Subject To - Clauses and Objections

Subject-To Contract Clause:

Since you probably won't get to examine the note prior to closing, make sure it says what the seller tells you...

 

"Price shall be $____________ payable as follows: buyer to take over payments on seller's first mortgage loan to _(lender)_ with a total balance not to exceed $____________ at (fixed/adjustable) interest rate not to exceed ____% with ___ payments remaining."

 

Also, if you can get the seller to obtain an estoppel letter from the lender ahead of time, that will be beneficial. If at the closing or during a title check you find undisclosed loans (liens, 2nd mortgages) - the seller should either pay them off at the closing, or you can walk.

 

If the seller objects to that you might not make payments and the loan will go into default (a valid concern) you can do two things:

1) Use a servicing company that will collect and distribute money to lender(s).

2) After sale, create a quit claim deed giving the property back to seller, and have that escrowed with directions to distribute it to the seller if you fail to pay after 30 days. Of course, you will want some period of time (say 10 days) to allow you to 'make good' and/or prove the payments were made. {Note: this requires some help from an attorney; there are implications regarding foreclosure law and other laws when escrowing a deed (at least in NJ).}

Getting Your Direct Mail Opened

Here are some tips I got from Kathy Kennebrook's class:

Using direct mail requires that you get three difficult things to occur:

1) Get the person to OPEN the letter
2) Get the person to READ the letter
3) Get the person to CALL and/or take action

 

Here are some tips to get prospects to open your letters, versus toss them as junk mail. The general idea is to make it look like a personal letter.

• Use white #10 envelopes
• Hand address (no labels, no windows!) in neat, legible writing
• Use return address, but NO name (gets their curiosity)
• Please spell their name and address correctly!
• Use first class stamps (no bulk mail)
• Optional: If you can stick in something slightly bulky, that typically gets them to open it. An example is a flat pen.

 

Getting the person to read and take action pertains more to the message conveyed in the letter. However, if you can't get the first thing to happen (opening it) then the message doesn't matter.

 

HTH

 

Mold

The EPA has an online document entitled: "A Brief Guide to Mold, Moisture, and Your Home" that has good info on mold remediation and other topics.

The Dishwasher Exploded

That's the call a fire department received last winter from a base-housing inspector. The inspector had been doing normal bimonthly checks of vacant units when this happened.

The inspector's usual procedure was to run the cold water in the kitchen sink, turn on the dishwasher, go upstairs to flush the commode, and run the water in the bathroom. About three minutes after she started the dishwasher, it exploded. The blast propelled the dishwasher (which was installed under the kitchen counter) across the kitchen. The cabinets, plumbing and walls were damaged.

The concussion splintered the face of the rear door to the housing unit and blew it open, destroying the lock. Pieces of the dishwasher and cabinets were scattered over 20 feet. The access panel to the attic on the second floor was dislodged, and the front door was blown open and damaged.

Read the rest at the elcosh website.

What This Means to You

When you move into a house or apartment that has been vacant, hydrogen gas may have built up in hot water lines, which could cause an explosion. The same is true when you return home from a vacation or open up a vacation home that has been shut. When you go to start the dishwasher, ask yourself how long the unit has been vacant. If it's more than a couple of weeks, you need to think about getting rid of the gas before you turn on the dishwasher. If you suspect hydrogen gas may have built up in the hot-water system, flush it by turning on all hot-water faucets in the building and letting them run for several minutes. And don't smoke while you're doing it.

Buying Real Estate with Your IRA

Did you know the US Government allows you to invest in real estate using your IRA? Yup. You just need to open a self-directed IRA and transfer your IRA money into the new account. Of course, there are some rules and best practices, and in this regard I highly recommend the book below: IRA Wealth by Patrick Rice -- (I read it twice!)

Click Here!

Things Are Heating Up!

I'm not sure what's going on but after three months of not one entry on my website - this week I already have three, plus a phone call. I guess the selling season is kicking in.

Out of the three folks who entered information, one looks like a great deal, one looks marginal, and another is no good. I will let you know how it works out.

