Friday, June 29, 2012

My Experience with an Appraiser

Appraiser was professional and polite. No comments were given on the condition of the houses, didn't bother to ask her any questions, just wanted her to do her job with no interruptions or distractions. She went through every room, took pictures and that's pretty much it. She didn't touch anything or asked any questions.

After 30 minutes, she said she was done and to enjoy our weekend! I can't believe I was worried all week for this... I might be speaking too soon considering I don't know what her report is going to say, but it's all in God's hands. I guess what was worrying me is that I kept reading that appraisers act like they are inspectors and that they check every inch of your property and write you up for anything that is wrong. It didn't seem like that at all! She didn't act like an inspector.

My realtor says that it will take about a week for the appraisal report to come in. I'm actually excited to see how much this property will be valued at. Because I am doing a 203k rehab loan, two numbers will be presented, the current value of my property as-is, and the second number being the value of the property after the items written in the contractors bid.

Thursday, June 21, 2012

203K Streamline Paperwork & LEAD paint

I finally had a contractor fill out all the documents the bank requires including a bid! 5 pages in total and the bid being about 10 pages. I am not done with this loan process yet, but I am not sure if I can recommend the 203k loan to someone that has other options like a regular FHA or conventional loan. Will touch this topic once everything is done.

The great thing about using the 203k loan is the bank loans you money to bring the property to par ..all in one loan (rehab $ and loan amt). The most difficult part for me was finding a licensed, bonded, and insured contractor who wanted to do the work for the "regular amount" it will cost to rehab a house to the minimum standards.

My initial budget was $18,000 and I had to increase it to $25,000! $25,000 might not seem a lot to others, but it's a lot of money and I'm sure that a non-licensed worker can do so much more with that amount. I'm talking about these non-licensed workers who work for the contractors and get all the work done. Contractors negotiate their fees to the penny with their workers, but maximize their profits when charging the client and play such a double standard game.

I suppose business is business...maximizing profit is the "big picture."

When I sent the bid to my loan officer at Wells Fargo he wanted my contractor to include the specific work he was going to do to get termite wood clearance and to include "EPA standards" when painting.

I talked to my contractor about the "EPA standards" and he went on and on about how that's going to cost a lot because we need to get a certified LEAD company to inspect the property and if lead is found, he would literally need to sand everything down to the original wood and paint that wood. He estimated all of this to cost an additional $3,000!

I called my loan officer and he said that the appraiser would call for the above if he sees any paint that is flaking, pealing, etc.

The moment of truth is when the appraiser checks the property out which I hope is soon so I can get it off my back already.

My experience thus far, buying a house is NOT easy!

Wednesday, June 13, 2012

The Nightmare Continues

I met again with the contractor who was giving the lower bid last week and at the end of it all, it didn't turn out well and I am now feeling like I'm starting all over again!

This contractor really wants to help me and said he'll do everything for $18,000, but wanted for me to buy most of the material! After thinking about it a few days, I realized that's not going to happen.  I cannot spend my money like that, I rather finance!

I received the bid from the company that was still working on it and it came in at $27,000. Not bad... but it went over my budget by $9,000. There are a lot of items that I can remove to bring it down to $18,000. I met with them yesterday and the guy really was disappointed I was cutting all of these items. After our meeting, he said he'll talk to his boss, but honestly... he felt like he didn't want to ever see me again. I called this guy today and he told me that he talked to his boss and advised me to go with a smaller company because they are a big construction company and that they do not deal with such small jobs! Can you say rude and arrogant?

We agreed that he'll create a list of the things he can do for $18,000 and see where we go from there. I am not sure where this is going to turn out since "$18,000" doesn't seem to be "enough" for them...they are charging me $275 to install a garbage disposal when they only cost $75...Just wanted to give you an idea of how inflated contractors prices are!

I talked to my loan officer to get an update on my loan and he said that escrow will officially be opened tomorrow. I was always under the impression that escrow was opened when they received my earnest money and contract, but I guess that's not the case.  So much for paying "overnight standard" to mail out my EMC two weeks ago.

