Question From A Newbie....

Comments(9)

• 
  rajwarrior22nd February, 2004

  sickdog,
  
  I think you need to sit back, rethink you situation and then write down a detailed plan of action. From your questions, you seem to be bouncing around several different investing options, so it seems that you have little direction.
  
  A limited warranty deed is what a bank will give you if you buy a property that they own. This practically the same as a general warranty, but since the bank's name is not on the title (it was foreclosed), this is the best that they can give.
  
  Insurance is obtained by calling your insurance agent and telling them what you want. Most investors go with a landlord or dwelling insurance policy. You may have to have additional liability insurance. Your agent should be able to help you with this.
  
  Just for the record, a REO stands for real estated owned, or bank owned property. Most banks/lenders now list their properties thru a local RE agent on the MLS, so driving around looking for vacant houses is a waste of your time IF buying REOs is your main goal (for that matter, so is marketing, UNLESS you are marketing for potential buyers only).
  
  REOs are very conventional, so you have to make conventional offers (no "subject to" here, etc). All cash offers are best, followed by pre-approved financing. The less contingencies and shorter closing time the better. There are several ways to get financing for this besides conventional lenders. Check out your options.
  
  As far as that goes, your best shot at financing would probably be a No-Doc or Stated income program. A good mortgage broker should help here. Do you really have $18K equity? Example, FMV = $100K, owe $80K. Your true equity is only $10K minus any closing costs because most lenders will only lend up to 90% of FMV. This is a good safety net for you as well, because overborrowing will only hurt you at some point.
  
  Roger

• 
  sickdog22nd February, 2004

  Thanks Roger!
  Your response was very helpful! Your right, I don't have much direction! I am trying to learn everything I can as quickly as possible! I'm like a kid on Christmas morning!
  As far as my equity goes....in that case I don't have 18k! Thanks for the heads up!
  I am really glad I asked about it.
  
  Let me ask this... When a bank forecloses on a home, do they cure the deed? Or will it potentially have liens remaining? Also, what if their was a second mortgage on the property? Is that wiped clean or would the new buyer have to pay it? Did I ask that right?!
  Thanks!
  Sickdog

• 
  rajwarrior22nd February, 2004

  If your buying a property that the bank now owns (ie NOT at the courthouse steps) then all prior liens against the property should have been removed or paid.
  
  However, it's always good to have a title search AND title insurance when you buy property.
  
  Roger

• 
  smithj222nd February, 2004

  Rajwarrior,
  
  Is a special warranty deed the same as a limited and general warranty deed? I am in the process of buying a Bank-owned property and the bank says that are going to deliver title under a special warranty deed.
  
  Is there anything I should be aware of about this type of deed?
  
  Thanks in advance.
  
  JS.

• 
  NancyChadwick22nd February, 2004

  smithj2,
  
  Here's how special warranty deed and general warranty deed are defined in PA:
  
  when an owner conveys title by special warranty deed, the owner warrants that there are no liens or encumbrances on the property during the time the owner held title except as noted in the deed.
  
  when an owner conveys title by general warranty deed, this "warranty" is not just for the period of time that the owner owned the property, but extends back to the very first owner of the property.
  
  In PA, special warranty deed is the warranty deed that is typically used, not general warranty deed.

• 
  HOLLERatG22nd February, 2004

  Hey, sickdog, welcome. If you're just starting out, you should try flipping or even assigning contracts to begin with.
  
  It'll give you experience in making offers and closings and put a little cash in your pocket until you get into the more complicated stuff.
  
  Definetely sit down and spell out a plan of action. Establish connections with other investors and rehabbers. Attend a local REI meeting if you can. It's easier to take your good old time and allow time to absorb information than it is to contract a property and then say, "OK... now what?" That's the quickest way to fail. You sound excited, that's good. Put that energy towards your education for now.[ Edited by HOLLERatG on Date 02/22/2004 ]

• 
  sickdog23rd February, 2004

  Thanks for the advice everybody!
  So what are the best properties to look for to flip and/or assign? Pre-foreclosure? Probate? For some reason I got the impression REO's would be a safer, less risky, first time investment venture. Although from reading posts here, I realize even if that's true, REO's leave little room for creative financing. Correct?
  Thanks
  Sickdog

• 
  tdelo5623rd February, 2004

  I would send out mailers looking for people in trouble with their payments, then you have options of which approach you should take to buy the property. That gives you the most flexibility. That's what worked for me starting out..
  Hope that helped you a little bit.

• 
  rajwarrior23rd February, 2004

  Personally, I'd spend some time at your local library reading up on a few different strategies and gaining a little education in REI instead of sitting here listening to everyone throw out their opinions.
  
  It doesn't matter if you like what they say or not. If you don't have a detailed plan, then you still won't accomplish anything. To get the plan, you need to educate yourself a bit more on actual investing methods.
  
  Roger