I am finding that the only drawback to having a website directed at the whole state of NJ, is that there are many areas for which I do not go to often and don't have a lot of insight into -- I need to either get a Realtor friend in south Jersey, or get a good list of investors to farm some of these leads out to (for a fee of course).

Confusion = No Deal

Remember - our natural tendency is to avoid anything we don't understand. This is generally a good thing, so it is your job to make sure that the seller is not confused about what you are offering. Confusion on your seller's part means No Deal.

Avoid confusion as follows:
- If you tend to talk fast; slow down!
- Don't use jargon (ARV, Subject-To, Lease Option, etc.)
- Answer all questions until they understand
- If they ask the same question, try answering in a different way so they 'get it'
- Don't try and hide anything from the seller; be upfront, and let them know what you are attempting to do

How to Close Using a Land Trust

Using land trusts are a great way to flip or assign property in cases where you cannot assign a contract (e.g., REOs). It also avoids double closings, and thus, double fees.

Step:
(1) Sign offers as "John Smith, trustee" (use your real name obviously)
(2) When buyer is found, fill out trust agreement with him as beneficiary and collect your assignment fee
(3) Create a Memorandum of Trust (used to file trust at Clerk's office)
(4) Closing: sign all documents same as above (buyer brings the money to escrow)
(5) After closing: Resign as trustee (one-page document)
(6) Buyer can designate his own trustee later (another one-page document)
* Note documents in steps 5 and 6 are not recorded anyway; just between you and him.
(7) Optional: Use a quit claim deed to take your trustee name off of the title.

Kathy Kennebrook - Finding Motivated Sellers

The first national speaker who presented at the Foreclosure Summit was:
Kathy Kennebrook, The Marketing Magic Lady.

She discussed formulating a marketing strategy to locate prospects, and pre-screen them in order to construct offers. The 2 different market strategies discussed were shotgun (e.g. using bandit signs), and rifle (e.g., targeted direct mail). She focused on the latter, since that is her specialty.

Here are some general hints and tips she mentioned:
* Follow-up is critical; very few prospects will call after only one mailing
* The Spanish language market is hot - put a translation of your markeitng materials on the opposite side of all direct mail flyers, and hire interpreters by the hour (or hire someone bi-lingual) when a prospect calls.
* Give prospects multiple ways to contact you (email, phone, US mail, etc.)
* Use a checklist or script when speaking to prospects to ensure that you get all the info you need the first time (i.e., it doesn't look good to keep calling them back because you forgot to ask something)

Here is a list of some potentially good direct mail campaigns:
* Out of state owners
* Burnt out landlords
* Military transfers
* Probates
* Pre-foreclosures
* Vacant properties
* New luxury home owners

Overall, she was a very good presenter, and if you want to ramp up your marketing via direct mail - I am sure that this is an excellent program. She provided a lot of valuable info (only some listed here) - but spent a little too much time (25 mintues) trying to sell her packages.

Vendors at the Foreclosure Summit

Here are some of the vendors that were at the Foreclosure Summit:

* BanditSigns.com Marketing
* Equity Trust Corp. Own Real Estate in Your IRA!
* RehabFunding.com Hard $$
* Brookview Financial Hard $$

Foreclosure Lists

Here are some services to get pre-foreclosure lists:

 

Foreclosure Listings

Foreclosure Deals

RealtyTrac

 

Foreclosure Summit Comes to NJ

I am hoping to attend the Foreclosure Summit next week in Newark. I will report back with details for those who cannot attend.

This week's recommended reading: Foreclosures and Flipping Advice

I read a lot of real estate investing books on many different topics. I recently finished these two books and I was impressed with the information they had to offer. The first one will be more of interest to those looking at rehabbing houses; the second is a good general method of obtaining properties for any purpose.

 

 

Find It, Fix It, Flip It! : Make Millions in Real Estate--One House at a Time by Michael Corbett

 

 

The Pre-Foreclosure Property Investor's Kit : How to Make Money Buying Distressed Real Estate -- Before the Public Auction by Thomas Lucier