We received the offer on House #6 on 3/12/09.  The buyer was not very qualified, but I was slightly in-experienced and based on their lender approval latter, we negotiated and accepted the offer.  Everyone seemed very motivated along the way, so I thought we could make it work.

Around 5/20 when they still had not closed escrow, I agreed to give them an extension until 6/30 if they put another $2,500 into escrow (from the original $5,000) and made it all non-refundable.  The agent agreed to this and relutantly, we continued on with this transaction knowing that if the agent and lender did not perform I would have to take $7,500 from this couple.  As 6/30 approached the agent still was not ready to close, we negotiated back and forth and she had approval, but they needed to do a review appraisal.  The agent figured they could get everything close by 7/10.  So trying to be nice, but take care of myself, I told them I would extend until 7/10 if they added another $2,500 (non-refundable, of course) to escrow and paid a per-diem fine of $100 per day.  They happily agreed.

The Review Appraisal
I saw this coming, but the review appraisal came in at $180,000 when the original appraisal came in $200,000.  This was terrible, as I was not really willing to negotiate down at the 11th hour when I had so much non-refundable money.  But the agent didn’t even ask to negotiate, she found a way to get her original appraiser to “challenge” the review appraisal.  A short letter was written that the review appraiser used bad comps, in bad areas and it was not a good number.  Somehow the bank worked with the letter and agreed to do the loan based on a $200,000 appraisal.  I was pleasantly surprised to see this happen to say the least.

We are all set to record with the county today (7/14) and they negotiated the per diem fee down to $500.  So I think everyone is pretty happy on this transaction, obviously, it took way too long.  But live and learn, low credit score buyers are not very good, even if they have decent money (they ended up putting about 10,000 cash to fund the loan).

It is good to have another one checked off of the list!

Sorry again for the lack of activity, I have been swamped with a couple other businesses I’m involved in and getting our existing properties into escrow.

House #6: This house has been in escrow forever now, since March.  The buyer had credit issues that are now fixed, but the agent has not been ideal to work with.  I think she has been stretching the truth the whole way through (but what agent doesn’t ).  It is set to close within the next week, if it does not, I have an $8,500 earnest money deposit that I will be keeping (and won’t feel very bad about it), as they have removed all contingencies.

House #5: This one has also been in escrow for a long time.  We’ve put the property back on the market (and got an offer today), but my escrow officer has a connection at the loan company and it sounds like this one should go through with the existing buyer before the end of the month as well.  This one has been in escrow about 50 days now, which is a long but seems to be the norm on FHA sales right now.

House #8: This one has been in escrow 45 days now, and we have all loan conditions removed, just waiting for docs.  Should close mid-next week .

House #11: Apparently, I haven’t written about this one at all, but this one we picked up at a sweet deal!  We accepted a really high VA offer, but VA appraisals are assigned randomly and the appraisal came in $28,000 under what we had it in escrow at.  We had a couple backup offers that fell through, so we did some fancy negotiating but still took a $15,000 hair cut (from original).  Luckily, it is a meaty deal, so there is still pletny of profit.

House #4: I will write about this one and upload some pictures.  We put it in escrow about two weeks ago, appraisal was good and we’re have a strongly qualified buyer, so I am hoping for smooth sailing.

The good news, if everything goes as planned we should close four properties before the end of June.

The bad news, we’ve looked at over 100 properties in June and probably made at least 50 offers.  So far we’ve missed everything, and not by just a little bit.  The moratoriums have really made the market go haywire.   One property was listed at $89,000, we were willing to pay $115,000, it ended up getting 40+ cash offers and went into escrow at $144,500.   Just amazing!  We’re going to keep on looking, hopefully I’ll have some time to catch up on the older blog posts.

If you have been reading the blog you know that our market seems to have become busier.  It seems like everything out there, priced anywhere near market value has multiple offers.  Banks seem much more realistic with pricing and buyers seem much more motivated (and not afraid to offer over asking price).

This is causing problems with appraisers.  It seems like prices are all over the map.  Some properties are cheap, other properties are expensive.  Quality of the inventory has a ton to do with it.

House #6
We got multiple offers on this property.  One was quite a bit over asking with the buyer asking for 6% back after closing (even when we calculated our net, it still is over asking price).  We put the property in escrow and the appraisal came back at $5k less than closing.  We negotiated a bit and ended up taking it most of the $5k out of what we were willing to give back to the buyer.

House #8
We just got an offer slightly over asking price, but appraisal is going to be a problem on this house.  The house is clearly worth what they offered, but most of the inventory is not in the same condition as our property.  I had our appraiser take a quick look, and it looks like the appraisal will be $10k low.  The buyer’s agent said his appraiser thought he could pull of their offer number.

The problem is, most buyers are new buyers, and need concessions at closing. There is also heavy competition on the well positioned properties in this market.  As the market shiftss from down trending to flat this problem will continue to get worse.

A willing buyer, a willing seller, but not bank willing to write the loan because the property does not appraise high enough… anyone investors willing to finance in this down-trending market?  I know I’m not!

Add this to the list of things for all you fix and flip investors to be cautious of.  Hint if you focus on the lower end of the market (buy properties really cheap and sell cheap), you will have less issues.

Our FHA 90 day period is about to expire on House #6 so we lowered the price and started to market it more aggressively.  Much to our delight Sunday afternoon we received a full price offer (with some concessions).  We countered them and have not heard back… we cannot put it into escrow until Thursday anyways.  So I was waiting patiently, but still getting quite a few calls on agents looking at the property.

This afternoon an agent called and started to ask a lot of details.  We mentioned the other offer.  About 1 hr after speaking with her she called back with an offer about 8% over asking price with 6% back in concessions.

We countered back a couple minor points to the agent and she called saying the client have agreed.  Now the challenge will be closing escrow.  The buyer’s credit score is a bit low, but they have a pre-approval letter from a loan officer and some money in the bank.

Hopefully, my next update about House #6 will be telling everyone it is sold!

It has been a little while since I have updated… again!  Sorry.

We have been working really hard and we are happy to say House #6 is complete!

Before

After

Kitchen

Main Bathroom

We still have about 35 days before we can sell it to an FHA Buyer, but we have listed it anyways.

At the end of the day, we where a couple thousand over budget but this was one of our most ambitious flips yet.  All new flooring, all new windows, all new kitchen, total rennovation of both bathrooms, re-stucco the entire house and the typical paint and touch-ups we always do.  We are happy with the end result.  This property should sell quickly as it is on a 20,000 sq ft lot.