12 Steps to the Closing Table and the Big Check

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By Kathy Kennebrook (The Marketing Magic Lady)

Okay, so your property is under contract, you’ve pre-qualified your prospect; they are working with the lender and everything is moving right along, right? Not necessarily. There are several steps to a successful closing and we are going to cover those one by one. Now remember, once you have your dream team in place, you will have the people available who will handle all of the details for you. In the meantime, you still need to know what all the steps are so you know everything gets handled properly.

  1. Make sure you get a big enough deposit from your buyer so they have some real dollars invested in the deal. Even if they are going for one hundred percent financing I still get as much as I can in order to secure the deal better. If your buyer puts down a larger deposit they are usually more committed to going through with the closing, so this is a requirement for me. I won’t even consider a deposit less than $1,000.00, but I always try for as much as I can get. The higher dollar the property is, the more deposit I require.
  1. Make sure that the lender or the mortgage broker orders credit and an appraisal on the property immediately. Usually, I will not consider a buyer who has not already been pre-qualified, so usually the credit check has already been done. Many lenders will try to wait until they get the contracts and other paperwork in before ordering the appraisal. This is a no-no. If you wait on the appraisal, it can hold up your closing by two to three weeks. Plus, if this buyer doesn’t end up buying the property, the appraisal can be used for the next buyer. Most appraisals are good for six months and now you have an appraisal that has already been paid for.
  1. Follow up with the loan processor to make sure the appraisal has been ordered and that the other parts of the closing are moving along. Many times your title agent or your Realtor or your sales person will do this for you, after all they want to get paid too. Make sure they have everything they need from the buyer regarding loan documentation.
  1. Follow up and make sure that title work has also been started. You want to make sure that everything is done in a timely matter so that there are no holdups when you go to close. Every once in awhile you may discover some small glitch in the title work that needs to be addressed, such as a deed that wasn’t done correctly. There would need to be an additional quit claim deed done to correct the mistake. Make sure the title agent understands the contract paperwork and what entity the funds are to be paid to. You also want to make sure they do the 1099 correctly so the right entity gets taxed. You will also want to provide the title company with a copy of the existing title policy. This means that they will be able to come forward from the date of your policy which takes less time and this may make the title search cheaper. Make sure the title agent understands who is going to pay for what regarding closing costs.

  1. Call the loan processor to make sure the property appraised for at least the amount of the contract. Make sure your buyer has ordered a termite inspection, a survey, a radon inspection or whatever else is required by the lender in order to close. Is there anything you can do to move things along? If you have a copy of a fairly recent survey, you can provide a copy. This will also save time and move you closer to the closing. Has your buyer’s deposit been credited? Have they gotten the paperwork they need to the lender including employment verification and rental history? These are all things you need to stay on top of.
  1. If your buyers are using city or county funds to supplement their loan, there will need to be another inspection done by the city or county. This is a stipulation of their program. Make sure this gets done quickly in order to address any issues that could come up with the inspection. If your buyers are having a home inspection done, make sure it is done right away. Not getting it done in a timely manner can hold up your closing.
  1. Does the lender have your information in order to be able to order a payoff on any underlying loans on the property? Have they received the payoff yet and have you reviewed it to make sure it is correct? Don’t just assume that just because they have been given figures that those figures are correct. Make sure they fax you a copy of the payoff for you to review. Double check the per diem amounts and make sure you aren’t being charged a prepayment penalty if there isn’t one due. Make sure the most recent payment has been credited against the amount due. These are problems I have had to deal with. If the loan is with a private lender, sometimes it takes even longer to get a payoff from them. Some of them don’t know how to prepare one, so they need the help of the title company or their real estate attorney for this. This is also the time you might be able to negotiate a discount with them. This works especially well if it was a seller held mortgage. We have gotten private lenders and sellers to negotiate discounts on loans on several occasions which just made our paycheck bigger.

  1. Has the buyer’s loan been approved? If not find out what the problem is and how to fix it if it can be fixed. If the loan has been approved find out what the proposed closing date is going to be. Has your buyer ordered insurance yet? You need to check this out and it needs to be done as soon as possible. This is another area where you could have a glitch. Sometimes the age of the property or the location of the property becomes an issue. For example, here in Florida where I live, if there is a hurricane brewing, we end up in a “box” which is a period of time where you can’t buy insurance until a hurricane passes. This can hold up a closing for several days unless the insurance is already in place. A buyer must purchase a homeowners policy for one year and it must pre-paid at closing.
  1. If you are selling a condo or a home with a home owners association, make sure the lender and the buyers have a copy of the home owner association rules and documents and that the buyers have set up their appointment for their meeting with the condo association or home owners association. If they are not approved by the condo association or homeowners association, the rest of the closing is a mute point. You need to make sure your buyer’s get through this process successfully.
  1. So now we have a set closing date. Make sure you contact the closing agent to make sure you get a copy of the HUD or closing statement before the closing takes place and before you arrive at a closing. Very recently we had a closing that didn’t take place because once we got the HUD all the figures including the asking price and seller assisted closing costs had all been changed. The closing price listed on the HUD was several thousand lower than the contract had called for. I have never seen anything like it and the deal never closed. Check the numbers! If there is a Realtor fee involved make sure the percentages are correct. Check the pro rated amounts you are being charged for property taxes or association fees. When you close on a property during the year, say in June and property taxes are due in October; you have to reimburse the buyer for the property taxes from January until the closing date in June since they didn’t own the property during that time period. The same would go for any association fees there might be. You will have to reimburse the buyer for the period during the month that they did not own the property. Double check to make sure these figure are correct. In my contract, if we are assisting the buyer in any way with closing costs, the buyer can’t walk away from closing with more than five hundred dollars. So this is another figure we check. Any amount over the five hundred dollars is credited back to our side on the closing statement.
  1. Call your buyer and make sure they have gotten a cashiers check for any monies they have to bring to closing and make sure they know where it is and what time the closing takes place. Make sure they bring a photo ID with them. The lender will require this. Believe me when I tell you that these are all lessons learned from experience.

