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Real Estate Snakes, Landmines and Grass Fires
25 minutes | 2 years ago
Value of a Broker – Real Estate Snakes, Landmines and Grass Fires – SGL002
Does a real estate broker add value to a transaction? How many people are involved in a transaction? How much is your real estate worth? We reveal the Not Obvious. There are often unusually or unexpected problems. What are the underlying main issues? You should ask revealing questions and find the true answers. Who, What, Where, When and How ?? We know what to do and we enjoy helping people. Listen to our discussion about real estate. Win a Laser Measure Ruler The DEWALT DW055E is ideal for layout and estimation. This measurement device allows for quick and easy measurement of up to 55 feet. New winner each month. To get your hands on one of these awesome Laser Measure Rulers, all you have to do is enter! Follow the link below and enter your information. We pick one lucky winner each month. Click Here to enter Here is the dialogue of this Podcast —————– Welcome to our podcast about Snakes, Landmines and Grass Fires. We are at the Poodle Ranch. How Does a Real Estate Agent add value to your transaction and your property. WHY? We reveal the Not Obvious. There are often unusually or unexpected problems. What are the underlying main issues? You should ask revealing questions and find the true answers. Who, What, Where, When and How ?? We know what to do and we enjoy helping people. Phone us to discuss real estate. We can make this discussion in three parts 1. Before the contract is written 2. While writing the contact 3. After the contract is signed and executed and before final closing. Depends on experience of the client. Does the client know the need to collaborate with an experienced agent? Even experienced buyers and owners know that experienced agents can all value by drawing on their vast history of transactions. This podcast will discuss past nightmares and challenges. Each transaction has different physical features, characteristics and odd actors and characters. Here is a list of 21 people that may be involved. Not all of them in each deal. Buyer Seller Buyer agent Seller agent Title company Building Inspector Bug inspector Mold inspector Environmental consultant Hydrostatic plumbing inspector Surveyor 1031 Tax Deferred Exchange 3rd Party Intermediary Commercial mortgage broker Residential mortgage broker Property manager Real Estate attorney Insurance agent Residential appraiser Commercial appraiser Residential lender Commercial lender Owner Association Each person has a different responsibility and world of experience. Importantly, each involved institution and organization, (both public and private) hire new personnel and frequently create new policies which affect a transaction. Active experienced real estate agents may have dealt with those people and institutions, thus they know what to watch for. This year I represented a seller and two buyers in 3 transactions which all dealt with that one specific lender in California which has 2 offices in Houston. The lender administrative personnel has unrealistic expectations and policies which we had to work around. We will discuss this type of lender and that transaction in another podcast episode. What happens before the contract is written? We talk on the phone and you visit the website at Houstonius.com, and you decide if we should meet. I have no planned presentation to sell you or convince you to sign a contract. We meet and you ask important questions. From that discussion, you, the client, will know and I will know that I can help you, or not. The prospective client knows … because I ask the right questions. Are we right to work together? If you are a buyer, we discuss your objectives and what you want to buy and challenges which we may encounter. If you are a seller or landlord, we talk about When you want the money and about the property. I surmise if you have realistic expectations. I may need to give you market research and analysis. I give you the required government form disclosing representation, called Information About Brokerage Services. The purpose of a representation contract is not to bind us, but to satisfy regulatory agencies and remind us of duty and responsibility. When writing a contract to buy or reviewing a proposed contract to sell, we talk about unintended consequences of the important paragraphs and how we might change the language to make the deal happen and also to protect you from possible challenges. I think this is a big value which I offer to you. The residential contract is maybe 11 to 16 pages included addendums and amendments. The commercial contract is 35 paragraphs plus addendums and amendments. One advantage I bring to the table is my license as a Senior Property Tax consultant. The world has changed since I started in 1994 and the process has become more complicated. I spend maybe 80% of my effort after the purchase/sale contract has been signed and executed. Need to deal with the other people and institution which are involved. We need to deal with the process of closing the deal.
4 minutes | 2 years ago
Prepare for the Unknown – SGL016
Welcome to the Poodle Ranch. These podcast episodes talk about Snakes, Landmines and Grass Fires that I have experienced in my real estate career. After 28 years experience, I have personally toured thousands of properties to make a determination of true value and have over 500 transactions. I frequently say that … I have seen everything and every day I see a different color snake. Recently a prospective client “Robert” came to my office to discuss his real estate objectives. He wanted me to find a good deal to buy at wholesale price. He thought that my purpose is to be his bird dog. We need to work together because the best way to have a good deal … is to find properties to implement good management and add features to increase value to a property. Robert has made only 5 real estate transactions in his life In the last 28 years the world has become more complicated with laws and regulations. Large companies have implemented more guidelines and policies to protect the liability of supervisor jobs and share holder equity. One transaction may involve 19 people and institutions with changing personnel, policies, guidelines and laws. Robert and I discussed potential Snakes, Landmines and Grass fires. Then we agreed that there is a good possibility that a problem will arise which requires experience to solve. With my 28 years experience, I am resourceful to handle each new situation. Normally, a seller will not know or expect a problem. Frequently, Personnel and institution guidelines policies cause problems. Robert decided that I am the broker with skills to handle a problem that nobody knows about, YET. You should schedule a time for us to meet and discuss how to avoid snakes, landmines and grass fires. The best way to “prepare for the unknown” is to have a good team at your side. This applies fully to real estate investing. There are costly dangerous snakes, landmines and grassfires to avoid. Having a good team can turn a regrettable experience into a great, memorable experience. Let’s build your team. On this website, Enroll to get our insights and updates. If you are considering a transaction, contact us to discuss your objectives and discuss how to avoid snakes, landmines and grass fires.
18 minutes | 2 years ago
We Reveal the Not Obvious SLG024
What does that mean? What is Not Obvious? If we knew, then it would be obvious. We know it when we see it. With only 5 or 10 real estate transaction, you are less likely to see the snakes, landmines and grassfires. You do not know where snakes are likely to hide. In the last 25 years the world has become more complicated. Government and large institutions have more laws, rules, regulations and policies which change frequently when personnel change the rules and policies or when clerks do not know nor understand their changing rules. With hundreds and hundreds of real estate transactions I know where lenders and government regulators hide the snakes. Sometimes title closing companies help to kill the snakes, but sometimes they are the snake. I have used a well known title insurance closer with years of experience. I send lots of title insurance business to several specific title companies and they will work to help me solve your problem. As you listen to these podcast episodes, you will hear real estate transaction nightmares and how we solved the problem. We want to know your expectations and concerns …. We have 25 years of experience and hundred and hundreds of transactions. We have analyzed thousands and thousands of properties, therefore we know that contracts can be written to solve a problem before it becomes a problem and to protect your money and time. Unfortunately, inexperienced real estate agents and brokers do not know where the snakes hide. My 28 years as a licensed property tax consultant and 25 years with a real estate license … helps me to reveal the Not Obvious …. To anticipate problems. As an example. I know transaction contract language to reduce your future property taxes. In 25 years, I have never seen another broker add language to a contract to save money on future property taxes. Real estate brokerage clients are often too concerned about price and sales commissions. They do not know that I can help with language to reduce property taxes and I may even know how to