Something new I also learned is that termites need to be included in the bid with a 203k loan! At least Section 1 does. Section One contains items where visible evidence of active infestation (termites, beetles, etc.) or infection (wood decay fungi) were found. Termite report that was paid by seller ($75) shows a total of $4,600 for section one! $2,700 for chemicals and $1,900 for wood damage! Isn't this fantastic? Not only was $18k not enough to cover all expenses, but now I have to worry about termite clearance too?

I now understand why so many people rather rent than buy a house! It's expensive buying a house! But I will enjoy all the tax deductions throughout the years and the large cost basis whenever I do sell. I can either come out of my pocket for all of these repairs or finance everything, which I'm going to HAVE to do! I am going to increase my $18,000 budget to whatever it needs to be in order to pay for all the repairs needed in this house. But I'll tell you this, if I have to increase my budget, I don't want to have to do anything myself afterwards, like painting etc. I want it to be move-in ready!

Also, if you are thinking of getting a 203k loan, be advised that you need city permits for ALL repairs requiring a permit. Contractor will need to schedule a city inspection and good luck getting a nice inspector if you have illegal additions.

At the end of it all, this house doesn't feel like a "great deal" considering all the word it requires, but this might be the case for the majority of REO homes.

Friday, June 8, 2012

I am done meeting with Contractors! Finally!

I received a bid from Salvador Hernandez from M.A.S Home Services yesterday and it was outrageous! He quoted me at $54,900 when other contractors have been quoting me between $17,500 to $36,000. And to come to think that he said he doesn't charge too much and that his prices are reasonable! Yeah right!

To date, I have met with four contractors and I am reading to make a decision. See below for bid amounts

- First Contractor: $17,500 (not including redecking, but did include exterior paint for 2 properties & fence)
- Second Contractor: Will have on Monday
- Third Contractor: $36,000 (including $18,000 total to redeck 2 properties, didn't include fence or exterior paint)
- Fourth Contractor: $54,900 (included everything to leave both properties ready except floor, plumbing, or electricity).

I am meeting with the first contractor tomorrow (Saturday) again to work out a plan that I'll be happy with. Again, my budget is $18,000 (which he knows already) and we will work off of that and see how much I can get done. For sure I need to remodel one complete restroom and paint one house. The rest of it is simply cosmetic work like painting the kitchen cabinets, painting inside and changing carpet... nothing dramatic to cost $54,900! What a joke.

I'll post pictures of the before and after projects along with the contractors information when everything is completed. The great thing about him is that he doesn't take days to get back to you like other contractors, he's been doing this for years and can give you a quote right there and then.

I've seen a house this contractor was working on in Gardena and it was beautiful! The house had four bedrooms and 3 bathrooms and a huge yard! He charged them $30,000 to remodel everything, except roof and stucco. He did the landscaping, exterior and interior paint, laminated floor throughout the house, closets, garage repair & door, gate, kitchen, plumbing, electricity and all of the small details like fixtures, door knobs, etc! He left the house ready to move in, and it looked beautiful!

I hope I can make my duplex look half as good as that house. I'm wondering if he can get all of that done for $18,000 considering I won't need plumbing, electricity, landscaping, laminated floor, and garage repairs/remodeling...... We will just have to wait and find out! Meeting with him tomorrow and will let you know how much I was able to get with an $18,000 budget.

Wednesday, June 6, 2012

Another Contractor and the Importance of Following Up!

I met with a 4th contractor yesterday! I now see why people say that a 203k Rehab Loan is a lot of work. The most consuming part is shopping for the best bid. If you know someone who is a licensed contractor who either has insurance or a bond, you'll be fine! Unfortunately, that's not the case for me!

This contractor really took his time measuring everything. It was great, but we were there for two hours... not fun! He measured every single window I wanted replaced even when they looked identical! He was just doing his job and I respect him for that. He didn't give me a quote on the spot because he said he'll need to go through everything in detail to be sure he is giving me the correct numbers. He said I should be receiving his quote late Thursday.

Also, I called the escrow company I'm working with today, Harmony Escrow in Irvine, CA, to make sure they 1) received my earnest money check (EMC) and 2) applied the check to my account. They have received my check, but have not received the sales contract so escrow is not officially open yet. I asked her who is suppose to send them the contract and she said the sellers agent has to send it.

After I talked to her, I informed my realtor about it and he said he'll let the seller know and a few hours later my realtor told me that the seller has sent the contract to the escrow company. I called the escrow company to confirm, and after transferring me back and forth, they were finally able to confirm that the contract was received today at 11:30AM. Nice... I'm glad I called. You see why it's important to make that call?

