I have a few updates and other things I would like to share…
Last week I told you that I was getting back into the real estate investing game full time. This involves first screening properties and making offers. Last week I was hoping to make two offers on bank owned properties but I was only able to make one. I will tell you why in a second but first let me tell you about the offer I did make.
The property is a Fannie Mae owned home that is listed above what the home would be worth if it was completely fixed up. I have noticed that a lot of bank owned properties in my area get listed purely based on comps as opposed to the actual condition of the property. So our offer comes in significantly below asking but it is the price that makes since for an investment property.
As an investor it is important to note that you make your profit when you buy, it is when you sell that those profits are realized. Buying at the right number is the #1 factor dictating your success. If you buy too high, your profits will quickly go away. In my area that means I am having to make a lot of offers, many of which will get rejected, but the goal is to land an accepted offer enough to have a successful and profitable real estate investment business.
I have not heard word back on this property, but if we go into negotiations I expect to get a 20 page set of addendum’s from Fannie Mae which will trump the initial contract I signed. This is just one of the many guidelines that Fannie Mae has and there is nothing that an investor can do to avoid.
Why did I not make a second offer last week? Because Fannie Mae requires that the first 15 days one of their properties is on the market that only home owners may make offers. After day 15, then investors can step in and make offers.
Another Fannie Mae guideline is that your Earnest Money Deposit ( EMD), must be greater than or equal to 10% of your offer price. So on a $50,000 offer your EMD must be $5,000 and on a $500,000 house your EMD must be $50,000! This certainly helps to weed out the pretenders from the investors who actually have the cash lined up to make a real offer.
On the second property I plan on submitting my offer on Wednesday of this week.
In addition, I am going to give my Realtor a call after I post this to go look at three (3) other properties, all of which are priced a little closer to where my numbers need to come in and order them in priority. My goal is to increase the number of offers I make each and every week until I land a deal or two…maybe even three.
You will never get a deal if you don’t first make an offer!
Cheers,
Ross Treakle
Thanks for the EMD percent requirement for REO’s. I was unaware of that.
That EMD requirement really only pertains to Fannie Mae properties. With most other lenders you can give whatever you would like. I would recommend to always give at least a $1,000 EMD. Also keep in mind that the bigger the EMD, the more serious your offer looks to that bank. As well as a big EMD, you also want to remove all restrictions from your contract (if you are comfortable with doing so). That means waive your right to inspection! Again, you should only do this if you are comfortable with doing so.
Also, in the 20 pages of addendum’s that Fannie Mae gives you, they will automatically have a 10 day inspection period. SO even if you waive the inspection, you will still have an inspection period if offering on a Fannie Mae property. NOTE: this is from my experience and not to be interpreted as a blanket statement which applies to all Fannie Mae properties.