lenders to reduce interest rate expense or reduce pre-payment penalties. Last year a lender demanded a specific form for a preliminary closing statement from the title insurance company …. On a form which the State of Texas not longer allows, therefore the deal would die three days before the closing date and buyer would lose acquisitions costs. The seller would need to find a different buyer and disturb tenants again for more buyer due diligence needs. I must compliment that title insurance company that I recommended because the closer found the outdated software to create a preliminary copy of the outdated closing statement form and sent it to the clerk at the lending institution. Later the title insurance company created the correct legal updated form to close the deal. Whew. On a separate deal for a small multifamily apartment property, the lender would not accept the legal description used by the county court house. The property was located in Houston, but the post master general is located in a nearby city, therefore the mailing address is not in Houston. The lender wanted the sales contract to show the property address to be in the other city with the postmaster general office. Also a block away, just a year earlier, When selling a four plex, the buyer did inspections and wanted $20,000 in repair money, which we negotiated down to $2,000. They claimed that the electrical boxes needed to be replaced at a very high cost, because they were a fire hazard. The name brand had been discontinued due to the bad publicity. There are 13 other fourplexs in the neighborhood and I had sold 9 of them. They all had the same brand electrical boxes and None of them had a fire since their construction in 1982. When selling a 16 unit multifamily apartment property building, The terms were agreeable to both buyer and seller. The seller agreed to contribute repair money to the seller, through a deposit to an escrow account at the title closing escrow company. Residential contracts do not have this feature, due to lender regulations, however commercial contracts are Not regulated. The Not Obvious challenge, some title escrow closing companies, will not take fund deposits in escrow for buyer repairs. The title escrow company may not want to have those funds on deposit. Some lenders of larger commercial loans, want those repair funds send to the lender. Sometimes the lenders of smaller loan amounts will let the title company give a cash credit to the buyer at closing for the smaller repair amounts. Sometimes after closing the deal, the title company requires a letter from the buyer to pay specific repair contractors. Thus some title escrow closing companies will not escrow repair funds. The Not Obvious challenges is knowing which title escrow closing company to be named in the contract. Usually the other agent does not know and the seller does not know the NOT Obvious. We need to know a title escrow closing company which will allow the escrow for buyer repair funds Land Surveys for residential properties may cost $600 and commercial surveys may cost $2,000 or $4,000 depending on the size of the property and the type of survey. Will the current seller’s survey be acceptable to the title company and lender? Does it include the metes and bounds on the second page? Frequently sellers only keep the graphic boundary survey and during the years, they lose the second page with written metes and bounds. Read the seller’s survey carefully, to know when it was completed and if copywrited. In the last ten years, most surveyors have added small print to prevent using the survey for multiple transactions. Some title company examiners will not accept older surveys. If the buyer needs to hire a surveyor, what type of survey is best and what will it cost? This is especially important after the recent flooding. You should ask what type of survey is required by your lender. Is an elevation survey required? I helped a seller of an auto repair shop and he was happy and retired. He got bored and purchased another auto repair without my help. The bank lender agreed to loan on the property, even though the Environmental Consultant’s Report showed a suspected leak from the convenience store gas tanks on the property next door. This makes it difficult for the new owner to sell at a later date. I suspect that he did not read the Environmental Report. When I read the Environmental Report, it was Not clear nor straightforward that the property was getting gas leaks from the convenience store gas tanks. It was subtle about the suspected pollution, because you actually have to test the soil on the property you want to buy. That soil dig and analysis may cost $8,000 or higher. Unfortunately, the client did not hire me to help him purchase the polluted property. I would have told him about the future challenge of selling a suspected polluted property. The seller decided to pay off the loan and seller finance to the new buyer. Over the recent years, there has become an increasing problem with plumbing under the slab. Some of the pipes are rotting metal and not PVC plastic. So I now a form for buyers and sellers to sign which can accommodate the buyer hiring a plumber for a hydrostatic plumbing test. I reveal the Not Obvious.
11 minutes | 2 years ago
I Don’t Know – SLG023
I have been struggling for several years to understand how to tell prospective clients that they need me. Most prospective clients know what they know and usually do not want to know more (except how much is it worth?) They do not know …. what they do not know. That requires humility and requires that we know our strengths and limits. Do you listen to your doctor and lawyer and accountant? WHY? Probably because they have years of experience, not because they are smarter than you. It is fair to say that if you have done 5 or 10 real estate transactions, you probably should listen to someone who has hundreds and hundreds of transactions of all property types. Yes, there are personality types that need control and think they know more. That may be because of several reasons Maybe I have not conveyed info about my years of experience and knowledge. You should review this entire website. It is not good to tell someone to shut-up and listen because I know more. This might best happen … by me asking the right questions and encouraging the prospective client to ask questions and to express their concerns. You might Ask about my service and about real estate generally and about characteristics of a specific property. Frequently, I can avert your future real estate problems by • Discussing your concerns • Touring the specific property to find future challenges We can translate your concerns and specific property challenges into contractual clauses. This may require experience and knowledge to know where the snakes hide. Make note, this is key….. Usually those snakes hide in institutional rules and regulations and policies and the changing personnel that make those changing documents. Hundreds and hundreds of transactions helps me to know about bureaucratic institutional policies and regulations of lenders and title insurance companies. Some real estate property characteristics and some attitudes of buyers or sellers or brokers, …. make it necessary to write a real estate contract to address future problems, before they become a problem. Normally, the problem is NOT finding a property. However, I must admit that buyers and have to look at numerous properties to realize the market values. And Sellers have to emotionally be disappointed by marketing for months. They do not listen to me …. and to speak fairly … clients should find out for themselves, as most people do when we grow. But hopefully I can give them evidence to shorten their expensive learning habit. A buyer’s time is valuable and sellers do not want their overpriced property to go stale on the market. (experienced brokers know that the first offer is frequently the best offer) How did I get started on this rant? Had a past prospect ask me to help him sell several properties. In the past he asked me to sell two properties that he did not own, so I am careful. So when He asked for my help again and wanted the value of the 3 properties, I said “I do not know their value, Let me do some research and then we can talk again”. I discovered that he owned one third undivided interest in each of the 3 properties. The other owner parties do not want to deal with him. The solution is to swap and let each of the three parties to each own one parcel fully 100%. Make three equal piles and let them go first to pick to pick a pile (property). He will need legal swap agreement. Then I will make a marketing agreement with each party to sell their individual fully owned parcel. Problem solved. I started by saying “I do not know”. This entire rant started because I watched a 2 minute video by David Burkus which you can watch below. P. S. Concerning your normal first question about “How much is it worth?” I have two answers. • I do not know, it depends. If you are a buyer, please listen to our podcast entitled “How to find a good deal” • I do not know, it depends. If you are a seller, I can get you any price you want, but it might take years. I will do research, however The market will tell you …. if you can wait enough months. ….. A better question is “When do you want the money?” Then price the property to sell. Phone me so and we can both discuss what we do not know. However, we do not know what we do not know.
