res-2000: contract for sale of residential real estate
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res-2000: contract for sale of residential real estate

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FAQ

I'm 19 and thinking of getting into real estate. How much would I need to save to start up, both for buy to let and residential options?
This is how I started in Real Estate and you are at a good age to do it. There is a great deal more to remember than just saving enough to buy and let a property. That’s easy. The harder part is buying the right property because success in real estate is often about location, location, location and once you own a property, even it it doesn’t perform, even if it depreciates, you still have to pay taxes and maintain it. So with that in mind remember that a poor or mediocre house in a good or up and coming neighborhood is almost always better than a great house in a bad or declining neighborhood. Do your research and find out where you want to buy before you even start looking for a property. Make connections with a realtor — and not the first one you meet, actually go an interview them — and then work with them based on your chemistry, their understanding of what you want and how well you get along. If you make the right partnership, a good realtor can help you make a great deal of money and it’s something that could last years and years and as the realtor becomes more successful, he or she will help propel you to success as well. They will also work to help you find tenants for your apartments. This is much more challenging than it sounds and it is time consuming and worrisome. A bad tenant is a disaster and you want to avoid that if at all possible. It doesn’t hurt to take a real estate course either. There are different kinds of courses such as a course that helps you get your real estate license or one that focuses on valuation of properties. If real estate development and accrual is your goal, either or both of these courses will be valuable.Now you have to think about the money. If you have a steady income from a regular job you can purchase a property with as little as 5 percent down plus closing costs, but you will have to pay PMI. PMI is a total rip-off and you need to keep an eye on it. Make sure you always know what your building is worth because once you hit 20 percent loan-to-value you can have PMI removed. But if you don’t pay attention the bank WILL NEVER TELL YOU when you no longer need PMI and will let you pay forever. That’s good money thrown down the sewer.One of the best strategies I have found is to buy a multi-family property because the bank assumes the rental income as part of your income and it allows you to purchase a much bigger building. For example, when I started I could only afford a house in the 100,000 range, but by purchasing a multi-family, I was able to get a house in the 200,000 dollar range. Not only did I have a place to live, but I was getting income from the apartments that reduced the amount I had to use to pay the mortgage.When you are starting out and money is tight you have to seriously consider your strategy. Are you purchasing to hold? Purchasing to re-sell for appreciation? Flipping fast? Or what? Each will determine the kind of mortgage you want to get. For couples starting out in life I always recommend a 30 year fixed mortgage because it’s safest mortgage with the easiest monthly payments. Although an ARM may have a lower rate, it’s for a short time and at the end, the monthly payment could skyrocket and you could lose the house if you can’t make the payment. But if your goal is to get in, fix up the house on the cheap and get out, then a short term ARM with a low rate is a good idea. But you really have to get out before the ARM expires and the rate goes up. If you plan to hold and let the property appreciate and it’s a multi-family that makes good income then get that 30 year fixed mortgage and let your money work for you instead of you working for your money. Keep an eye on mortgage rates and don’t be afraid to refinance as rates go down. The name of the game is maximizing the money in your pocket today and in the long run and the lower the rate, the more money you get to keep in your pocket month after month instead of paying to the mortgage company. When you’ve had enough and the building has appreciated enough, then you can sell it and take profits.You will want to make connections with certain people if you are going to collect properties. You want a good tax accountant, you want a good contractor who can repair the buildings fast and cheaply (good is desirable too, but it depends on your strategy — if you are flipping, “good” is a relative thing - “good enough” is the more likely strategy because time is money and YOU WANT TO GET OUT FAST when you are flipping.). You will need a landscaper or someone who can take care of the property and a manager who the tenants can call at 3AM to fix their clogged toilet. At the beginning, you will be all these things yourself but as you acquire property it will become too onerous to do it yourself. Taxation, in particular, is complicated. There are depreciation schedules and write-offs and if this is your real business, then there are even more complications and write-offs, but usually a tax professional knows how to handle them. You will need the numbers of a plumber, a locksmith, an electrician, your insurance agent and eventually a lawyer, especially if you decide to incorporate to limit liability.People think they can find cheap properties in foreclosures and short sales and often you can — but you usually have to be capable of putting up 10,000 dollars in a certified check immediately and then you have to be capable of getting a mortgage for the rest in a reasonable time frame. This requires either saving enough for the check, a big down payment and the ability to make the mortgage or a partner with deep pockets who can finance you for a piece of the pie.If you start to accrue properties there will come an inflection point when the income from the rents will be enough to sustain you and allow you to live a better life but that will not be right away. You will have to work at another, secure job for awhile to keep income coming in. You can refinance, consolidate loans and use property for leverage to purchase more properties but you must maintain a fine balance and not over-leverage yourself. Too much debt can bring the entire thing down like a house of cards. You have to reduce costs through re-fis and consolidation but you also have to work to maximize revenues through rents, appreciation and sales.Real estate has been a tried-and-true mechanism for generating wealth throughout the centuries and you can do it, too, if you are careful.