  1. Now, Show up at the closing and don’t forget to bring the keys or garage door openers. Take several deep breaths and try to relax. Once you get through the closing take another deep breath, call your spouse and go out to dinner to celebrate.

Here is another point for you to consider. In my business, it is rare that I go to closings anymore since the whole closing process is outsourced. The funds from the closing are directly wired to an account for us so we get paid right away.

If I do go to a closing, I don’t go at the same time as the buyers. I usually go right after they are done with all their paperwork. The paperwork on a closing for a buyer is fairly time consuming and needs to be explained to the buyer by the title agent. I don’t like sitting at closings for an hour or more until I need to sign my documents. If you have done your due diligence and followed all the steps in the closing process, there isn’t really anything that can go wrong at the last minute, so breath easy but expect the worst.

Then when you get through the closing, cash your check or make sure your wire has arrived and go to dinner to celebrate!! For more information on Real Estate Investing tools and Marketing to Find Motivated Sellers, Buyers and Lenders visit Kathy Kennebrook’s website at www.marketingmagiclady.com. While you are there sign up for the free Monthly Newsletter and receive $149.00 in real estate investing tools absolutely FREE!

Are you FUNDABLE, or Do You Just Have a Good Score?

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Lenders only make money when they lend, right?

Well, you would’t know it from the way lenders keep borrowers in the dark about how to be a good borrower and qualify to borrow their money! You would think that lenders would be bending over backwards to teach, coach, and instruct borrowers on how to be a good borrower. We are simply told we need a good credit score.

As a result, anyone who wants to borrow money is obsessed with their credit score. The problem is borrowers have been led to believe that their credit scores are the chief determining factor to getting approved for credit—and it’s not true.

My intention in this article is to disclose some of the things I have learned over the last 25 years as a credit and funding expert. Many of these “secrets” revolve around what I call “fundability.” Fundability is far more than a credit score. Fundability is the composition and quality of your entire financial situation as represented by your credit “profile” such that a lender finds you attractive and desirable enough to extend you credit. As I have learned, fundability is measured by three major factors: credit score, credit profile quality, and underwriting criteria. Let’s take a look at each of one of them.

There are certain fundamental aspects of credit scoring that ARE important. The first of these is that your credit score, for it to be fundable, needs to be a FICO® credit score. Most borrowers are unaware of the difference between a FICO® credit score and what I call FAKE-O™ credit scores.

A FICO® credit score is a three digit score that is generated by filtering the data of one of the credit bureaus through a specific algorithm created by Fair Issac Company (FICO®). FICO® scores fall into two categories: the first is called an “unweighted” score and grades the raw data of your credit profile. This unweighted score is the score that lenders and creditors provide as part of their credit card offers. However, this score (even though it is a FICO® score) is NOT a score that is used by lenders to evaluate your fundability.

The second category of FICO® scores is what is called “industry-specific” scores. They are also know as “weighted” scores, because they are weighted for the particular industry where you are applying for credit. For example, if you’re looking to purchase a vehicle, the lender or dealership will be using FICO® software that weighs your previous auto loan reputation. If you have a good payment history, your score will be higher than your unweighted scores, but if you had a missed payment or repossession, then your auto score may be lower than your unweighted score. Industry-specific credit scores include auto scores, mortgage scores, credit card scores, etc.

So while you have been trained by the financial world to be score sensitive, no one has taught you the difference between FICO® and FAKE-O™ scores. If it does not have the FICO® registered trademark it is not a legitimate score—NO lender will lend on it. I hate (not really—just being polite) to inform all of you that the credit scores offered on sites like CreditKarma.com, etc. are FAKE-O™ scores and are not used by lenders to extend you credit. The best place to acquire your true FICO® credit scores is myFICO.com. It offers both unweighted and industry-specific scores. Another feature to the credit report you get from myFICO.com is that it also contains credit scores calculated using various versions of the FICO® scoring software so that you can see what the lenders see—regardless of which software version a lender uses.

Whaaaaa?

As with all software, there are versions that are more recent and and there are versions that are older. The challenge is that when you go to a lender and submit an application, you do not know what version of the FICO® software they are using. To add insult to injury, when you pull your myFICO®.com credit report, you will see that there can be as much as a 20 to 70 point difference between scores generated by the different software versions. And each version grades the exact same data on your credit profile!