10 minutes | 2 years ago
AirBnB Disruption – SLG022
Disruption of Bed and Breakfast and hotels I have been to AirBnB meetups each month to learn more about what is happening. There is an entire industry and supporting ancillary services. Some home owners offer the extra room in their home. There are hundreds of homes and apartments which are booked for short term hospitality to a variety of guests which have different reasons. Some guests want privacy. Other guests may want their family or group to be in one residence behind one door. They may want a larger space inside or outside. They may want to be nearer to a specific destination such as entertainment and business venues or outdoor parks or even learning centers. Some AirBnB providers offer just a place to rest or sleep while others offer an entire experience. These might be outdoor teepee and tents near national parks or they convert a train caboose to residential living. I know a provider host in Houston that owns an 8 plex multifamily building. Each unit is dedicated to be a hospitality host unit. He has painted one unit interior to look like a colorful rubics cube. There are ancillary services to help manage these hospitality doors. There are services dedicated to house cleaning, accounting, booking and entire property management. They install special Wifi internet door locks and outside entry door video surveillance. There are providers of furniture and kitchen utensils Some entrepreneurs are doing AirBnB arbitrage to bear the entire burden and responsibility of providing hospitality. They long term lease homes or apartments and then advertise short terms AirBnB hospitality. They have a domain name and website to lend credibility so that landlord will sign a long term lease with the assurance that an AirBnB provider will be a better cleaner tenant. Some hosts have enough doors to hire a local manager host. The hotel hospitality industry complained to city officials that this private hospitality distruption was unfair because hotels charge a city tax to guests and forward it to the city. The Guests log into the online booking website which had maps, photos and descriptions of each property of hospitality provider. They can filter the type of accommodation the guest is looking for. The prospective guest can see the evaluation and reviews of previous guests. They can search by map area, by price and by the number of beds. The guest can specify if they are looking for an entire home or just one room. After the guest leaves, the website server sends an email survey asking the guest to evaluate the service of the hospitality provider. The best rating is “SuperHost”. That is what you want when you have a party at your home. There are online internet advertisements for you to attend seminars, webinars and books to start a successful hospitality business. There are 2 Houston AirBnB Host facebook groups
15 minutes | 2 years ago
How to Find a Good Deal – SLG021
To find a property and add value, look for properties which need repair or which do not offer features which are now popular. You can add Covered parking Additional storage Make it pet friendly, such as covered dog runs. Make it gated and locked or add fencing Resize windows to add light Add accent lighting behind ceiling crown molding Add sky lights. Install wi-fi door locks Add outside lockboxes for deliveries Add outdoor wi-fi internet real time video There are many features to add value which do not require repairs. They are add on features. As the city changes and properties get older, buildings can become functionally or economically obsolete. This can create an opportunity to add value to a property. You can also RE-purpose the use. As an example, you can find a multifamily property on a loud freeway which makes it hard to sleep and get high rent. Change it to a commercial use such as retail or office space. But leave the bathtubs, otherwise the city inspector will require changing all wiring from residential to commercial specs. Just put a bookcase on top of the bathtub after the inspector leaves. Actually, some business tenants travel long distance to work and prefer a shower onsite, instead of traveling home before their next appointment. I know of a 6 plex multifamily apartment property on the 610 Loop South. Too loud for tenants to sleep. Consider converting to white collar offices with signage for an insurance agent or a law office or an accountant. I want to buy the land next to it for additional parking. Again …. Leave the bathtub and put a bookshelf on top. Yes …. To repurpose the function of a building can cost some money, so carefully analyze your forecast spreadsheet. You may need to hire an architect who knows current building codes and who knows how to get city occupancy permits and who understand the American Disability Act. I read recently that an office building was converted to self-service storage units. With the advent of Amazon, retailers using overnight delivery distribution. Some retailers are wanting space for storage and packing areas. Thus we can look for a retail strip center or office building with land behind or adjacent to the rental unit. We can add storage space such as shipping units or modular storage space and add lights and insulation with AC. A retail strip center had land in back to add a storage ship contain to the back door. Thus retail store now had a warehouse room for inventory to service their online sales efforts. You can find multitenant warehouses and add a nice retail showroom in front with decorative ceramic floors and recessed and pin-spot gallery lighting Some seminar gurus say that to find a good deal…. Do not use the MLS to avoid seller having to pay real estate commissions. Send hundreds or thousands of postcards to owners and find motivated sellers. Convince owners to sell below market value to get a quick cash closing. Seller wanting a quick cash sale can avoid paying for repairs. I note that you will need to drive by to look at hundreds of properties and meet with many hungry owners. A client recently purchased a four plex on a busy street (thus hard to tenants to sleep) and converted to white collar high end offices. She kept the bathtub to avoid having to replace ALL the residential electrical wiring with commercial wiring. She put a bookshelf on top of the bathtubs. After you remodel and get stable higher rents, you can refinance and get your cash out or sell for a 1031 tax deferred exchange, if you own it for one year. We can learn from new concepts such as We-Works, a communal office small business center. Co-Living centers have sprouted in several major cities. Sorta like high end dorms for adults wanting urban living with friends. There are several projects to convert warehouse to business incubators. The Texas Medical center has converted a building to an entrepreneurial development center for medical technology companies. It may be possible to convert an old stadium or large warehouse to a flying drone raceway. Several cities have eSports stadiums with giant screens to show the team high tech battlefield and seating for spectators, who may also have laptops. Know that the largest events in the world, the ten largest are all eSports events. Larger than the NBA and NFL combined. When Microsoft introduces X-cloud it may explode again. X-Cloud will allow players to play without a special lever console like xBox. Player will be able to play and have virtual battlefields on every device, even mobile phones. Know that Fertitta, the owner of the Houston Rockets, purchased the Houston franchise rights to play “OverWatch” for $12 million. Dallas has an eSports Stadium. Convert your Bar and restaurant to charge for tickets to their weekend eSports qualifiying tournaments. The building can be remodeled and designed for the events. You can also convert a warehouse for eSport events or indoor drone races. Add a burger restaurant. (you could start with a food truck) Convert a large warehouse to a farmers market with good lighting or flea market or antique market with spaces rented to dealers. Be sure to have good parking. I saw a warehouse that has a big room to walk and train your pedigree dog by walking in a circle around the room. They charge money by the session. There are several food truck courts in Houston. Point is …. There are numerous ways to add value. Go drive by and look for problems. Do not buy a property that only needs carpet and paint. We are sometimes told to update kitchens and bathrooms. These are just cosmetic challenges. You could add modern features. However, know that there are thousands of home buyers wanting to fix cosmetic issues. Hundreds of Home flippers want to buy homes with easy fix and they do not have creative vision. These buyers compete to make prices high on fixer upper homes. They do not have the experience nor the vision to find the better opportunities. More importantly, I suggest there are various types of current properties with economic and functional problems which can be improved by changing purpose and type of property.
14 minutes | 2 years ago
Should I use a Real Estate Wholesaler ? SGL020
Should I buy real estate from a wholesaler Should sellers work with a real estate wholesaler? Wholesaling real estate is the practice of acquiring properties at discounted prices and reselling them for profit. A real estate wholesaler enters a contract with a property seller, markets it to potential buyers, and assigns the contract to the most appropriate buyer On the internet I found the 15 reasons to be a real estate wholesaler. 1. Fast Entry (Great For The Beginner) 2. Simple To Learn 3. Quick Results & Quick Cash 4. No Cash Or Credit Required 5. Location Independent 6. Valuable Experience 7. High Demand 8. Larger Paychecks 9. High Return On Investment 10. Ability To Work With Bird Dogs Or Deal Scouts 11. No Need To List Properties 12. No Membership Charges 13. Volume Potential 14. Minimal Risk 15. No Repairs Involved This morning I was watching TV and saw a 30 minute show hosted by Superman, actor Dean Cain. He told us about an opportunity to phone to get a reservation for a two hour live seminar about real estate Wholesaling and financial independence with no money. Stop living paycheck to paycheck. You owe it to yourself and your family. Anybody can do this program. Phone to get 4 VIP tickets and get the investor toolbox. What do I have to lose? I can get some free gifts. The TV commercial has a disclaimer at the bottom that said “The student success herein are not typical”. I Found a wholesaler online that said “Honestly there aren’t much benefits to selling to a wholesaler. I am a wholesaler and I will admit that…” “However, I market to find people that have a strong desire to sell.. If you are marketing and you get a “tire kicker” who wants full retail or more for there house its going to be near impossible to make a deal out of it… especially with the housing market being so hot. Yea I do let the seller know I pay cash which saves fees and I close fast and such, but deals come from problems… find out the problem and why they want to sell and base your whole pitch off how selling to you solves those problems.” WOW Are you looking for a good deal. You may need to drive to one hundred properties. Good deals require a distressed seller as result of death, disease or divorce. (Maybe, sometimes) It is more likely that you will find a fair deal to add value If you consider buying from a wholesaler, then ASK this … Do you believe the wholesaler financial numbers? Do you have the right to inspect and the unrestricted right to terminate , even if the sky is blue … and get your earnest money refunded. Can you include all the inspectors you choose including • Building inspector • Mold inspectors • Pest and termite control • Hydrostatic plumbing inspector • Environmental consultants who may recommend soil testing • Asbestos sample testing. Are the inspectors limited to specific hours or specific days? Is seller required to turn on all utilities? You might also lose your earnest money and inspection money and acquisition costs due to Banks and government regulations and changes to policy changes by changing personnel which causes snakes to delay the closing date. Do you lose the earnest money if you can not extend the closing date due to an unknown undisclosed competing signed backup contract at a higher price? (hint … I have a cure to this potential problem.) Will the lender require additional due diligence documentation from the true legal current owner? Can that seller provide the additional required docs? Is the contract with wholesaler promulgated and approved by the Texas Real Estate Commission or Texas Association of Realtors? Or must you pay an attorney to review the contract. If the title company finds a cloud to the seller’s title or the title company will not remove an exception to the title insurance, can the buyer get refund of earnest money? How long is the wholesaler contract with the seller? What is their final closing date? Can their contract and your contract be extended if the buyer needs more time …. Due to lender problems? Will the earnest money show up on the final closing statement? Who pays closing costs – you or wholesales or current owner/seller? Is there an entity transfer like a corporation or LLC? Do you, the buyer, inherit the unknown debt or judgements? As a seller How do you know if the buyer is a wholesaler? Is the buyer a licensed real estate agent or broker? Are you getting the highest and best price or is wholesaler marking up the price to flip to another higher price buyer? How long is the contract period? Does the wholesaler get a free look or have skin in the game? Will the wholesaler and their buyers …. disturb the tenants? Will the wholesaler taint the property reputation with a failed contract? There are now people who sell seminars on How to be a wholesaler. I noticed YouTube has numerous seminars hosted by wholesaler gurus and mentors Because this is a new recent trend, does the wholesaler have experience to know how to solve problems and kill snakes.
