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Real Estate Articles
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CONTROL
YOUR CLOSING
A Street Smart Secret to Making More
Money |
| by
Louis Brown |
|
Satisfied Customer |
| ...I
did want to thank you for your help in
training and educating me to reach some
achievements I did not think were
attainable when I first bought your
"enchilada" back in January.
Just wanted to let you know that the
very first month after purchasing and
reviewing your "whole enchilada" I was
able to buy 4 houses worth over 100k in
cash and equity.
I charged one point on my first owner
financing contract, and that one point
has paid for your whole course.
More importantly, it has also allowed me
to quit my job and go full time into
Real Estate effective April of this
year.
I used to only know how to buy houses
with low all cash offers, but now I can
take them as they come and consistently
buy "subject to," agreement for deed and
with options and lease/options.
I know I still have a lot to learn
about cash flow and how to "survive" the
acquisition phase, but I feel very
confident that with what I now know that
I'm only one phone call/deal away from a
solution to today's cash flow needs.
Thanks Again!
Kris Kirschner
Atlanta, GA
|
Where does the rubber meet the road in real estate
investing? The rubber meets the road where the
investor makes money. In twenty years of buying and
selling property, I have learned that where I make
my money is where I need to have control of what
happens. Have you sold a property and then had the
sale not go through? Have you pulled a property off
the market for weeks and lost marketing time and
money, waiting for a closing to happen? I have had
many situations where closings did not happen. In
almost every instance, it was not my fault that the
sale fell through, yet it was my problem - and my
expense.
A lot of us don’t even consider the expense of a
delay. In addition of the cost of the effect of time
lost, we’ve also got the continued cost of loan
interest, property taxes, and maintenance such as
mowing the grass. This can add up to a lot of money.
Not to mention the cost of lost opportunity by not
having the funds to do another deal.
Your whole focus on a property shifts when you think
you’ve got a deal. You focus on other projects, drop
your advertising, gleefully tell callers “It’s sold”
or “It’s under contract”, so proud of yourself and a
little righteous that the callers are just too late
for this great deal. Then you discover you have a
problem. Sometimes you don’t discover it until the
day before closing or even the day of closing. Then
you get to hear “The lender has a delay”, or “The
loan is stuck in Underwriting” or “The package
hasn’t arrived at the attorney’s office” or my
personal favorite, “The borrower still needs to
provide some additional information”.
For most of us, this can produce an effect anywhere
from disappointment to frustration to devastation.
We may already have a deal under contract, which
requires the proceeds from this sale to close. A
delay in the closing may mean losing that deal and
the earnest money that sealed that contract. We may
have promised a lender that they are to be paid off
now. We may need the proceeds for bills. We may not
have the next payment on the loan in pocket. We may
be moving out of the sale season. We may have a
balloon payment staring us in the face. Whatever the
reason, a delayed closing is not a good thing.
So what do we do to solve the problem? I’ve learned
a lot over these many years and I haven’t found a
substitute answer that works as well as simple
control. You must CONTROL THE CLOSING. You must use
your team. You must use your lender, your appraiser,
your attorney, your title company, your title
insurance company, your title researcher, your
termite guy, your insurance company, your team
(depending on the laws in your state). Your team
understands the way you do business. You need to
develop a team if you don’t already have one. This
team will not only give you control over your
closings but the speed and the assurance that will
lead to more money because you will be able to do
more business.
Who should be on your team? For starters, a lender
or mortgage broker who is very familiar with
programs for borrowers without perfect credit.
Someone who has done many of these loans will make
your life much easier. In fact, having more than one
mortgage broker is even better. This is an area
where experience far overrides enthusiasm. When
choosing this team member, be prepared to ask
pointed questions. When a possible lender tells you
of the great “can they fog a mirror it’s that easy
to get this loan”, zero down, money back, horrible
credit okay, no review appraisal, instant approval,
no income, no job, no tax returns, no money
necessary loan program they can use to get your
buyers a mortgage with, you need to be asking a few
questions. “When WAS the last one like this YOU
did?” “How long did it take?” “What was the final
interest rate and terms?” “What documentation did
this no documentation loan require?” You see,
lenders lie to brokers who in turn unwittingly lie
to their borrowers. When the lender goes to sell the
loan, they find that the market for this particular
borrower (your buyer who is a great person but
really not all together when it comes to financial
matters) just isn’t there. They can’t find a loan
because of the credit or job history. So they back
up and punt. The lender tries to sell this loan to
someone else who requires more documentation or more
money or more interest. Then the lender goes back to
the mortgage broker, who goes back to the borrower
for more documentation. You, the seller, are in the
dark. Suddenly you are told of the delay - “Oh, it
will only be a day or so”… famous last words.
Mortgage brokers are either eternal optimists or
pathological liars. It doesn’t really matter which
it is; the bottom line is no closing, no money.
Later you find that the loan has been moved because
of these lenders who misrepresent what they can
provide for people like your buyer. And there you
sit, waiting for yet another application process to
be completed… and waiting for another closing date.
The only solution is to know your broker(s) who will
keep you abreast of the developments every step of
the way. Why would they do this for you? Because you
mean business… not only for this closing, but also
for all the other closings in the future they know
you will be involved in. You become their bread and
butter. You are the one who brought the client. You
are the one who may bring future clients. Now the
same is true for the appraiser, the attorney, the
title insurance agent, the termite guy, etc.
Here’s a typical chain of events. The broker tells
you they need a bank statement. You follow up
directly with the borrower or the real estate agent.
The broker says they are waiting on the appraisal.
You follow up with your appraiser. You mean
business. The squeaky wheel gets the grease.
Suddenly your appraisal is done. Your broker says
they need a chain of title or title binder from an
attorney. You follow up with your attorney. Voila,
the title binder is faxed to the lender. Your broker
tells you that the package is out of underwriting
but the attorney cannot close on the last day of the
month. You make a telephone call and suddenly a spot
is found for the closing at 7:00 PM. You see… “If it
is to be, it is up to me” is critical for your
financial well-being.
So how do I get everyone to cooperate? It starts
with the contract. I created a 14 item special
addendum that could be used with any real estate
contract that outlines areas I needed to control and
penalties if my buyer would not agree to have me
participate in helping them get the deal done. It is
part of my “Street
Smart $ECRETS of BUYING, SELLING, and HOLDING”
course. By including in the Special Stipulations
section of any contract “As Per Attached Addendum to
Purchase and Sale Agreement”, I’ve been able to
create cooperation between the parties. It also
stipulates that a closing will occur or I will
receive compensation of $50.00 per day for each day
they go past the closing date if they insist on
using their broker. Any of you who have experienced
the pain I outlined at the beginning of this article
can appreciate what I am saying. I have been
successful in changing how business is done in our
area in the areas of Land Trusts, Personal Property
Trusts, Lease Options, Agreement for Deeds and now I
would like to work toward putting ourselves - and
our buyers in the position of success by controlling
the loan and closing process. If we all do it, it
will become the way things are done. Give it a try…
YOU”LL LIKE IT!
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