What’s more disturbing still is that lenders do not educate borrowers about the complexities of credit so that they can make intelligent borrowing decisions. Of course, we are not schooled in these credit vagaries. We are told only to pay our bills and we’ll have a good credit score. The secret is that “paying your bills” on time is only one of 40 activities on your credit profile that FICO® measures. Once again, our ignorance of those other 39 criteria leaves us in mystery as to how to positively affect our fundability and our credit approvals.

The second contributing factor to your fundability is the quality of your credit profile. Your credit profile breaks down into five distinct areas: your identity, your revolving accounts portfolio, your installment loans portfolio, inquiries, and derogatory or negative indicators (late pays, collections, liens, judgments, and other types of score limiting data). Let’s take these one at a time.

Your personal credit identity is the single most important feature of a high-quality credit profile. Lenders, credit bureaus, and FICO® do not think of you as a person in the traditional sense. You are an identity—a data set that they can quantify and track. Since you were never taught how to correctly apply for credit, you probably applied using various versions of your name and different addresses. Since the credit bureaus collect every scrap of data you submit in your applications, they have a record of every version of your name, every address you’ve ever applied under (even Aunt Mae’s where you spent the summer). Credit bureaus do this so they can collect and merge all your data to better identify you. The bureaus have spent tens of millions in data development and management, when it seems to me that it would just be simpler for them to instruct borrowers how to establish a credit identity and use it consistently when borrowing. But alas, such is not the case. One of the first things you will see when you pull you’re myFICO.com credit report is the veritable mess of inconsistent information that is listed under your personal information section (credit identity). It is vital that you present a single, clear, and concise identity to your current creditors as well as any future lenders.

The second area that contributes to a high-quality credit profile is what I call your “revolving accounts portfolio.” This is the collection of all of your revolving accounts: credit cards, credit lines, charge cards, and HELOCs (home equity lines of credit). The most important score contribution to you’re revolving accounts portfolio is your balance to limit ratio (known in the industry as utilization), followed by the average age of your revolving accounts portfolio. Next priority is the quality of each individual account. Quality is defined by the “tier” of the lending institution and the contribution of the account to the quality of the profile. While I can’t go into great detail here, you need to know credit instrument quality ranges from Tier 1 banks and 100% contribution to Tier 4 lenders and 40% contribution. Until now, we were never trained on how to build a high-quality fundable credit profile and so many of us have low-value “junk” cards which show a lender a lack of credit sophistication.

The third area of a high-quality credit profile is your installment loan portfolio. As with your revolving account portfolio, you can have a Tier 1, 100% quality loan, and you can have a Tier 4, 40% quality loan. The quality of the loan contributes to or detracts from the quality of your credit profile and the quality of your credit profile determines your fundability.

The next contributor to a high-quality credit profile are your inquiries. Inquiries count against your credit score for 12 months, but what we were not told is that the inquiries count against underwriting and fundability for 24 months. FICO® and lender underwriting software downgrade your fundability significantly when you have too many inquiries. How many is too many? FICO® allows one inquiry per six months without a significant degradation of your credit score or fundability.

After one inquiry per six months, there is a steep point-loss curve as you incur more inquiries. Additionally the quality of the accounts you are applying for will impact your credit profile. Finance companies, mall store cards, and other low-grade credit instruments have a greater negative impact against your score than higher tiered credit instruments.

Finally, the most powerful negative contribution to your profile and fundability is the presence of derogatory accounts or other negative indicators. The credit repair industry has increased borrower awareness about the negative impact of bad credit. Unfortunately, credit repair is not a solution that will help your fundability. Credit repair companies offer a meager dispute letter writing campaign in the hopes of removing a few negative accounts. While the removal of these accounts may improve your score a little, it does not improve the essential nature of your fundability as we’ve described in this section—credit repair does not help you build a powerful FUNDABLE credit profile.

By definition credit repair strategies and those service providers who offer them, are completely ignorant of fundability and do not know how to create a credit profile that will contribute to credit approvals. In fact, most credit repair firms, in a feeble attempt to help their clients “rebuild” their credit, refer them to low-value junk credit instruments, etc. These junk cards pay referral fees so the credit repair company wins, but the clients take another hit to their credit. It is a travesty how much ignorance there is among organizations who say they are trying to help disadvantaged borrowers.

Let’s take a look now at the final fundability factor: underwriting. Underwriting software expands the requirements of fundability significantly. Since it is the lender that is actually extending the credit (and carrying all the risk), lenders have developed (in concert with FICO®) their own underwriting criteria and software.

Underwriting software takes into account credit score, income, debt load, current banking relationship (checking account, average daily balance, recency of last bounced check) and the 24 month look-back period. Underwriting software calculates behaviors over the preceding 24 months and measures it in a logarithmic scale. A borrower’s behavior over the last 24 months is the key indicator of what the borrower’s behavior will be for over the next 24 months. The 24-month look-back period cannot be underestimated in its importance to your fundability.

The next time you are at a cocktail party or social gathering and someone tries to dazzle you with their credit savvy, politely interrupt them and ask them to share their understanding of ANY of the topics you have learned in this article. When they stutter and hum and ha, overwhelm them with all your knowledge about fundability!

