Closing on a property purchased with private lenders
Closing on a property purchased with private lenders
When you make your offer on repossessed homes for sale, there should be no paperwork involved, just a verbal commitment. Once your offer is accepted, you need to move forward with the mound paperwork that is your passage to closing.
When you are working with the realtor on cash deals, the realtor will take care of the closing preparation for you.
If youre purchasing a bank repo houses, youll be working with an asset manager. Once your offer is accepted, one of the first things they will ask you for is earnest money. You have to put some money down. Normally, I try to get by with $100. Sometimes this flies, a lot of times it doesnt take off. Often these folks are looking for $1,000. I had heard a rule somewhere that you should never give more than two percent. I dont know if thats valid, but its what I heard.
I probably shouldnt be so open about what I am about to tell you, but I am going to tell you what I did on one deal. I made an offer and it was declined.
I thought I could buy that particular property at that particular price. This was back when I touched the private lenders money; I dont do that any more. I had the private lenders money in my bank account. They turned me down and the next day. I went back in with my exact same offer, to the penny, that they had turned down on the day before. But, this time, I gave them 100 percent of that offer as the earnest money. They took it. I had a substantial reduction. They wanted this amount, I offered this amount, I low-balled the thing and they turned me down. So I just put up earnest money to the full amount of my offer. And they took it.
I dont play that risky game now but, I did back then.
Now, the asset manager and your realtor will coordinate paperwork as well as schedules to determine the date of closing. Contact your lender to arrange for a transfer of funds at this time. You also need to set up insurance, both hazard and fire.
It is important to note that if youre dealing with a bank, they are going to ask for protection of their loan. Private lenders dont do that because they assume you know what youre doing and you take care of that.
At this, it would be easy to slide by and forget insurance. Thats why youve got a check sheet. I am going to keep drilling the idea of check sheets into your mind. It is easy to forget things during this process.
It would be a nightmare to be at a closing and remember that you havent lined up your insurance. Check sheets are the way to avoid this nightmare.
On bank repossessed homes, you get 60 days to close.
Often, I have a lot of houses in process and on rehabs. Theyre in the pipeline with offers accepted on them and my contractors cant keep up. Do I really want another house on top of all of this?
We can start to get overloaded, say I buy 17 houses in two months. This is a lot of work. I can actually use this 60 days as a tool.
If the offers accepted, I push things back to the 60 days. If Ive managed to keep things flowing without working my people to the bone.
If my crew picks up the pace during that 60 days and gets the work done, I can pull that date in. I will call and say, Hey Im ready to close.
That 60 days they give me, is a great tool for me. I can use it to buy time if time is needed.
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