How likely is it for me to win a lawsuit where a seller wants to back out of a signed commercial real estate offer/contract?
Obligatory legalese: I’m not a lawyer and you should consult one for legal advice.Generally speaking, if you have performed as specified in the contract, including putting in deposit, removing any applicable contingencies, and informing seller of your intent to close, then I think you have a pretty good case.However, in practical terms, it’s not clear if you should go to court. Lawyers are expensive and, depending on the contract and the state you’re in, you may not be able to get back your expenses, even if you win. And any case, even a winning one, is going to take a long time to complete, is it really worth your time and aggravation?
How do you build up an organisation model for any business? I have task to work on organisation model for these businesses: Hotel, restaurant, Golf field, Resort, ICD, residential real estate (landonly), apartment for sales, commercial landonly.
I would start my research of known corporations that are large in the field. You can do this on the Internet.Look at the management teams listed. Read about them. If they are public corporations look at their finance reports 10k on Yahoo Finance, or similar. I would look at 3 different entities per category as a start.Start the deductive reasoning process, thinking of the models, business size, customer targets etc. compared to your envisioned entities and design organizational charts based on those that you believe you'll need.This process is part of a new business plan, and all business plans are dynamic, not static, in the real world. As market conditions change so does the business plan and the components that make up the plan….that includes the organization.
How do I estimate the cost of the land vs. the cost of the structure for US income tax purposes when renting out residential real estate?
There are a couple different options. Easiest - contact your county assessor / auditor and they will have a split. In Ohio it's online, separate from tax bill.Harder - how much land does it have and figure what the average acre is going for. Then deduct from the amount of original purchase.Hardest - have an appraisal ($400) done to figure out the values. My accountant has stated that as long as reasonable and consistent the IRS Is going to accept all 3
What are the most common sales tactics of real estate agents to look out for?
Aha - I thought this question would never be asked :)Home sellers ask me all the time why real estate agents take overpriced listings!What could possibly be in it for those agents to knowingly get involved in marketing a property that’s overpriced?“There sure isn’t a home buyer out there who’s going to pay those kind of prices, am I right?”So, why do they?It just goes against all common sense and logic!And that’s exactly why it’s considered to be one of real estate’s dirty little secrets!I will discuss in more detail below why real estate agents behave that way and why they’re so keen on taking those overpriced listings:Desperation rules!Real estate agents desperate for business are often at the root of an overpriced listing.Unfortunately, a lot of real estate agents lack the basic integrity, lack negotiation skills, or are so desperate for new business, that they will agree to any price the home seller proposes!The home seller may have heard via the most recent neighbourhood gathering that ‘the one down the road from him’has his property on the market for at least 25% above the average selling price in the street!“Honey, listen to this – guess how much Raymond a few houses down is asking for his house?! I’m 200% convinced now we can ask AT LEAST as much, if not more for ours! I’ll make sure to tell it to those agents tomorrow!”The ‘weaker’ agent might right there and then already know that he’s dealing with an overpriced listing, yet agrees to market the property at that price anyway!?Why would anyone in his right mind enter into a proposition like this?To someone not active in the real estate business, this might look like the silliest move on part of the real estate agent! (to put it mildly!)As mentioned in the introduction, this counter-intuitive move is exactly what is considered to be one of real estate’s dirty little secrets!While the majority of us might be baffled as to why an agent would want to do this, as the veil gets lifted every so slightly, you’ll realize how dirty this little secret really is!Keep in mind that this very competitive real estate business is a commission-based one, where the agent who walks away empty-handed from the interview, will likely be the one not making any money on this transaction.Wasn’t it Heinz Guderian who said that, “There are no desperate situations, there are only desperate people“?A reputable real estate agent will actually face the reality music and inform the home seller the truth regarding his price, hereby of course potentially losing out on getting the mandate to sell the property!Check mate the competition!Competition amongst agents to provide the highest valuation often leads to an overpriced listing.Even though most real estate agents are independent contractors, quite a few do have to report their ‘busy numbers’ to their brokers: how many open houses this past week or month, how many contracts closed, how many pending deals in mid-negotiations… and how many new listings on the books!How’s the latter for an extra incentive to make sure some of those overpriced listings get onto the books?!Not only that, at the same time, you’re making sure via signing the mandate that you’re the listing agent.Yet another property the competition doesn’t have on their books!Eventually, the home seller will start to realize over the weeks/months of low-to-no activity that something needs to be done in order to sell his property!Yet another reason why the real estate agent who took on the overpriced listing is now rubbing his hands together! Price reduction – woo hoo!Advantages for real estate agents!Of course, there will always be real estate agents who will be more than happy to take on overpriced listings!Next step in their ‘ingenious marketing plan’ will undoubtedly be to make sure to put up a ‘For Sale‘ sign outside the property, get it onto the property portals (or MLS) asap, and start organizing the first open houses!After all, all these free advertising tools will lead to more clients (buyer and sellers) contacting them, who would like to view other houses or want the agent to stop by to do a valuation.And if this strategy is one where they take on any and every