She said the next steps would be to print out the contract, review them, and after 48-72 hours in the initial step, package is sent to the execution department and then escrow will be open.

Close of escrow is exactly two months from now, August 6, 2012! Exciting exciting!.... Not!... You can't allow yourself to get excited until you have the keys in your hand, at least that's how I feel after what I've been through. I had my very first offer on an amazing deal accepted and I was already throwing myself a parade to celebrate my achievement, for it to fall off of escrow a month later...It's like when you want something so bad and you are making plans on how better your life is going to be once you get this "thing" and you didn't get it.. At this point, your emotions are out of control!

So now, my motto towards my investments projects are "No Emotions, No Pain!" Simple as that!

Tuesday, June 5, 2012

Waiving My Rights, Contractor, and Loan Update

Listing agent wanted me to initial a document that says I received certain reports (e.g., termite report, 9A report, mold report, etc.) even when I haven't received them! My realtor knows that we haven't received them, brought it up to his attention and he said that if I don't initial those forms, we don't have a deal! This is the kind of stuff these brokers/realtors do behind the curtains and never expect to get caught! I wish I was an undercover investigator working for the Department of Real Estate to catch all of the unethical activity these son of a biscuits try to pull!

It's a lot of work once your offer gets accepted and the thought of losing a deal and starting all over is exhausting and a lot of buyers (like myself) are afraid to walk away and will just do as they say. So with that being said.. there I was.. initialing these reports that I have "received."

Another great thing that happens behind the curtains, is that they require you to sign about 3 to 5 forms requesting your rights to be waived for X,Y, and Z! (e.g., sue, no final inspection before close of escrow (COE), and the list goes on). The law is suppose to protect you, but if you waive your right, the law doesn't protect you, simple as that. But let me remind you, if you don't sign these forms, you won't get that house you invested x amount of hours in.. haha what a joke!

Another fun thing I did yesterday was meet with a contractor who said that the roof needs to be re-deck and was charging me $9,000 for an 800 sq. ft. home and another $9,000 for a 900 sq. ft home! (remember.. this property is a duplex). Oh and his company stands on his prices being very competitive! another joke! But on a serious note, I didn't include the roof on my budget. My budget is $18,000, however, with the 203k streamline I can have improvements up to a total of $35,000. I am not hitting that max, because the more money I borrow, the more my monthly payments will be.

Quick loan update: locked a 3.75% interest rate with Wells Fargo for a $215,000 loan amount and 3.5% down. Monthly payment will be $1,504. Whenever you think of buying your first home or your second home, please make your life easier by buying a multi-unit property so you can have the second unit help with your mortgage. In my scenario, I am planning on renting the first unit (2 bedroom/1 bath) for about $1,200 and the remainder $304 will be my monthly payment! Talk about playing your cards right! Ok now check this out... when I move out...I will rent out my unit for about the same price ($1,200) and I will then have $890 left over! Of course this isn't including regular expenses I'll incur along the way (water bill, repairs and maintenance).

Start saving your money so you can find that investment property that will bring in passive income!

Monday, June 4, 2012

Mailing out EMC & Sellers Package

Seller wanted earnest check to be at least 2% of the selling price, it hurts to mail out a $4,100 cashiers check! That's a big chunk of my down payment, let's hope this deal closes. 

Went through the 64 page contract sent by the seller and it sure was a lot to digest! Whoever wrote the contract was really tired because I found A LOT of typos, not to mention documents that had a completely different address. I made my corrections and signed off on every single page. These contracts are pretty much standard in the real estate industry, with slightly changes here and there, but overall, they are all standard. 

Will be blogging about my experience with the contractors next post.

Sunday, June 3, 2012

New Offer Accepted

It took the seller about three weeks to counter my offer. I offered $200,900 on a duplex property with an asking price of $192,900. They are asking for $203,000 instead and they will pay $6,000 of my closing cost! The net cost for me would be $197,000  ($203,000 less the $6,000 BCC). I accepted their terms and they also threw in a 2 year home warranty.

Will be financing with a 203k loan at a 3.75% interest rate. I am now scheduling contractors for free estimates.