14 minutes | 2 years ago
Internet Buyers to stop pain ? SLG019
I recently had a seller client phone to say she had received a solicition from an iBuyer (internet Buyer) that wanted to bid on her house. I contacted the iBuyer and they decided not to make an offer. The reason was inane and innocuous. I am guessing the seller asking price was to high. iBuyers advertise nationally to buy your house quick. The main iBuyers are Offerpad OpenDoor Knock Zillow Instant Offers Redfin Now I am told they buy 10% of the homes sold. That seems like millions of homes worth Billions and Billions. They exist to help consumers avoid pain of the real estate process. They will offer to buy a home with a desktop appraisal and no inspection and no licensed appraiser inside your home. It will happen quick. Several people have argued about the reality of getting a fair price. This seems vague to me, but it has been written that it might cost the seller an additional 1% to use an iBuyer. It depends on opinion as to whether the buyer got a good price. Ask ten people the value and get ten different answers. Some agents might comments that iBuyers offer 7 to 12 % below the market value. Thus the seller nets less than using a traditional broker for 6% sales commission. The iBuyer also uses a discount broker or an employee to sell the property. The argument is that …… even if the iBuyer sometimes loses money on a transaction ….. they do so many transactions that they do make money …. To off set an occasional loss. iBuyers are involved in one out of 10 of residential home transactions. Hard for me to believe. The reason for this disruption is In summary, iBuyers help to avoid pain of the real estate process. I started this podcast about Snakes Landmines and Grassfire because I have seen the pains of the process which are caused by changing personnel, institutional policies, guidelines, bureaucratic rules and laws. I suggest that experience can foresee some problems which can be averted by just avoiding some buyers or writing a contract to prevent the future possible problem …. To transfer the pain to the other side of the transaction. Have 49,000 hours of transaction experience to avoid the rocks that hide snakes or just kill the snake. Certainly, there is one problem can only be cured by time and pain. That problem is caused by client unrealistic expections. Sellers normally want a sales price that is not possible today …. But Maybe later possible with years of price inflation. They often choose a broker that will promises a higher price, only to be disappointed later and then reduce the price to a reasonable price. Then the seller has more time to again realize that another price reduction is necessary. Sellers frequently blame it on the broker and find another broker that will price the blue sky. I mention that the issue is NOT price …. The first question to ask is “When do you want the money?”. Then set the sales price. Buyers want to find a good deal at wholesale, however sellers price at unrealistic retail prices. The buyers should look for properties to add better management and add features to increase property value. It helps to have the experience as a Senior Property Tax Consultant to know to how to determine value of thousands of property. It is good to know Appraisal Theory and the 3 methods to derive value. The comparable approach, reproduction approach and the Income approach. Be sure to ask for our online digital app which can help you calculate your property value today, using the income approach. It is easy to understand and use. Use it on your desktop or your phone. Certainly, most snakes can be avoided by writing the snakes out of the contract. Most agents know how to fill in the blanks on the contract, but most agents do not know which blanks and boxes to be careful. I am not a lawyer nor do I add legal clauses to promulgated forms, however I can suggest caution in certain contractual situations and mention solutions. Sometimes snakes appear after the contract is written. Several years ago, I was helping a client to sell a 45 unit multifamily property in very poor condition and one 5 foot corner was overlapped on the land parcel next to it. Fortunately, I had helped the seller to pick a competent escrow title company which found a letter from a distant past owner which allowed the encroachment . Sometimes only God has control due to tragedies like death and disease and natural disasters. Then my experience helps to remedy and salvage a transaction. On a more positive note, we should talk to discuss your concerns. Prepare for the unknown. We reveal the Not Obvious. There are often unusual or unexpected problems. What are the underlying main issues? You should ask revealing questions and find the true answers. Who, What, Where, When and How ?? We know what to do and we enjoy helping people. Phone us at 281 236 8189 to discuss real estate. Go to our website at Houstonius.com. Visit us at the Poodle Ranch.
12 minutes | 2 years ago
Contingency or Non-contingency SLG018
What is Contingency? Which is better Contingency or Non-Contingency real estate commission? How can real estate buyers get a rebate on their next transaction? How can Sellers get reduced sales commissions? Contingency is defined as – Dependence on chance or on the fulfillment of a condition; uncertainty; fortuitousness: . A contingent event is a chance, accident, or possibility conditional on something uncertain: Let me help us discuss this in context. In 1994 I was licensed as a real estate agent with Coldwell Banker in Houston. The have both company offices and franchise offices in the United States and around the world. With approximately 80,000 agents, they sell and lease residential and commercial properties. In 2010 I decided to be an independent broker and have No agents, thus allowing me to have more time to help important clients. One reason for leaving mother Coldwell Banker, was to offer the public, the option for non-traditional compensation fees. An attorney will work with a client on a contingency or Non-contingency compensation plan. With a contingency pay plan, the attorney bears the cost of the research and court costs, however the attorney may get 40% of the awards to the client. A $2,000,000 award to the client would thus yield $800,000 to the attorney. Hopefully that would be more than the costs incurred by the attorney. However, the attorney might prefer to work for an hourly fee which is not contingent upon a successful result. The work might entail legal research or require a lawsuit which is not likely to be successful. The attorney would probably require the client start with a startup retainer fee. For 60 hours of work at $400 per hour, the attorney would bill $24,000 legal fees. Although I have no scientific research data to prove these numbers, we agreed that real estate brokers get paid by 25% of their customers. Meaning that brokers work on contingency and only 1 of 4 customer relationships resulted in a pay day. How can that be? Last year, I was helping a client to buyer a home in partnership with his brother. I had previously helped him to buy a commercial property. Since he trusted me and I also had many years of experience with residential homes, we started looking for a home. He as preapproved by a mortgage broker. As it turned out, the mortgage broker encouraged the buyer to finish his tax return in February to help get preapproved. The mortgage broker told the buyer that it takes 30 days for the tax return to be recorded and transcripted online …. As proof to the lender. However, the mortgage broker did not know to tell the buyer that the buyer also had to pay the income taxes and did not know that the buyer waited until April 15 to pay the taxes. When we submitted our offer to buy a home in March, the buyer’s transcript had not yet been put online until June and the seller of the home would not wait and offered the home to another buyer. It was actually kind of crummy, because the he was a first time buyer. He did not know that 15 year old homes can have movement which causes small sheetrock cracks, which can be easily patched. Welcome to Houston. He did not believe me that small sheetrock cracks may not be major repairs, but should be seen by a licensed inspector. The buyer decided to not trust me. But his brother phones me frequently to have a nice pleasant discussion. Once I was helping a man sell a home and found a buyer. He was distraught be the divorce of his wife and committed suicide one week before the final closing docs were to be signed. Some buyers can not find a home which they want. The point is that agents waste a lot of time which does not produce a pay day. As a result, real estate brokers must receive a 3% real estate sales commission to make enough money to offset the wasted time with the nonproductive 3 of 4 sales relationships. When they charge 6%, then half or 3% get transferred to the other broker representing the buyer. When a broker represents a buyer, then the seller broker transfers half the 6% commission to the buyer’s broker. So usually a transaction results in a payment of 3% of sales price, which is paid to the broker. Many people think that brokers are overpaid because of high sales commissions, but after accounting for all costs of doing business to keep the door open, brokers only make approximately $200 per transaction net net net. The bulk of the sale commission goes to the agent, the only gets paid for 1 of 4 client relationships. Often we see advertisement for discount brokers offering discounted contingency sales commissions. Those are usually brokers who are desperate to find a client. The end result is …. Those discount brokers close their doors or stop offering discounts. We can always find anything cheaper. I shop at Walmart sometimes, but I drive a nice new luxury car. I frequently shop for the beat price on commodity items. The question is ….. are real estate brokers a commodity. Are some brokers better? Do a broker have more value than another broker? Maybe real estate brokers should offer non-traditional compensation options to their real estate clients. There could be several options. For sellers, the broker could work like an attorney and charge an hourly rate with a startup retainer. For buyers, the broker could also charge an hourly rate with a startup retainer, however give the buyer a rebate of all earned 3% sales commissions transferred from the seller’s broker to the buyer broker. Essentially, we are talking about risk. Who is willing to accept the risk of contingency or non-contingency? The real estate broker or the client? There are several reasons that a buyer would not agree to pay to receive a rebate. The buyer is not sure he wants to buy. Buyer is not sure he can get a loan. Buyer does not know and trust the broker. In the past I have offered a compromise to both buyers and sellers. If a buyer pays a startup fee of $1, when the buyer hires me as broker by signing a representation agreement, the buyer then receives a $3 rebate at the final closing table. A $5,000 start up fee would allow a $15,000 rebate to buyer at final closing table. The State of Texas Real Estate Commission requires that I disclose that this is subject to agreement by represented parties. In actual experience, most clients did not want the risk and decided that the broker should bear the risk and get a bigger contingent pay day. Some clients have paid the startup fee and received the big rebate. Most clients did not want the risk of Non-contingency and preferred to hire me to be paid based on a successful contingent event. They decide that the broker should bear the risk and get a bigger contingent pay day. I have no preference of contingency or Non-contingency and I continue to be an excellent broker. We watch for snakes, landmines and grassfires. We are prepared for the unknown. We reveal the Not Obvious. There are often unusual or unexpected problems. What are the underlying main issues? You should ask revealing questions and find the true answers. Who, What, Where, When and How ?? We know what to do and we enjoy helping people. Phone us to discuss real estate.
