All Forum Posts by: John Newland

I have a seller who purchased a property that has two buildings on one lot. He wants to divide the current lot into two separate lots with each building having it's own lot and sell each property individually.

The only way the city will allow him to split the properties is to make them into condos. There will be two tax keys and the "lot" will actually be a limited common element appurtenant to each building rather than having an actual separate lot for each building.

His intent is to sell these properties to investors interested in holding them as rental properties. The buildings themselves need updating and upgrading and he is looking to sell them as is, i.e. these are not your typical condos (one building is a mixed use property with an old unused tavern that has living quarters upstairs and the other is a two bedroom bungalow.)

I am trying to determine the best course to market these properties. The best case scenario would be a buyer coming in and purchasing the property as it currently sits, currently only one lot, one tax key, and two buildings. As a group of savvy investors, what do you think we are going to be up againt if this seller decides to do split as condos? Will the buy and hold crowd be turned off at this kind of set up?

Have you considered listing it with a flat fee MLS broker? I know wholesalers who list their properties on MLS after exhausting their buyers list and go on to sell that property in short time for good money by doing so. If the place is priced right, it should sell relatively quickly. If it's not, you may need to reconsider your pricing. $14,000 is a pretty good spread on a wholesale deal. That 10% you're willing to part with should cover the flat fee listing and the buyer's agent commission.

Not sure how things work in your state, but you should have your agent issue a notice withdrawing/voiding your offer IF nothing has been accepted in writing. Then submit a new offer with the correct price. The notice does not need to be signed by the seller side, only your signature is needed. I would not hesitate to do this, although it takes these banks a while to create binding acceptance in my experience.

Renae, you say you're starting at an agency after the first of the year and you have already obtained your license. It also appears you are looking to save up for your GMAR and MLS dues. I would see if the brokerage you are going to work under will let you work as a licensed assistant. You are eligible to receive compensation since you are a licensed real estate agent. This will allow you to save the $600 in fees you would have to pay to use the Realtor designation and have your own MLS access. As the broker's assistant, I'm pretty sure you could use their MLS access, show properties, and potentially collect commissions depending on the arrangement you work out with the broker. You may have to actually assist them, so be prepared for that, as well as the fact they may not allow such a set up. If they do, great, and apply that $600 to a running car.

A replacement mound system can run from $7500-$15,000 depending on the lot/property, so $20,000 does seem a little on the high side. Just because you may end up spending $10,000 on a new septic or mound system doesn't mean you need to discount the property the full $10,000 if the price is already right on the place.

I agree 100% with Steve's answer. If I could also offer up a quick bit of advice. I've heard from a few plumbers that do septic inspections that on vacant properties you need to bring the septic up to a typical operating condition. Since the property is presumably vacant and the septic system is not in use, you could get a false result indicating everything is okay. What they do is simply run water (about 50 gallons per bedroom) out to the leach field. The next day the inspector comes back and performs the actual test. All this is well and good, but it is wise to plan for total replacement with your price.

It would still be a good idea to test the system, or at least check to see what kind of replacement system can be installed. Where I am from (south eastern Wisconsin,) a mound system usually goes in place of a standard septic system with a drain field. The land must perk for a mound system, otherwise the alternative is a holding tank, which is less desirable and sometimes a deterrent for a buyer.

By writing a cash offer, you are simply not utilizing a financing contingency. As long as the seller gets their check at closing, they could care less about where the money is coming from. You can fund the transaction with a mortgage/loan, but in the event financing is unavailable and you cannot close, you are risking your earnest money deposit and possibly more.

Hard money is a loan no matter how you slice it, so you probably should have had a financing contingency as a safety net. If you are being refused the hard money, and you cannot get financing by any other means necessary, you may want to reason with the seller or their agent if one is involved and change the terms of the contract to include a financing contingency or just release you from the contract. If you cannot close and they will not fully release you from the contract, you should probably contact an attorney, even if it costs more than your deposit and even if you are fine with losing your deposit, because the seller can sue for specific performance.

If you have not put in an offer yet and intend on using hard money, then definitely protect yourself with a financing contingency or at least a provision making the deal contingent upon obtaining a hard money loan with the terms that are acceptable to you.

You can try calling the listing agent and asking them why the carpet was removed. The better question would be why the previous offers fell through, and if it was due to financing, why didn't the financing go through.

If there is a known issue (referred to as a material adverse fact) affecting the property, a licensee must disclose it, as should a seller. However, REO sellers and their listing agents seem to be immune from this rule, so even if they do know something is up with the property, they most likely will not disclose it, even if they should.

So basically, it's up to your own due diligence to determine if there is an issue with the basement flooding out and any issues (i.e. mold, especially in the drywall) caused by the flood, as well as any other defects in the property that would influence your decision to purchase. Be sure to read the terms of the auction, because in most if not all cases, you have to make all inspections you deem necessary BEFORE bidding, at your cost, even if you do not win the auction. If you make a pre-auction offer and it gets accepted, you may be able to make the offer contingent upon a satisfactory home inspection and not chance the home inspection money for nothing.

Well, if it's an online auction, you should know exactly what the current bid is. However, the current bid may not be the highest bid, meaning the high bidder could have a proxy bid exceeding the amount of the current bid by several thousand. For example, the current bid by Bidder X is $25,000, but they could have set a maximum bid of $35,000. You would have to bid at least $35,001 to out bid them. You are also up against the seller's reserve if there is one, which ususally goes undisclosed.

The best advice if you really want the property and are not persuing it to make a profit is to bid what you think the property is worth to you. I would not go all in at once mind you, but I would bid up the auction to get the high bid if the price makes sense. If you are the high bid but do not reach the reserve, the seller will try to counter you up, and conversely you can counter them until you either get the property or walk away.

The whole point of a rehab is to make the house healthy again for a new buyer. So if an item is "iffy" or questionable, I think the only answer is to repair or replace. In my opinion, the stopping point is when all detrimental issues of the property have been addressed AND the place looks the part. Covering up issues (potential or existing) is unacceptable. And like Ophelia said, if you notice it, you can bet the picky buyers in this market will notice it too.