's perception of value vs. price.
Why did you price it where you did when you launched the listing? Revisit the steps with your agent and make sure you agree with her rationale and logic.
What does the competition look like? Have you, yourself, visited these competing listings with your agent in tow so you can compare and contrast similarities, features and benefits and then reflect in your marketing.
Do you know which demographic you are targeting? Millennials, move-up buyers, 50+, who? Then target your marketing to that group.
What is the market doing in Magnolia; how many active, under contract/pending, sold, withdrawns, etc. Is your situation better or worse than the market?
Has your agent conducted any OPEN HOUSES? If yes, what is the feedback from those folks who walked through the property?
Has your agent conducted a Broker Open House? Just like everyone on this post, we all have opinions. If your agent invites Brokers with a some wine and cheese tray from your local HEB store, you will get a bunch of feedback, which could be used to sell your newest flip!
Best of luck to you! I wish you well.
Forgot to answer your question about wholesalers putting properties on the MLS. Not illegal, just impossible unless you are a licensed agent, or can get one to do it for you.
In many MLS's, you have to be a license Realtor (not just a licensed agent) as many MLS's are owned/operated by Realtors. Depending on KY Real Estate Commission rules, you can possibly hire a licensed MLS member agent to post your listing as a "limited service" agent.
If you do not want agency representation from a full-service broker who has your best interests in mind, there are discount agents that will post a listing for $100's, not the typical $1,000's. They will post the listing and handle the paperwork, but little if anything else. To find these agents in KY, just Google "Discount Realtor," or "Discount Real Estate Broker" and you will receive lots of hits on these cut-rate brokers.