12 minutes | 2 years ago
Single Family Homes vs Commercial Contracts – SLG017
We did a podcast about each paragraph about the Commercial Texas Promulgated contract. So why did we not discuss the 1 to 4 family contract? Because the commercial and residential contracts have similar features except the commercial is several pages longer and has more complicated wrinkles. For my friends that want to sell residential homes, I do not want to appear disinterested or unqualified. I spent over 12 years selling single family homes and now I only help friends or absentee landlords who need snake proof boots on the ground near the house. I do not specifically advertise or farm single family neighborhoods. Maybe because generally single family homes are less complicated with fewer snakes, landmines and grass fires. However, sometimes there is an unexpected snake in the grass. The problems are not caused by the home. The challenges are caused by people and institutions with changing personnel, guidelines, policies, rules and laws. Let’s talk about the differences between the residential and commercial contracts and what to expect. What rocks to turn over and which bush to avoid. In not specific order. Residential properties may have different tax laws and exemptions. Your home is your castle. Pay careful attention to the effective date, the day the contract clock begins to tick. Residential contracts are effective and start which both buyer and seller have signed the contract. Commercial contracts are effect and start the date the title company receives the contract. The earnest money from buyer is due within 3 days, which includes weekends and holidays. The effective date starts the option feasibility period which then starts the days to terminate if you can not get the loan specificed in the Commercial Financing addendum. Therefore we should know the residential and commercial contracts have different effective dates. A SFR is required to have a “Seller Disclosure Statement”, preferably when the home goes on the market, however it can be 7 days after the effective date. Commercial Contracts are not required to provide a Property Condition Statement. Although there is a box to check, which can require the Condition Statement. If I represent the buyer and contract requires seller provide the State Form Property Condition Statement, and the seller instead provides private brokerage company form statement of condition ….. is the seller then in breach of the contract and can the buyer then void the contract at will? Maybe. That can be our secret … do not mention it to anyone. Residential closing date can normally be written for 45 days after effective date because residential appraisals are easier and quicker Whereas commercial closing dates are normally 75 to 90 days after the effective date. This allows several weeks for a $2,000 Environmental Phase One study by an environmental consultant. (maybe not with multifamily). I have never had a lender require an environmental study on a multifamily property, except for one bank with a new inexperienced loan officer who had some experience with warehouse loans. Several years after selling a 40 unit multifamily, I got a phone call from owner who was remodeling several units. He sais that the remodel contractor required environmental guidelines to remove and dispose of some sheetrock. Another contractor in previous year had caulked the joints between the sheetrock with a caulk which contained asbestos, which he bought from a well known home repair big box retailer. A SFR contract may also include Owner Association Addendum for docs to be given to buyer and also other docs which a big brokerage firm as created from their attorneys. Commercial loans are not regulated by government and lenders can offer different kinds of loans, depending on how strong the buyer is. The residential loans are more standardized in order to be packaged and sold to investors. Residential appraisals may cost $600 to $800 and inspections and surveys also. Commercial inspections, appraisals and surveys and environmental studies maybe $2,000 and higher for each, depending on the size and complexity So generally, SFR are easier and quicker with lower acquisition costs and fewer snakes. Once I was selling a duplex for a very nice elderly lady in Dallas, Texas. She told it that it was not occupied. However, the bottom 2 bedroom apt of the duplex was occupied the Dad and two teenage daughters and 2 german shepherds and 2 cats. The inspector refused to go inside because of the smell. Life is good.
18 minutes | 2 years ago
Real Estate Financial Analysis App – To Determine Value – SGL015
We talk about the purpose and use of my web application to determine value of an income producing property. You can use it on a desktop computer or your mobile phone. For use you determine value for buying or selling. Also use as evidence at property tax protest hearing. Click here to get app
13 minutes | 2 years ago
Can you get the money? – Commercial Financing Addendum SLG 0014
If you can not get a loan, don't make an offer. Gosh I am cold. Here is a discussion with the Queen of the Poodle Ranch. We discuss the Commercial Financing Addendum of the Texas Promulgated Real Estate Contracts. It stipulates the criteria and terms, which might dictates if buyer gets return of the earnest money due to the financing terms. The other parts discuss issues regarding institutional third party loans, Assumable loans Seller financing. It also stipulates issues regarding credit worthiness. Commercial Financing addendum Similar to the Residential addendum. Paragraph A (1) states the amount of financing. Be sure to have the same amount as the main contract Paragraph 4 which states the amount of financing, the years of interest to be paid and maximum % interest rate and the years of amortization Paragraph A (2) states maximum number of days for buyer to notify seller of buyer inability to get a loan with those loan conditions and criteria. Therefore if the bank will not loan enough funds at a rate specified by the buyer, then the buyer can terminate get refund of earnest money. Keep in mind that seller does not care about the buyer loan terms, but wants to know quickly if buyer can borrow the money. If buyer does not notify seller, then the earnest money is not refundable under the terms of the Financing addendum. For unique properties with few comparable properties or when buying a property with low occupancy and high vacancy or Properties needing repairs or remodel or Reasons not yet discovered, It may be wise to NOT make the contract subject to nor contingent upon buyer ability to get a loan. It is a box to Not check is Paragraph 4 of the main contract. My attitude is …. If you can not get a loan, do not make an offer. I contracted to build a one story home on two acres and the appraiser for the bank loan had to compare to homes which were two stories on smaller land. I presented a seller of a 4 plex which did not have a kitchen in one unit and did not have a bathroom in another apartment. I represented a seller of a commercial 5 plex and buyer tried to get a loan for a residential four plex. Know that if a party should rightfully received the released earnest money and the other party refuses to sign the release of earnest money …. The party can file lawsuit and get the earnest money plus damages plus legal fees. After appro one year, the title company will send the disputed earnest money to the State of Texas…. Which will release it to the buyer, upon reasonable request. Yes, it happened to my buyer client. Paragraph B deals with assumable loans and states the lender, amount to be assumed, and date of the loan. Para B (3) states that the earnest money if refundable if the loan to be assumed is greater than “X”. It also says that the earnest money is refundable if the “Assumption fee is larger than “X”. Assumption fees are normally between ½ and one percent. Normally, the lender will require that the buyer qualify for the assumption, thus it is called a “Qualified assumption” The amount that buyer must come to the table with is the sales price minus the balance of the assumable loan and maybe the assumption fee, if negotiated. Paragraph C stipulated the terms of seller financing. Normally a lender will not allow together both an assumptions and seller to financing of the down payment. It stipulated if the borrower will be personally liable for the loan. IT stipulates who is responsible for the property taxes and insurance. Paragraph D discusses credit approval of the buyer for loan assumption or seller financing. And the number of days seller has to terminate if buyer is not credit worthy.