Every borrower in this country, and every individual in the upcoming generation needs to learn what we have reviewed here. We cannot remain in our ignorance. We cannot be “at effect” of these billion-dollar organizations who not-so-secretly profit from our ignorance. We need to turn the tables and make ourselves knowledgeable AND fundable. If knowledge is power, then applied knowledge is a superpower.

If you would like to know more about Credit Funding Optimization, go to CreditSense.com/frequently-asked-questions. We also have an exhaustive YouTube channel: YouTube.com/Creditsense. Take a moment and review our website or call us at 801.438.9090. You will find these resources available nowhere else. Read, study, watch, and get empowered with the knowledge that will transform your financial world. And for most of us, when we transform our financial world, the rest of our lives will significantly improve. CreditSense.com offers the only Credit Funding Optimization in existence. It is the only integrated process that optimizes your credit score, your credit profile quality, and your underwriting capacity so that you can become FUNDABLE.

Sincerely,

Merrill Chandler, CEO and Chief Strategist

Trust Strategies

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By Randy Hughes

After using Land Trusts to hold title to my real estate, contracts and notes for the last 40 years, I have discovered that 99% of the population does not understand the nature of a Land Trust nor the many benefits that can be derived. I consider this good news.

Because of their low profile, Land Trusts are very useful for (off the radar) real estate transactions. The following ideas are merely suggestions that you might consider. Be careful to think through all the ramifications before engaging in these concepts.

If you want to borrow money conventionally and you will use a deed to real estate as collateral for the loan, you will have to give the lender the full deed. In other words, you cannot divide a deed up into pieces no matter how much you are borrowing. For example, if you owned a parcel of real estate in your own personal name (your name is on the deed), with $100,000 of equity and you wanted to borrow only $20,000, you would have to collateralize that deed in full. In other words, you would have to give $100,000 of equity to secure only a $10,000 loan.

The Land Trust can be used to solve the problem of over-collateralizing a loan. The beneficial interest of a Land Trust can be divided into unlimited shares. Therefore, a Land Trust holding a piece of real estate with $100,000 of equity could use some of its shares (but not all of its shares as is required by a personally held deed) as collateral for a $10,000 loan. With a share value of $1,000 there would be 100 shares.

The beneficiary of the Land Trust could “temporarily assign” 10 shares for a $10,000 loan. This would leave 90 shares unencumbered that could be used for future financing. The flexibility of using a Land Trust far exceeds the standard method of title holding.

In another scenario, assume that two real estate investors have owned their properties (of similar current market value) inside Land Trusts for 30 years. Both investors are “out” of depreciation. Neither investor wants to conventionally sell their properties and incur huge capital gains.

Once again, the Land Trust trots in for the rescue. Each investor (beneficiary of the land trust) sells the beneficial interest to the other on an installment sales agreement. The terms are nothing down, interest only (no capital gain to report) and a ten-year balloon (enough time to figure out what to do next).

What this transaction accomplishes is a new amortization schedule for each investor (new basis). The deal is private and flies under the assessor’s radar (no reassessment upon the “sale”) and no transfer tax is triggered. If the parties involved so desire they can hold options to buy the beneficial interests back after (or during) the ten years has lapsed.

If you don’t think this will work, look up and read the tax court decisions on; Weaver, 71 TC No. 42. 1978; Rushing CA-5, 441 F.2d 593, 1971 and Pityo, 70 TC No. 21 1978.

The key to taking advantage of these creative ideas is finding someone who will “play.” Of course, my mind wonders to people who have studied my Land Trusts Made Simple® home study course or taken one of my live seminars. It is those who understand how the “game is played” that benefit you the most. I encourage you to seek out other “players” like yourself…it will benefit you greatly.

There are many other similar structures that I discuss in detail in my Land Trusts Made Simple® home study courses. Please go to: www.landtrustsmadesimple.com for more information. Or, if you would like to attend one of my FREE Land Trust Webinars, go to: www.landtrustwebinar.com/411 Also, feel free to call me with any questions. I actually answer my phone! 1-866-696-7347

 

Probate Investing: Getting Inside the Mind of the Executor

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By Sharon Vornholt

Today I want to talk about getting inside the mind of the executor. Most people know that probate investing is my favorite real estate niche of all. This group of sellers is very motivated to sell any property in the estate. Once you can understand the seller’s viewpoint, it’s easy to see that investors provide a much needed service to anyone settling an estate.

Who Is In Charge?

The terms executor and administrator are interchangeable. The term personal representative refers to either of the above. So what’s the difference?

The executor is named in the will by the deceased. In this case the deceased has specified who they want to be in charge of their estate. In the absence of a will the court will appoint an administrator. Both the executor and the administrator (also referred to as the PR or personal representative0 have the same duties and legal responsibilities. That person is the decision maker, so that is the person you ideally want to be in contact with regarding the sale of the property.

There are times however when one of the heirs will be the one to show you the property. This is generally because the personal representative isn’t available. Maybe they live out of town or they can’t be there for some other reason. This isn’t unusual, but you need to be aware that they cannot legally sell the property unless the heir is also the executor or administrator.

