Archive for the 'Home Buying' Category
Flipping can Work in a Bad Market
Today’s market seems to reward flippers who are able to buy homes and gut them well, then start from scratch. Homes with terrible interiors, and unconventional basements, or weird pockets of space, can often be purchased very cheap and then cleaned out, repainted, re-floored, and resold quickly and for a good profit.
Finding homes with easily convertible basements or patios is an easy way to add square footage to a home, and make an old 1 bedroom 1 bath into a three bedroom 1 bath. It sounds great, but finding such perfect projects takes a lot of time hunting, and a trained eye to identify the diamond in the rough.
If you find yourself looking at a finished home, you’ll likely be impressed at the space addition, and new look to the formerly old home. That said, if you’re up to the project, I recommend doing it all yourself, rather than paying a flipper tens of thousands in profit for the month’s work they did.
How to List your Home on the MLS Free
This will be the first of a series of information on ways to save money when buying or selling a home. While I am a licensed real estate agent in the state of Utah, I encourage people to always buy homes for as little as possible, even without an agent if ability and circumstance permit.
Perhaps one the best places to approach when thinking of selling your home is IggysHouse.com. They allow you to post on the MLS and on Realtor.com absolutely free of charge. While they naturally encourage clients to use some of their sister companies paid services, they are still hands down one of the cheapest ways to list your home if you plan to sell by owner. (Can’t really beat free now can you?)
While still a new service, you really have nothing to lose by trying them. If the MLS listing fails to yield a buyer, you can consider other options for selling your home quick.
In an effort to increase recruitment, the United States Army is exploring a proposal that would allow new recruits to accrue up to $45,000 over the course of their enlistment, tax free, towards the down payment of a home. With Veteran benefits already offering generous loans to veterans, it is certainly easier to buy property as an enlisted man.
But is it worth it?
Leasing to Own is a creative method of essentially writing a long term purchase contract on a home with two big differences. You can move into the home immediately, and you lease the home until the contract closes. Such ‘Lease to Own’ options tend to appeal to a few select groups:
1. First time homebuyers with low-credit, no down payment, or are in some way unable to afford/obtain a mortgage
2. Illegal aliens, persons seeking citizenship, or persons who need time to find a family member to cosign with them.
3. Investors who wish to gamble that a home will go up in value, but don’t want to risk too much if it does not.
4. The constantly evicted who otherwise cannot find places to rent. (Sellers sometimes get desperate to fill the property and as a result are not as thorough in background checking)
For most first time home buyers leasing-to-own is a BAD IDEA. Chances are that almost every lease to own property you find will be constructed to result in one of the following outcomes:
1. Buyer agrees to rent the house for more than it would normally rent for, with the understanding that a small amount per month will be applied to the purchase price should you purchase in a year or more.
2. Buyer spends all kinds of money fixing up the house, making repairs, and so on. Buyer generally believes he or she will own the house so they take better care of it than if they were just renting.
3. X year(s) pass, and it’s time for the buyer to buy the house. One of three things happens:
a) The property has decreased in value —–> so the buyer walks away, losing a few thousand dollars in what was paid to extra rent, plus all the repair costs, new carpet, custom blinds, paint, landscaping etc.
b) The property is worth less —–> buyer stupidly buys at originally negotiated price because of money already sunk into the home.
c) The property has increased in value —–> seller then tells buyer about the new, higher price. Buyer threatens to sue, seller laughs. Seller sells for higher price, either to buyer…or a new sucker.
Keep in mind that smart real estate investors use the lease-option scam to extract extra money out of their investment properties. If you own investment property, a carefully constructed rent-to-own option can make you several thousand dollars AND get you a good renter.
Leasing to own is usually a BAD idea for illegal aliens, and others who are currently unable to get a loan, but think they might be able to find someone to cosign or get the loan for them in a year or two.
Having someone else own your home is just asking for trouble. Also, since home loans can be such a complicated process, it is very difficult to predict accurately that you will be able to get a loan in time to purchase the home.
That said, if you find a deal (which investors often do) locking it in a long term lease to own contract could be a wise way of gambling. Should home fall in value, you can walk away relatively unscathed (vs actually owning it).
Doing so REQUIRES a good attorney to help you construct a bullet-proof contract so that you can actually purchase the property should it increase in value. You should also try to contract the option of subleasing, as you may not actually want to live in the home, and subleasing is an easy way to minimize loss, and possibly even break even. Sellers may resist this (for obvious reasons, as you could potentially sublease to a very destructive renter)
Always be creative when approaching a seller, as proposing a rent-to-own could be an excellent method of buying a property with minimal risk. For the reasons already listed above, a buyer should generally avoid properties already being marketed as lease-to-buys.
1. Builders will sometimes use non-standard forms and contracts. If you’ve decided to buy a home without an agent, you should be careful before signing ANYTHING.
Prior to purchasing you should sit down and look over all forms, including the general state-approved forms. Make sure you’re comfortable with the language and wording of it all. If you’re not, you should decide on an attorney, agent, or builder’s agent to help you through the process.
2. If you find a builder and decide to use the builder’s agent as both your buying agent and their selling agent, keep in mind that the agent will have primary fiduciary obligations to the seller. That means you as the buyer, will most likely not get the best deal.
3. Use an attorney to look over contracts. Whether you have an agent or not, you can get in serious trouble if you don’t carefully contract the builder to build exactly what you want by a specific date. No one wants their home’s construction to be delayed three years, or worse, never be finished. An agent is NOT a lawyer.
4. Agents get paid off commission. As a result, most agents will act in their own best interests and not yours. This can be a serious risk, as the agent may not bother even looking over contracts and could get you a bad to terrible deal in an effort to secure a quick and easy commission.
5. Coming to the transaction with no agent should give you better bargaining power, especially with a builder. The advertised price for the home should generally includes a potential commission for an agent. This means builders can and should lower the price if you’re able to work without an agent. They should not increase the list price if they find you’re using one however.
Good luck on the purchase. A good agent can save you thousands, but a bad one can leave you with an unfinished home!