14 minutes | 2 years ago
The End of the Commercial Contract – SGL 0013
In this podcast, we discuss paragraphs 16 through 26 of the promulgated commercial contract for properties with improvements (buildings, not just vacant land). We discuss when the clock starts for duties, disclosure, (or not), condemnation and acts of God, and also the drop dead date (the contract, not people). This makes the contract sound biblical. Previous podcast episodes have discussed up through paragraph 15. It would be a good idea for you to listen to those beginning episodes. What is the latest at the Poodle Ranch? I have been picking pecans and raking leaves to find them. Got a bushel Paragraph 16 - What happens if the subject property is damaged before closing If the seller does not restore the property • The earnest money and option feasibility fee are returned to the buyer • Extend closing for 15 daYS • Buyer can take the property in current condition and get any insurance proceeds and get a credit from seller for the insurance deductible amount. IF the property is condemned by a jurisdiction, buyer can terminate and get refund of EM and option feasibility fee Or defend the condemnation Para 17 – IF there is a lawsuit the loser pays the attorney fees Para 18 – What happens to the earnest money if the deal does not happen. The party that defaulted or was in breach should release the earnest money to the other party. If they do not, then the parties can send written notice to other party asking the okay to release to the party that asked to receive the money. If the title company does not get written permission to release the EM, then a party can file lawsuit to receive damages, EM, attorney fees and cost of the lawsuit. It is easier to release the EM. Para 18 Also let you check the box for buyer and / or seller to do a 1031 tax deferred exchange. We will discuss this tax code in an upcoming podcast. Para 19 allows seller to agree to provide a Property Condition Statement (similar to a residential Seller Disclosure Statement, which requires of every single family home. Or check the box saying that the seller is not aware of bad property conditions. There are two ways to view this issue. It can be argued that if seller knows of significant problems with the property, the seller should disclose to avoid a lawsuit in the future. The other view is that seller should not check either box and make not statement, and encourage buyer to hire a licensed building inspector. I am inclined to disclose important significant problems with the property that seller is aware. I do not need legal challenges. Para 20 says that buyer and or seller can receive notices by their email address. I am inclined not to agree to notice by email because it can get lost in cyber space. Para 21 say parties agree to mediation to solve a dispute before further litigation. Para 22 says the contract is binding and specifies the addenda which are to be included with the contract. Do not forget to include all the addenda. It may bite you later. Para 23 says time is of essence ? Para 24 is important because it sets the clock to start and you need to know when you must perform certain duties. The effective date is the day that the title company receives the contract. Get a written receipt from the title company with date stamped. Para 25 - The residential contract effective starting date is the day that both buyer and seller sign the contract, and is not related to the title company. Important distinction. Para 25 also discussed flood districts, sewer areas, and flood areas and lead based paint, mold remediation certificates Para 26 includes the drop dead date which is the deadline for signatures of both buyer and seller.
16 minutes | 2 years ago
How to Prevent Real Estate Snakes – SGL 0012
What is new at the Poodle Ranch? In past episodes, we discussed through paragraph 11 of the Commercial Purchase contract This episode discusses Paragraphs 12 through 15. How to stop Snakes -SGL 0012 What is new at the Poodle Ranch? Recently we discussed through paragraph 11 of the Commercial Purchase contract Paragraph 12 to gives buyer and seller a space to provide for special specific concerns. As a Senior Property Tax Consultant, I know that the County Appraisal District subscribes to the sales prices from property sales at commercial real estate websites and residential MLS HAR.com If not on MLS we can insert language into Paragraph 12 Special Provisions to say “Seller and Seller’s Broker will not disclose the sales price to anyone except seller’s accountant and the IRS.” We do this because, after the sale, the seller’s broker will change the status on the advertising website and immediately a box pops up, asking to record the sales price. This paragraph can say that broker can not disclose and therefore the broker will insert a price $1. Know that Texas is one of 5 Non-disclosure states which does not require seller to disclose the sales price. However, they unsuccessfully tried to pass a bill to change that. Additionally, the county appraisal district will send a letter to the seller, asking the seller to remit the sales price. And the agent may get a phone call asking the sales price, which is confidential personal information. IF the price was $1,000,000 and taxable appraised value is $700,000, the difference would increase taxes by approximately $7,500 per year. After inspections a buyer may ask for the seller to do repairs, which may result in repairs which are to satisfactory to the buyer. Or the buyer may ask for $$ in lieu of repairs. In a commercial contract, we can add language that says “Seller will deposit $ “X” of sale proceeds into an account at the title company for buyer repairs.” This is better than reducing the price because it requires that buyer bring less cash to closing table. Often lenders will tell the title company to give the money to buyer at closing. For large repair dollar amounts, some lenders may require the funds be sent to the lender for escrow. Then lender will send the a representative to the property to verify that buyer did the repairs and lender will then send that escrow repair money to buyer. For residential contract, regulated lenders do not allow cash from seller to buyer, except we can use paragraph 12 “Settlement and other Expenses” Whereby seller can contribute to buyer closing costs and mortgage fees. This would be in lieu of buyer repairs. However, buyer should be careful not to insert a dollar amount greater than what regulations allow. It depends on the type of residential regulated loan. Talk to the loan officer. This paragraph only applies to residential loans. Some lenders do not want multi-tenant properties where the leases are month to month. Ask your loan officer in advance of signing the contract. The lender may require buyer to deposit 6 months of rent with the lender until new leases are signed with tenants. Paragraph 8 says that seller can not sign leases, therefore we can insert language in paragraph 12 Special Provisions which says “Seller will sign current leases with tenants which vary in length from 6 to 15 months at an amount not lower than current lease rate.” The lender wants leases and does not want all tenants to move out in the same month. Buyer wants short term leases because the buyer wants to later decide the price and terms of leases. Frequently, buyers and sellers wat their pet clauses in Paragraph 12 Special Provisions which are not necessary because other paragraphs already says the same thing and are redundant. The other agent does not understand the contract or/and can not explain the contract to the client. Paragraph 13 discusses the normal closing costs that buyer and seller will pay for.
15 minutes | 2 years ago
More Commercial Contract Snakes – SGL 0011
Large snake pits herein. There is language which we can use when negotiating the contract to avoid problems after the option feasibility period of the contract. Last week we discussed Paragraphs 4,5 and 6 of the commercial contract. Again I reiterate that the 1 to 4 family residential contract is similar to the commercial contract, except the commercial contract has more pages, because there are more snakes. Paragraph 7 Property Condition Para 7 A states the repairs that the seller will do before closing. I can not remember when I used this paragraph, for reasons which will be evident later in this podcast. Paragraph 7 B - is very important because it gives the buyer time for building inspection by a licensed inspector and a property environmental study, which may be required by a lender. The consideration paid to the seller for the feasibility period is negotiable. Why is money paid to the seller for time? If you pay for it, you own it. If you do not pay for it, a gift can be revoked. Additionally, the seller wants “Good Faith” money. No Free Look. It might be a small amount if there is doubt about the ability to sell or if seller needs to deliver questionable documents. The length of the feasibility period may need to be extended in Paragraph 7 B (2) …. If a preliminary tour indicates a possible need for and EPA Phase 2 soil sample tests. Paragraph 7 D says that the seller will deliver feasibility docs to the buyer within “X” days. Those docs may be required by Buyer’s bank lender. Frequently buyers and inexperienced buyer agents check every box to get every document. Primarily because they do not know what the contract language means nor the use of those docs. As an example, the Buyer will ask for copies of notes and deed that the Buyer will assume, but the loan is not assumable. They ask for water and sewer utility capacity letters from the city, but the Buyer does not expect to build new construction Or the city wants to see building plans in order to provide the utility capacity letter. The buyer may want copies of insurance policy, but insurance is not transferable nor assumable. The buyer wants “ As-Is” construction plans for a 40 yeara old building that is 2 stories short.?? Buyer wants property tax statements, but that is online FREE. Paragraph 8 B may be necessary to know if the landlord gave free rent to a new big box store instead of money to install walls, bathrooms, and heating. This is not usual with multifamily apt units. However, sometimes I have to tell buyer agents “No estoppel Certificates” signed by tenants. Some do not speak English. Paragraph 9 B (1) Says Seller’s broker may pay buyer broker a commission at closing or seller will pay buyer broker at closing. The last page of contract states “How much” the seller’s broker will pay buyer broker Some buyer agents will inadvertently say that the buyer broker will be paid by BOTH the seller and by the seller’s broker. Oops. Change that …… One but not both. Paragraph 10 Closing Is “X” days after the feasibility inspection period or a specific date. Seller wants the money quick or put it back on the market. Seller does not realize the world has changed in last 10 years. More government regulation and lender bureaucrats have more loan policies The bank clerk takes the loan application out of file drawer to review, one week before closing …. Because the clerk is busy with other loans. The clerk then asks buyer and seller for more paper documentation and clerk reviews the additional docs. The clerk gives the file to the supervisor for review. Then the supervisor wants more info from buyer and seller. Some the info is not available and we debate. Last year a bank lender wanted the buyer to pay for one year of hazard insurance before the bank would deliver loan note docs to the title company for closing. IF the seller was in a car wreck, buyer would get a refund for 9 months of the annual cost.