Get in the habit of asking the person contacting you if they are the executor. If they say no, ask what their relationship is (family member, heir etc.), and ask who the executor is and get their contact information.

The Typical Investor’s Mindset

If you ask the bulk of the investors out there why they aren’t working in probates, they will tell you that they feel uncomfortable since the property is being sold due to a death. Many will say they don’t know how to talk to those sellers; they don’t know what to say. Sometimes they will say probate investing is just plain “creepy”.

The truth of the matter is, these are just regular people that have a problem. They have an estate to settle that involves selling property. This whole process can be very confusing to the executor or administrator. They aren’t familiar with the terminology or the timelines. In addition to settling the estate, they have their own lives to get on with. They have jobs, families and other responsibilities. The last thing most of these people need is an unwanted property they have to sell. When you can show up as the expert, they will be so thankful for your help.

Once you understand your role and how you can help those folks selling the property, it’s easy to get inside the mind of the executor and understand how they feel and think.

Why do they put off Selling the Property?

There are two main reasons.

One is being overwhelmed. The executor is being pulled in a lot of different directions. Often times they just don’t know where to start. The other reason is all the “stuff” in the house. They have to decide how to dispose of all the personal belongings. I can tell you from experience that this is a gut wrenching experience.

Those were the deceased’s treasures. They were things they loved in many cases, but they have little if any value to the family. Family members will choose keepsakes, pictures and heirlooms and then there is … the rest of it. The family has to decide what to keep and what to dispose of. There can be a lot of guilt in the mind of the executor and the family members when it comes to disposing of personal belongings.

When you can step in and offer to finish this job for them you have just solved a huge problem for the executor and the heirs.

That is what investors bring to the table where estates are concerned. A solution to a problem that allows these folks to get on with their life.

Remember that in most cases they don’t want the property. They just want to sell it, settle the estate and move on. When you can help them do that, it changes everything for the seller. That’s why having a clear understanding of their viewpoint makes your job as an investor so much easier.

Retirement Savings – History & Trends

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By Kaaren Hall

“The retirement crisis is the largest and most urgent global crisis we face today.”

The world’s most respected economists and financial analysts believe the pending retirement crisis is of paramount importance. So how did we land here? How have retirement plans evolved over the years? What risks and challenges do individuals face now? What emerging trends and strategies are arising that could save the global economy, and your financial future?

To really get the value, the importance, the right perspective, and the potential of self-directed IRA investing it is critical to understand the history and emerging trends…

A Quick History of Retirement Accounts

  • 13 BC Roman Emperor Augustus began pensions for legionnaires with 20 years of service[1].
  • In the 1st century the New Testament pioneered the idea of tithing to help the poor and widows.
  • 1717 the Presbyterian Church begins a fund for retiring ministers[2].
  • In 1889 century if Plymouth colonists were wounded in combat they received a pension[3] to support their families. However, the tax collection to raise these funds was often carried out by the ‘retired’ veterans themselves.
  • In 1875 the first private pension plan in America was created by the American Express Railroad.
  • 1900 – Life expectancy is 49 years old[4], with retired workers generally being disabled.
  • In 1935 Franklin D. Roosevelt signed the Social Security Act into law. The act provided a fixed income for the disabled and retired workers aged 65+. This was funded by a 1% tax on employees and their employers. By 2006 that tax had risen to 7.65% on employees and employers.
  • 1974 saw the birth of tax deductible IRAs.
  • In 1981 401ks were established.
  • Then Roth IRAs were born in 1997.
  • In 2009 uDirect IRA Services, LLC was launched to assist individuals with self-directed IRA accounts (and Solo 401(k) accounts)
  • August 31, 2016, S&P Dow Jones Indices and MSCI moved stock-exchange listed Equity REITs and other listed real estate companies from the Financials Sector of their Global Industry Classification Standard (GICS®) to a new Real Estate Sector.

Looking back a couple of century’s average people just never lived long enough to retire, nor was simply dropping out to play golf and sip tea all day something people strived for. They simply worked till they dropped.

The ‘golden years’ was a term originally coined to refer to the peak working and earning years of 25 to 40. Now it is commonly used to describe a coveted period of relaxation, golfing, bingo, and travel, with plenty of income, and no work. Of course those are the golden years most of us are craving today; and if we can get there in our 40s we’re even happier (at least until we get bored).

So how well are Americans doing at achieving the finances needed for a retirement, and preferably a comfortable, and timely one? With ten-thousand Baby Boomers reaching age 65 every day for the next decade this is a question in desperate need of an answer. Not only is this large sector of our population aging but the vast majority of pensions are under-funded and Social Security is anything but secure.

The answer may well be found by taking retirement into our own hands and investing in the asset classes we know best. That’s what self-directed IRAs allow us to do. We can move our retirement accounts over to self-directed accounts and invest in “alternative assets” like real estate, private stock, precious metals, notes and more to secure our financial future.

[1] http://www.seattletimes.com/nation-world/a-brief-history-of-retirement-its-a-modern-idea/

[2] https://en.wikipedia.org/wiki/Retirement_plans_in_the_United_States

[3] http://www.thinkadvisor.com/2006/04/01/the-history-of-retirement

[4] http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1049&context=legal

Due Diligence – What it is and Why it Matters!

