Money, Contracts, and FSBOs... oh my.

[NYBirdDog]

OK, so I think I found a good investment property. No, let me rephrase. I know I found a good investment property.

I have a few problems now.

1) How do I get it "under contract"? How do I make an offer on it?? I know a friend of the guy who's selling it, and he's asking $225k for it, but they seem to think he would take $180k. I've never bought a house -- how do I put in an offer on it? Do I just need to call him and say, "Hi John, $180,000"??

2) Other than the three "Fs" (Family, Friends, and other Fools), where can I look for money? Are there any well known hard-money lenders that would invest in a first-timer??

Thanks for the help, I feel overwhelmed!!

-Bob

[CafeMonkey]

1. You don't know how to write a contract, but you run a bird dog website?

2. Get a piece of paper. Write "I, Bob, promise to buy 123 House Street. You, Sammy, promise to sell me 123 house street. I will pay you $180,000 and will give it to you on or about June 18, 2005."

Sign it. If he signs it too, it's under contract.

That's all you need for your first contract... However, if you don't know how to fill out a contract, I have a feeling that there's a few other little bits of info that would be helpful to know before you get involved in dealing properties. I suggest that you get a good course on the subject.

I hear that Steve Cook has the best in the biz...

[NYBirdDog]

CafeMonkey,

1. Wise guy -- Correct. I don't know how to write a contract, but I run a Bird Dog website. Just like I don't know how to juggle, but I ride a bike just fine. I'm good at teaching people, which is why I run the Bird Dog website. I'm not good with contracts, which is why I'm not a lawyer. ;-)

2. Thanks. I guess that's what I was looking for -- confirmation that it only took a simple thing like that. It's hard to believe when you see the highly elaborate forms floating around.

I'll look into Steve Cook's course, thanks for the referral.

-Bob

PS -- would you like to write the section on "Contracts" for my Bird Dog website?!? :-)

[judyo]

Bob,

If you're going to do this alone then what you need is a good attorney. In my area a good real estate attorney can be found for a flat fee of around $300-$400. Well worth it in my opinion. However, if the attorney has to write the contract they might charge a bit more, even if they're only technically filling in blanks because f they don't use the local real estate contract they certainly have their own template.

Before going into what you are doing, with the knowledge that you might have wanted to invest yourself, your first step should have been to find a good mortgage broker in your area.

[AaronSOLD]

You absolutely need to line up the financing first and you should certainly get a real estate attorney, or even a real estate agent, to help you close the deal. Some questions you want to think about:

Do you want an inspection?
What happens if the Seller fails to close on the date agreed?
What happens if you fail to close on the date specified?
What statements on the condition of the home is the seller providing?
What is the motivation for selling?
What happens if the house burns down before closing?
What happens if the seller does not vacate the home?
What if the seller leaves a bunch of crap?
How will breaches of contract be handled... court or arbitration?

Those are just some of the reasons to have a professional do the contract. You found the house... that's the easy part of the real estate business :-)

[kensmith]

Simple thought you shouldn't be trying to do this on your own. Everyone wants to save a buck and so many end up costing themselves SO much more than they "save". You need a good mortgage guy, you need an attorney, you need an home inspector, and IMO you should hire an agent.

You say you "I know I found a good investment property", do you know what the current pricing trends are? do you know what the average days on market is?, is that rising or falling? (it's rising in almost every market) If you renting it out do you know what the market rent is? how hard it will be to rent? what % to assume for repairs? what % to allow for vacancy? how much your closing cost are going to be? how you can get the seller to pay for them? The list goes on and on, yet you don't even know the question...how could you know the answers.

Save yourself some real money, hire a professional to represent you as it will be the best money you ever spent.

[ResaleBroker]

No, let me rephrase. I know I found a good investment property.

In your opinion, what makes this property a "good investment"?

[Homesurfer]

All you big tough Realtors are picking on the amateur investor. Naughty.

For others reading the thread, it is very obvious this guy doesn't know what he is doing. If he knew what he was doing, there would be no criticism. Of course, he wouldn't have posted with such an elementary question.

First, every elementary real estate investing book has a simple contract in it. That doesn't mean it is a good contract, but it is better than nothing. Additionally, most hand-written contracts have some fatal flaw, usually something that is missing, that a good attorney can shred in instants.

Second, buying a house isn't like buying a washing machine or a car. As one of the posts above mentions, there is a LOT of other stuff that should be in the contract.

Third, he says he found a great deal, then proceeds to say that he is going to offer $45,000 less than the asking price. Obviously, it is only a great deal if the seller is willing to accept the offer. That is a "potential" great deal, and the potential is actually pretty small.

That's just the beginning. It takes lots of constant hard work to know what one is doing in investing. Some who go looking for the "get rich quick & easy" schemes learn by losing money on their first deals, since they didn't learn by patient hard work.

Finally, I think it is a bogus post, more interested in getting attention than in resolving a problem. If you look at the poster's web site, it attempts to give the impression they know what they are doing. But the question indicates they don't.

My opinion.