15 minutes | 2 years ago
Stop Real Estate Abuse – SGL 0010
Last several weeks episodes we discussed the commercial real estate contract paragraphs 1 through 3. Today we discuss paragraphs 4 though 6 which concern Third Party Financing, Loan assumptions, and Seller financing. Additionally we discuss Earnest Money and the Universal Commercial Code searches. What should buyers and sellers watch for? Be sure to subscribe to our eye-opening newsletter in the box on this page. Last episode we discussed the first page of the Texas Association of Realtors Commercial contract It is similar to the 1 to 4 Family Residential contract, but longer …. 14 pages instead of 9. Para 4 can be very challenging with 3 parts dealing with Third Party Financing Assumption of existing loan Seller financing If the property is unique, then it may be difficult to appraise. If you are a seller, you may wish to NOT check the box which makes the contract contingent and depending on the attached Third Party Financing Addendum This means the lender must be willing to loan the amount noted in papr 3 and 4 By NOT checking this box, the contract can not be terminated if the buyer can Not get a loan. If the property appraises at a low value, the contract is still binding. Some buyers are not confident of their ability to get the perfect loan with great terms, By Not making the contract, contingent upon the Third Party Financing Addendum. If the buyer can get a loan, but on terms with are less than the criteria expected in the separate attached Third Party Financing Addendum, then the buyer can not terminate days before the expected closing date. If the contract is written such that it is not contingent on the Third Party Fianncing Addendum. Then the earnest money is not refundable to buyer after the inspection feasibility option period. If the property appraises low and the contract is contingent upon the terms in the attached Third Party Financing Addendum, then the buyer can terminate and receive the earnest money. Assumption Concerning assumption of existing loan, a buyer may wish to see a copy of seller’s loan note in advance to know before acquisition costs …. 1) If the is a bank loan assumption fee of 1% 2) If the seller has a pre-payment penalty Seller Financing – will it be a 1st lien or 2nd lien. The contract should stipulate who writes the loan note? If seller’s attorney writes the loan note the day before final closing ….. it may be one-sided and have terms which a prudent borrower can not agree to. Thus buyers may lose earnest money and acquisition costs if the buyer backs out. Maybe the contract should stipulate that the title company attorney will write the loan note. Paragraph 5 It is common for earnest money to be 1% of the sales price, however if the property is hot, it may need to be 10% of sales price. They call it “Earnest Money” ….. I call it “Good Faith” money. If the buyer abides by the contract, then the buyer can terminate to get the earnest money refunded to the buyer. If the other defaulting party does not sign the “Release Of Earnest Money” form, then a penalty at court might be 3 times the earnest money plus legal fees. Frequently sellers do not realize the time and effort it takes to the finish line. In the recent 9 years regulations and lender policies have become strict and cumbersome. Or the seller want the ability to close quickly or find another buyer. But life happens to create unexpected nightmare snake pit delays, which we have discussed in other podcasts. Snakes sometimes get hiccups or trigger landmines near appraisers, slow lenders and bad environmental studies. Therefore sellers can be placated with Paragraph 5B whereby buyer deposits additional earnest money, thus the seller becomes convinced that buyer is confident that deal will happen or lose the additional earnest money. Paragraph 6 A (3) In Texas, normally the seller pays for title insurance policy. A title commitment can normally be sent to seller in 15 days. Paragraph 6 A (2)
18 minutes | 2 years ago
Stop Grief and Do It Right – SLG 009
The contract to purchase a commercial property is similar to the contract to purchase a 1 - 4 family residential property, however commercial properties are more apt to be irregular with more snakes, landmines and grass fires. The commercial contract is several more paragraphs and pages. We discuss page one with the first 3 paragraphs. Although the form is fill in the blank, there are challenges which depend on the uniqueness of he property. We need to be concerned with the circumstances of the buyer and the wishes of the seller. Often the wishes of the seller are diametrically opposed to the buyer. Sometimes other involved people and institutions, such as inspectors and lenders, can not oblige the time table of the seller. This will be a good listen for you. The Great of State of Texas gives me authority to use approve contract forms and amendments. Can not scratch through and change, however the principles, buyers, sellers, tenants and landlord can scratch through, change, rewrite paragraphs and then initial. They should consult me first to discuss correct words, ramification and unintended consequences. Who can sign? • Husband AND wife to make it binding • Legal owners and their legal reps • LLC requires the Managing Member • Uniform Gifts to Minors Act – parents or guardians • INC. = Corporate officers with authority means President and Secretary. • Durable Statutory Power of Attorney - notarized The principals involved will need to show proof of authority to the title company. In Paragraph One stating the names of buyers and sellers…. Sometimes the client wants to write “Or Assigned”, but there is a different place in the contract for that. Paragraph 2 - “Property” – Get the correct legal description. Know what your are doing. An address is not adequate nor legal. The post office gives address to deliver mail Vacant land do not have an address, because not deliverable. A correct legal description in necessary because other involved instituions may use the contract. The title company and lender may use your contract words in Para 2 legal description. The buyer may get ownership of part of the property if not done correctly. Review the county tax records for legal descriptions Sometimes we may need an Exhibit “A” with metes and bounds” of the properties, if available. Can get “Metes and Bounds” description from the survey, deeds, title company insurance commitments and court house records. I helped a buyer from California to buy a riverfront home on a bluff, which had 2 acres of land comprised of 6 irregular sized land parcels. I reviewed the county plat maps and correctly wrote the contract offer to include all 6 legal descriptions. He and wife bought the river home and they were happy. 3 years later I was named in a lawsuit because he could not legally ID one of the seven land parcels at his home. His attorney later discovered that the title company insurance commitment had omitted one of the land parcel legal descritions from the title insurance commitment. One parcel had not been identified to have insured ownership of the buyer. I had correctly written the contract to include all land parcels in the purchase. The Title insurance company revised the title insurance commitment. It cost some legal attorney fees. Helped a buyer with 2 buildings which contained 18 commercial warehouses. Each was on approximately half an acre. After the title company received the signed contract, then contract said that ten days later title company would send the insurance commitment. The legal description only included of the two parcels. The county appraisal district had two account numbers, each of which had a separate legal descrition. The county appraisal district had a main address with property account number, however it had a co-joining account number sometimes referred to as a “Child” account. I made the phone call to the title company and they made the correction.