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By Laura Alamery

 

Buying real estate is not as simple as having enough money to purchase the property. It requires time and effort to check and make sure that the condition of the property is good and the title is valid before making the final decision. That is what you call due diligence.

In case the buyer discovers that something is wrong with the property, he may give suggestions to the seller so that the latter can act on it by addendum to the contract, or the buyer can decide not to buy the property.

Contractual Due Diligence

There are certain elements within the sales contract or purchase agreement which are critical to the ‘satisfaction’ of due diligence. Let’s take a closer look at each of them.

Contingencies – Any contingencies which the buyer wants performed prior to finalizing the purchase must be stated on the sales contract. Some examples of these conditions may include: inspections, partner’s approval, financing, research of code violations or permits – and, of course, a clear and marketable title. At the end of the contingencies timeline, the buyer must either release the them and proceed with the sale or cancel the purchase.

Time is of the Essence – Due diligence supported by contingencies comes with a definitive timeline in the sales contract. If the buyer cannot complete his/her due diligence by the deadline, he/she will have to renegotiate with the seller. The seller has the choice whether or not to agree to the extension; which in turn may compel the buyer to follow through with the purchase regardless, or cancel the contract.

Title Discovery – Whenever you purchase real estate (especially as an investor) a marketable title is the most crucial element. Without it, an investor cannot sell or transfer the property. There are several types of title discovery searches which look into a chain of title; as well as liens or judgments against the property. The following are 2 main types of searches performed; keep in mind these may go by different names according to the title company and location:

  1. Full Title Search – the most complete of the two, this search checks into everything affecting the property’s history. It is the only one that will be used prior to issuance of title insurance, and is of course the most expensive to perform.
  2. Letter Report – a summary of what’s on the title; which reveals any possible liens and judgments.

Please note: Securing title insurance is an important step. Though title insurance for cash transactions is optional, it is mandatory when the buyer must obtain a mortgage to purchase the property. In my professional opinion, an investor should always acquire title insurance. According to Wikipedia, “Title insurance is a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property, and from the invalidity or unenforceability of mortgage loans.”

Due Diligence Questions & Answers

 

Q: Should an investor perform due diligence on every property before purchasing?

A: Yes, and no. When an investor is looking at several possible deals at the same time – and not sure if they will go through with a specific contract, holding back could be wise. For example, it would be prohibitively expensive to perform even a Letter Report (average cost is $150) on every single property. These actions are also time consuming: even a title report will take 3 business days to be issued.

With that said, there are times when some basic due diligence is an important decision factor; for instance, when an investor is considering a property coming online at a foreclosure auction. The investor will want to know what potential issues there might be on title (liens, judgments) and whether the title would be marketable.

Q: Is it necessary for a title company to perform the due diligence for any sales contract?

A: The investor can actually perform a lot of their own basic due diligence without hiring a title company or spending any money. Checking with the appropriate government offices (most of them can also be accessed online) for some basic discovery is the simplest way to gain confidence in proceeding with your purchases.

Q: Which government agencies do you recommend searching to complete due diligence?

A: I don’t check with all the government offices for each property. If my discovery at the Recorder of Deeds Office comes out clean (with no red flags) I will stop there; unless I see a spotty history of liens and releases on title. This is also a useful means of locating properties undergoing issues that have kept them off the MLS. Here is a list of searches available in the public domain, and what you can expect to find:

  1. Recorder of Deeds Office – Will have record of liens such as: Mortgages, Federal & State Income Tax Liens, Sewer, Water, Judgments, HOA (Homeowner’s Association); and other property document history.
  2. Collector of Revenue – Lists any Back Property Taxes and Tax Liens
  3. Building Inspections Office – Data on any building violations and inspections.
  4. HOA – If the property is within a subdivision or a condo development, there are probably Homeowners’ Association Dues.
  5. Clerk’s Office – Mechanics Liens (filed by contractors for unpaid work on the property).
  6. Comptroller – City liens, for unpaid taxes and fees.

Due diligence is a must when it comes to purchasing real estate. Though a preliminary search can be performed at no cost before making your decision to proceed – it is my opinion that a full title search and insurance are necessary prior to final purchase.

 

Finding Deals Through Probate & Eliminate Your Competition!

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By Jimmy V. Reed

No matter who and where I have taught, the Million Dollars question has always been “how do you find a Deal”? Cause folks, without a deal, its just real estate. It doesn’t matter what area of investing you are in whether its buying, selling, or holding, it will always comes down to the numbers and do they work. So my goal is to show you what I believe is one of my top five ways to get a deal, and that is probate.

Probate is a guaranteed source of real and personal assets. We don’t always like to talk about it but there are two certainties in life, death & taxes and both are involved in probate. Our objective is the real assets i.e. real estate property that usually through a death ends up in a situation where taxes are due. It has always amazed me that 70% of Americans do not even have a will. While the other 30% do they may still own it in their name which means it is still going to go to probate.

I always encourage other investors to hold real estate in some sort of entity to avoid the probate process. This is why my partner and I decided to create a how-to training book on finding deals through probate. Our program is “The Hidden Treasures and Profits of Probate” In this book we teach 7 ways to buy probates.