overpriced listing in that particular suburb, guess who will be all over the place with their signs?More exposure = more business! (or at least, that’s what they hope will happen!)These agents might not necessarily sell the overpriced properties they have on their books, but they sure will get some solid leads off of them, which will result in some commission somewhere coming in!In other words, these overpriced listings will be used as springboards to help sell other properties!Disadvantages for the home seller!Home sellers get the short end of the overpriced listing stick!Time is not your friend!Every day, every week, every month that passes, and your property hasn’t sold, it means your chances of getting a market-related price are seriously dropping!Period!As a home seller, you need to realize that the longer your property is on the market, the more damaging it will be for your final closing price!That’s assuming your house has been correctly priced, which is especially important if you’re trying to sell your home in a buyer’s market!In the event of it being an overpriced listing, you’re pretty much guaranteed from the get-go to be sitting on the market for a looooong time!You want to test the market and see if you get anyone interested at those overpriced levels?Sure, why not!Make sure you then remember who decided to market the property at those inflated prices!Humans are known to get greedy: if you ask anyone whether they want more money or less money for their house, what do you think the majority will answer?Point in case: was it Agent A, who gave you a correct market value, or Agent B, who was slightly overpriced? Either one would have been able to save you now.However, if you opted to go with Agent C, who came in with a valuation WAY off mark, and clearly stood apart from his fellow agents with his higher price, let’s hope you remember WHY you decided to choose him! There are plenty of home seller mistakes to make when choosing a real estate agent to represent you!Let me ask you this:Do you know what the #1 question home buyers ask when they meet the real estate agent doing a viewing of the house?“And how long has it been on the market for?”Whereas many years ago, the agent might try to avoid answering the question, nowadays, most educated home buyers can find out for themselves when the marketing of the property started!“Ooh, it’s been on the market for more than two months?!”“Jeez, what’s wrong with it?”“These home sellers must really be desperate now to see any offers. Let’s try to go in low and see what happens!”That’s the reality!I kid you NOT!Having an overpriced listing is a kiss of death when trying to sell your home!Adjusting your price lower after all that time on the market will only raise even more questions from the few interested buyers left!“If I wait another few weeks, I’m sure they’ll drop the price even more! We must not hurry with this one!”As statistics have clearly proven time-and-time again, overpriced listings do eventually sell, but at prices below they would have if the property had only been marketed at the correct market price from the start!Closing thoughtsBy now, you must have a good idea how bad things can get when you decide to work with a real estate agent who was eager to tell you whatever price in order to get your business!Sure – those type of agents will slowly but surely develop a reputation in town of taking on any listing, regardless of price!Some real estate agents even hope that those particular agents will get the mandates first, so by the time they expire (and they definitely will!), they can then swoop in and guide the home seller towards a successful home sale!At a realistic level!So, is it the chicken or the egg?Is it the real estate agents who are pushing those listing prices higher and higher?Or are the home sellers getting more and more greedy, only feeding off those other high prices?Bottom line: home sellers should be doing more homework prior to placing their property on the market:How to interview a real estate agent when selling your home? What are the consequences of being an overpriced listing in the market? What would be your reasons for overpricing your home?And more agents should try to take the ethical approach of actually telling the home sellers the truth when it comes to pricing!Over the long run, they’re not only damaging home sellers one overpriced listing at a time, they’re actually hurting their own reputation! (plus they’re creating quite the headaches for those agents trying to do a correct job)I guess until then, every local property market will be faced with its fair share of overpriced listings.And consequently, its fair share of disappointed home sellers!I hope this answered your question.Good luck
How much capital do I really need on hand for the 1st few years of my residential real estate career in order to survive?
It depends on where you live, how much your lifestyle cost, and what you're willing to invest on when it comes to establishing your business. But there are digital tools that you can get now that enables you to have your own virtual realty company. Check out MiRealty
In Washington state, are contracts for the sale of real estate not only are required to be in writing, but must usually also contain the legal description for the real property that is the subject of the contract?
You would be best served to ask this of a qualified Washington state attorney. Real estate professionals can answer what is common and policy procedure but cannot give a legal answer.
How can I get out of a real estate contract when I priced the property too low and really feel it is a mistake to sell it?
Number one thing is to step back and think objectively talking to your listing agent. Hopefully, you did use an experienced Realtor to help you set the price. If a home is priced correctly, you should expect to have interest and offers early. You may have to wait a while before you get another similar offer. When a home first goes on the market, you get both the people who’ve been looking for possibly weeks or more plus new buyers just starting.If you truly want to get out of the contract talk to a real estate attorney. As a seller contracts really don’t give you much out unless a buyer defaults. If this your homesteaded home, you may be able to avoid being forced to sell but could be held liable for buyers costs and possibly damages. Your home may even be held up from being sold to someone else. If you have a listing agreement, you may be responsible for commissions.Think carefully, then talk to an attorney.
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