9 minutes | 2 years ago
Vacant Unhealthy Ghost House – SLG 008
Our neighborhood division has 25 homes and each has approx 1 ½ acres of land. We own our sewer system and own the horseshoe road. We each have a water well. We live two blocks north of the Addick Dam Reservoir and several block from Bear Creek Park and two blocks north of the County courthouse on Clay Road. We are in the Katy School District but east Katy City limits. Not only will we talk about snakes, landmines and grass fires, well will also talk about raccoons and rats. Vacant homes are a problem in southeast Texas since the hurricane last year. We have lived here for 3 years and am not sure how long the vacant home has been empty. It has been vacant approx 10 years since it partially burned and it did flood last year during Hurricane Harvey. The county health and environment services has had 2 courtroom trials, one of which is since I have lived here. We hoped the judge would tell owner to tear down the house, however he instructed the owner to take away the trash in the back yard and keep the grass cut. I think our legal remedies are finished. If you have a nuisance building in your area, first determine if you are in an unincorporated area of the county or if the property is in a city. In Houston, contact the Director of Department of Neighborhoods at 832 394 0600. They fight blight. If the property is in Harris County, but not a city or town, You can ask the county to enforce the Neighborhood Nuisance Abatement Act. Phone Harris county Environmental Public Health at 713 – 274 - 6300 Before calling Harris County Public Health to file a complaint: • obtain a correct address of the complaint site (name of street, street number, nearby cross street). • obtain the legal description of the property in question, if possible (name of subdivision, lot number, block number). • obtain the name and address of the owner and/or name of the occupant of the property in question, if possible. Hopefully we will find a way to get rid of the vacant ghost home. Several Owners nearby have seen many raccoons and rats. It seems that the County laws do not require the owner to maintain it to be livable, however it must be locked to prevent entry. The trash must be taken away and the grass cut. The 11 homes on the south side of the horseshoe did flood. When we built our home, we noticed another owner on the south side corner was pouring a slab and did not think to ask why. She built a duplex and has tenants The realtor across the street did not complain nor the next door neighbor. The owner on the corner also turned the garage and garage quarters above the garage into a duplex. In her main house, she rented two rooms upstairs. It has an indoor pool attached to the back of the home. So the owner has 6 tenants and they sometimes walk down and around the horseshoe road. In our neighborhood, We look our for each other and watch for people we do not recognize. Previously we knew all our neighbors on this street which a horseshoe and not a through street. We do not have an owners association therefore deed restrictions must be legally enforced by one or more owners in the subdivision. We own the road and could put up a gate if we have 100% written authorization from all the owners in the neighborhood. The deed restrictions say that each owner may have a single family home … not a multifamily rental property. Legally, another neighbor can file a lawsuit to force the multifamily owner to stop renting to tenants. She might claim that they are not rental units and she is not collecting rents. We may have to take depositions from the multifamily owner and her tenants to prove that she does lease the converted apartments After the flood, all our owners met at my house to discuss flood challenges and we agree to put up temporary wood barriers at each end of the road, to keep out looters. I offered to help the multifamily owner sell her flooded property and NOT charge a sales commission. ZERO sales commission to me.
13 minutes | 2 years ago
A polluted property and he threatened me – SLG 007
6 years ago, I helped the owner of a large automobile repair shop to sell his 9 bay building on one acre of land, including equipment and inventory. There are not many people who want to buy an auto repair business. My advertising found a gentleman with repair experience and money for a down payment. We got help fronm Dennis David, and SBA loan expert. We wrote the contract to include a “Non Realty Items Addendum” form, to include the equipment and inventory in the sales price. I represented the Buyer and Seller. The buyer hired a licensed building inspector and also an environmental consultant. The bank hired an appraiser. After a successful transaction the seller retired. 4 years later, that same seller phone and asked me to sell another auto repair shop. He retired and six months later decided to work again. He bought a building and remodeled and upgraded the building. I agreed to help and it took 8 months go find a buyer. The buyer toured the property after normal business hours. The buyer then had questions which seller agreed to answer face to face. We should understand that the buyer gets the same net net funds regardless of buyer paying cash or getting a mortgage loan. The buyer asked the seller if he would accept a price 90% lower than the asking price. Seller asked a question with one word which commited him. He ask “Cash?” I think he could have gotten 5% higher price. If the seller had not negotiated face to face. Buyer wrote a contract which required a bank loan and needed a bank which would also finance the equipment and inventory. The current lender also had a separate loan for equipment and inventory. But the buyer wanted to use a different bank. Here comes the challenge. Remember he had hired me to sell the previous property. Unfortunately the current owner/seller did not hire me when he bought the property 3 years ago. Because he knew the seller and just made a deal. The environmental study indicated that the retail convenience store next door to the auto repair shop also sold gasoline and suspected that the tanks leak to the auto repair shop. It gets worse. I represented the seller and the buyer represented himself. When I am writing a purchase/sale contract, the seller phones to say he is now finally speaking with his estranged nephew. His nephew had 15 years experience as a real estate agent and wants his nephew to over the transaction and asked me to report to his nephew, who lives in Las Vegas. On a telephone conference phone call, his nephew agreed to handle all communications with the buyer, whose office is 5 minutes from my office. I write the contract with a drop dead date tomorrow, and seller took it to buyer office. I had expected nephew to email it to buyer for signature, today. It gets signed after the drop dead date. Nevertheless, buyer deposits earnest money at the title company, which makes the contract good regardless of contract date. (it is a fine legal point). I phone nephew in Las Vegas to discuss fine points of the contract and process of buyer due diligence. Buyer nephew get mad at me for acting like I know everything and give me 8 “F” bombs directed at me personally. I suggest we hang up and continue the conversation tomorrow. We did not. The Buyer lender would not loan due to previous environmental study with a discussion about possible pollution from the convenience store on the continguous land. The Nephew and I do not have further discussion nor conversation. I get my info updates from the title company. They spoke to the title company and arranged title company attorney to write a loan doc for seller financing, because a bank would not loan on a suspected polluted property. It gets worse. Several days before final closing date, I get a certified letter from an attorney representing seller with several demands. We spoke and attorney suggested that seller would make a complaint to the Texas Real Estate Commission about my services unless I reduce my sa...
12 minutes | 2 years ago
The Buyer Would Not Sign the Last Page – SLG 006
Helping seller of a fourplex asking $400,000. The seller used a furnished apt unit for AirBnB weekly rentals. Buyer did not sign the last page of the contract because buyers agent said it was the last page that would be signed only by the buyer attorney, if there is an attorney. The buyer agent did not speak good English and was partially retired from work. I said that buyer should sign the last page where it asked for the seller signature, other we would not have a good binding contract. I was going to phone the broker of the agent, but first I phoned the agent to appeal again that the contract be signed in full. She apologized and realized that buyer should sign the last page. After the contract was signed and executed, buyer deposited the earnest money at the title company. Buyer then hired an inspector and gave the inspection report to the seller accompanied by an amendment requiring seller to reduce the price by $20,000. A large part of repairs were claimed because the buyer inspector said that the 4 electrical breaker box panels would need to be replaced because they caused a fire hazard. I helped to sell 9 other identical fourplexs on this same city block which had the same electrical panel manufacturer and there has never been a fire. Additionally, the City of Houston Dept of Habitability did an inspection 2 years previous and issued a Certificate of Habitability to the property, which means the property passed a safety inspection. We negotiated to have the seller give the buyer $2,000 for repairs, which would be credited to buyer at closing, thus reducing the funds needed for the buyer at closing. A priced reduction would not have given the money to the buyer for repairs. The buyer hired a lender bank in California with two offices in Houston, the same lender which we will discuss in another podcast. Before closing, the lender wanted a preliminary closing statement to show where the money goes with debits and credits. The title company sent the buyer’s preliminary closing statement. Approximately two years ago, the State of Texas, ceased to use the HUD One with buyers and sellers debits and credits on the same form. The State of Texas mandated that buyer closing statement (which shows debits and credits) be separate from the seller’s closing statement. None of their business. It is the private business to each buyer and each seller. The buyer’s lender insisted to received the old formerly used HUD One. The title company agent found the old software and printed an outdated HUD One form which satisfied the California lender. The title company however used separate buyer and seller closing statement for the final closing. Buyer and seller separately signed the final docs. I instructed buyer’s agent that the seller would move out of the furnished apt unit in 24 hours. The next morning the buyer had a locksmith change the locks on the seller’s furnished apt unit. At one pm, 2 hours after buyer changed the locks, the seller showed up with movers and truck to move the furniture from that furnished apt unit. His key would not open the door. He broke a window and crawled in to open front door and move the furniture out. The phoned the police the next day to make a police report and the downstairs tenants confirmed the incident. What do you think of this?
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