The basic process to them all is getting to the Executor before anyone else can. The Executor is the person in charge of probating the will. They actually are now the seller who must satisfy not only the will but also the taxes owed on the estate or on the property. Most people with a will usually make a big mistake by making a relative or a friend their Executor. This is where we come in as Problem Solvers.

We help them by buying the property at a cash discount. In doing so we solve the tax situation and take the property as is solving the problem of having to repair it so it can sell. I can only give you the basics here, but in our manual we go in step by step details for all 7 methods of buying probates.

Remember the basic process is getting in and tracking down the Executor, and then the inventory lists, then we get the contact info. Then it’s off to the tax office for the assets to be tracked down. From there we use our tracking form and pre written letters to start the initial process of making contact. Once contact is made we use our conversation form to ask the right questions. Once we have all our info its time to make an offer. Understand the main goal of the offer is to offer just enough cash out of pocket to satisfy the courts and any debts. We can get very creative on the purchase price, what matters to the Executor is getting the money owed for taxes and removing the problem from them to you.

I hope this can open your eyes to the possibilities of doing what others won’t, yet it is a very simple and easy process to do in the Probate arena. And most of all, out of the 4 million probates in the courts right now, you would be approximately one of only 5% of investors out there who are working them.

jimmy

Jimmy V. Reed

Jimmy V. Reed of Fort Worth, Texas has been investing in real estate since 1987. In 1991, he started conducting full-day training sessions on Wholesaling. He then began teaching and mentoring others throughout the country. He is currently the founder of the Fort Worth Real Estate Club www.1REclub.com and has his own real estate training company that includes Wholesale, Probate, Mentoring & a Biblically based Debt Free training course and more!

More info available at www.JimmyReed.net

This is the Best Day of the Year for Real Estate Investors

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By Fuquan Bilal

What is the best day of the year for real estate investors?

I think Mother’s Day is a strong contender. It’s hard to beat from both a business point of view, and in being personally meaningful.

If you’re not a mother yourself, then you’ve got mothers in your life. Either they work with or for you, rent from you, support you in your investing, or are your grandmothers, daughters, cousins or just your neighbors. Everyone can relate.

The Start of a New Season in Real Estate

Mother’s Day really marks the start of a new phase of the market each year. New property listings are popping up to get ahead of the peak buying season. Serious buyers are coming out to sign contracts and set up their summer moves so they are all settled before school starts again in the fall. It can be a fantastic time for Mother’s Day themed open houses.

What Real Estate Investors Can Do For Mothers

The first and most obvious thing we can all do is celebrate and honor the mothers in our lives. That can be in your office, at home and out in the community.

Housing them is a huge deal. One of the best benefits of being in real estate for me is what I can do for my mom. I can house her, and recently bought her a car. I’ve also really enjoyed just taking time to intentionally spend quality time with her to learn from her years of wisdom.

Housing and keeping a roof over their family’s heads is a top concern for moms out there. It keeps them up at night, and working hard. I love giving them a chance to put their families in a safe, healthy and attractive looking place in our rentals and when we sell properties.

As a real estate investor, I believe one of the greatest gifts you can give is sharing your knowledge and experience, and giving the mothers out there the chance to own those benefits for themselves and their children. Host an educational lunch, or turn them onto the PFREI podcast, or take them to an industry event with you.

The workforce and housing market is changing a lot in many cities. That can mean some transition time while getting reskilled for modern jobs, and trying to hang onto homes, and keep up with all the mail and mistakes that some lenders, insurers and tax authorities make in their paperwork. This can all lead to loan defaults and distress, that could have been avoided. If you are investing in mortgage notes this is a great time to do a cash for keys deal, or to modify loans and help moms have a fair chance to get back on track and have a fighting chance to keep their homes.

Let us know what you are doing in real estate around this Mother’s Day on your favorite social media networks and tag us so we can like your posts!

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Approaches To Real Estate Negotiation

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By Bruce Kellogg

Introduction

Negotiation, unfortunately, is not taught much to real estate professionals, or to investors. International, corporate, and purchasing courses exist, even to the extent of Master’s degrees, but real estate has not received the same coverage. This article aims to help that.

Start Out Early

Negotiations begin at the first encounter (e.g., phone inquiry). Many people think the initial pleasantries are just that, and the formal negotiations will begin later. Not so. The superior negotiator will have already begun gathering information and setting expectations. Start early so you don’t have to catch up.

The Three Elements

There are three elements to any negotiation: 1) Information, 2) Time, and 3) Power. These will be described below.

Gather Information

The negotiator who gathers the most information usually has an advantage. Interview people, obtain reports, do inspections, use the MLS (Multiple-Listing Service) and other online resources. Hire a private investigator on the seller if the deal is large enough, looking for vulnerabilities (e.g., bitter divorce). You can’t know too much.

The Factor Of Time

It helps to know if the other party has any time constraints, along with your own, of course. Pending foreclosure, divorce, condemnation proceedings are some examples. If the property is “a steal”, scoop it up fast. If it’s priced at or above “market”, then “grind real slow”. Use time to your advantage.

The Factor of Power

In some negotiations the power levels are uneven. One party has more leverage over the other. Seasoned negotiators assess power levels and devise strategies to take these into account. Then, even the weaker party can optimize its outcome.

Be Generous When Selling

Some sellers believe in “Win-Lose” negotiating. They want “top dollah”. This apparent greed and intransigence grates on everyone involved, sometimes to the extent of legal action or retaliation. Be generous when selling. Paint that bedroom. Purchase a Home Protection Plan for those first-time buyers. You’re on your way to wealth. Don’t be cheap!

Keep Your Word/Perform And Smile

Keep your word. Perform everything you’ve agreed to do. And smile as you do it, even if the deal is going against you and you are taking a loss. Don’t whine. Smile. Builds character….and your reputation.

The “Concession Pattern”

In the back-and-forth of negotiations, your “concession pattern” is very important because it sets up expectations in the other party. Always negotiate fairly tightly. Don’t concede too much because the other party will see that as an opening to seek more. Go back-and-forth more times if need be. Try to set things up so you take the other party’s counteroffer rather than force them to take yours. This way they will feel they won, and you will have less trouble with them the rest of the way. And, please, don’t arbitrarily “split the difference”. Amateur negotiators do that.

“Sharp Practices”

The day will come, if it hasn’t already, when the other party will bring “sharp practices” to the table. If these are illegal (e.g., undisclosed money back after the close), call them on it, and refuse to participate. If these are not exactly illegal, then counter them as best you can, or walk away. Life is too short, and your reputation is too important. Always “take the high road” in negotiations.

Re-Negotiating After Inspections

Y’all know to re-negotiate after property inspections, right? ‘Thought so.

Reading List

Included here is a list of Recommended Reading. Buy all of them, used. Read and highlight them. Then, once a year, re-read the highlights. You owe it to your clients, and yourself, to be in tip-top shape a as a negotiator.

Recommended Reading

Negotiate This, Herb Cohen, 2003

Everything’s Negotiable, Eric Wm. Skopec and Laree S. Kiely, 1994

Guerrilla Negotiating, Jay Conrad Levinson, Mark S. A. Smith, and Orvel Ray Wilson, 1999

The Negotiating Game, Chester Karrass, 1992

The Only Negotiating Guide You’ll Ever Need, Peter J. Stark and Jane Flaherty, 2003

Seal the Deal, Leonard Koren and Peter Goodman, 1991

You Can Negotiate Anything, Herb Cohen, 1980

How to Win Friends and Influence People, Dale Carnegie, 1936

Garage Sale Real Estate – Make Money in Real Estate and be Dead Broke Doing It!

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By Jimmy V. Reed

Folks are always telling me I would love to make money in real estate but “I’m just too broke” And I would respond every time, so was I. Back in the late 80’s I started reading books on how to make money in real estate. Every time they kept telling me you find a good deal, then you go get a loan and buy it, fix it, sell it or hold it. That’s when I would say to myself well it sounded too good to be true.

Later I learned it is too good to be true. I learned how to Wholesale Properties. I learned what I would say was the greatest technique in real estate. How to buy a house without actually buying the house. Now let me tell you how that works. I compare it to when I would go garage selling with my wife on the weekends. We would drive around looking for SIGNS! You know Garage Sale Signs. We would find a sale and then look for a deal, and we always seem to find at least 1 deal. However once we started making offers and negotiating, By the way I have taught thousands of students whose number one fear is to make an offer. But the second you put them in a garage sell they start making offers so low it was like kicking the seller in the knee cap. Any way we would finally agree upon a price. And many times realize we didn’t have enough money on us to purchase the item. So we would ask the Seller to hold it until we came back with the money. And wahlah Garage Sale Real Estate!

I know you’re thinking what? Well let me tell you the secret to this. At the garage sale we would run to the ATM get the money come back and pay. Now take this principal a little deeper as we teach in our Wholesale Classes. Tell the seller to hold it, how? A simple Purchase Contract. That’s when you tie up the property until you have the money. I know I know you’re broke! That’s ok because while it is under contract we contact other investors who are looking for deals! That’s right we are deal finders finding deals for our customers. These investors have CASH! Now we just assign the contract to them for a fee. And now you just got Paid!

Sometimes we even use a double close to close on the property because the profit margin is so large. That one is a lot of fun. Well hopefully by now you at least can see a glimpse as to how so many investors can make money in real estate without having money. Did you know when you go to a car lot, or even Wal-Mart, the items you purchase from them has most likely not even been paid for by them yet. That’s right Wholesaling has been going on in most business forever. Now the question is are you up for some Garage Selling? Well it’s all up to you, but if you need a little help look us up, we’ve been teaching Wholesale to investors since 1991.

jimmy

Jimmy V. Reed

Jimmy V. Reed of Fort Worth, Texas has been investing in real estate since 1987. In 1991, he started conducting full-day training sessions on Wholesaling. He then began teaching and mentoring others throughout the country. He is currently the founder of the Fort Worth Real Estate Club www.1REclub.com and has his own real estate training company that includes Wholesale, Probate, Mentoring & a Biblically based Debt Free training course and more!

More info available at www.JimmyReed.net