My agent and the buyer's agent all got quotes for repairing the roof - I think I've seen about 6 different quotes. All are around the $7,000 to $8,000 range. The roof is not damaged enough for insurance to cover it, so that's out. The buyer and I have renegotiated and we are now back to their original offer price of $50,000. That $5,000 less than the original contract price, but it's still less than what it would cost me to repair the roof, so I'm coming out a bit ahead there. (I won't be coming out ahead on the entire property though.)
We are still going to try for our original close of escrow date of July 2 - which is Wednesday. Not sure this can happen, but the title company is going to try. They are unable to locate the abstract of the property, so I've given them the name and company of the title agent I worked with when I bought the place. There were potential title issues then and they had to do some work to clear it up. To my knowledge, it was cleared up, but I guess they didn't return the abstract or something.
The title company is also going to fax me all the paperwork to sign and I will need to overnight it back so they have it on Wednesday. I just realized my wife's name is on the paperwork too. This will be a bit of a hassle since our signatures will need to be notarized. There is a notary in my office, so getting mine done is no problem, but getting hers will require some running around. And, of course, I will need to wire the title company some funds. I did find out that the buyer already has all the paperwork and their funds at the title company.
Good News For Flippers!
Here is some good news for anyone flipping properties. The FHA is waiving it's anti-flipping rules and will now insure mortgages on properties that have been owned by the seller for less than 90 days. The waiver is in effect until June 2009.
Full details here.
Full details here.
Roof Problems
The roof on Rental #1 is quickly becoming a big problem. Got this email from my agent today:
I do want to get out of this house and now I am facing the prospect that insurance may not cover the repairs. Looks like the buyer and I will be going back to the negotiating table soon.
Termite damage under the house to the supporting rafters. Around $2600 to repair/replace, buyer has enough to do this himself. Roof has 3 layers on it. Original layer is wood shingles, two are composition shingles.
Inspector did notice some shingles missing on one side of house, suggested we try to get insurance claim as you know. He informed the buyer that he should get a bid on roof due to fact this could create some problems in future and insurance coverage could be one of those problems. We have sent two roofing companies we use out to get estimates, both have come back with the comments that the roof is not showing any leakage nor missing enough shingles and their thoughts are the insurance will probably reject any claim. The roof is still a problem. It does have some areas that are caving due to the weight of the layers and the fact that wood shingles are attached to the rafters, not to deckboard, so adding the age of original roof and the 2 layers of composition shingles, this is why the sagging is occurring.
This is creating a new problem for the buyer. He will have trouble getting insured and he does not have enough money to cover the problems underneath the house and the roof, which is going to run around $7,000-$8,000 to tear out completely and replace properly. He was told this by a roofer he called out and was confirmed by our two roofers.
I do want to get out of this house and now I am facing the prospect that insurance may not cover the repairs. Looks like the buyer and I will be going back to the negotiating table soon.
Pointless Contract Verbiage
The buyers for my Rental #1 had the inspection done and they found a couple of things. There is some roof damage that appears to have been caused by the storms on June 4. Some floor joists are rotten and need to be replaced and there are some other minor issues. The buyer is willing to do all the repairs except for the roof. My agent suggests that I file a claim with my insurance to get the roof repaired.
Now, you may recall this offer was as-is. My agent said the buyer was still within their inspection window and could back out of the contract based on the inspection results. So I asked my agent, if the buyer can still request I make repairs and can still back out of the contract and get their deposit back if I don't make the repairs, what exactly does as-is mean? She had no satisfactory answer. I don't feel I really have the standing to fight this. The contract did state that, even though it was an as-is offer, the buyer still had the right to inspect the property. When I read this, I thought it meant they still had the right to enter the property before the close of escrow to inspect it. Apparently, other parties feel it means they still have the right to cancel based on the inspection results. In other words, the words as-is in the offer are meaningless. It ambiguous enough that I don't want to bother fighting it.
My insurance deductible is $1,000. We're going to call the insurance agent and have them send someone out to look at the roof and see if it warrants filing a claim. If it does, we are going to ask the buyers to split my deductible with me.
Looks like we definitely will not make our July 2 close of escrow date. I hope we can close before July 15 though, so I don't have to make another mortgage payment.
Now, you may recall this offer was as-is. My agent said the buyer was still within their inspection window and could back out of the contract based on the inspection results. So I asked my agent, if the buyer can still request I make repairs and can still back out of the contract and get their deposit back if I don't make the repairs, what exactly does as-is mean? She had no satisfactory answer. I don't feel I really have the standing to fight this. The contract did state that, even though it was an as-is offer, the buyer still had the right to inspect the property. When I read this, I thought it meant they still had the right to enter the property before the close of escrow to inspect it. Apparently, other parties feel it means they still have the right to cancel based on the inspection results. In other words, the words as-is in the offer are meaningless. It ambiguous enough that I don't want to bother fighting it.
My insurance deductible is $1,000. We're going to call the insurance agent and have them send someone out to look at the roof and see if it warrants filing a claim. If it does, we are going to ask the buyers to split my deductible with me.
Looks like we definitely will not make our July 2 close of escrow date. I hope we can close before July 15 though, so I don't have to make another mortgage payment.
Another Investment Made
Today I made another real estate investment. I'm a hard money lender in a first mortgage on a single family home in Oakland, California. This was a property the buyers picked up at a foreclosure auction. The amount owed on the defaulted mortgage was $495,000. The bank set the opening bid at $202,000 and the buyers got it for one cent more than the opening bid. There is probably about $25,000 worth of repair work to be done to it and three independent people have appraised the property at $325,000 to $350,000 after repairs. The buyers are contractors and each is a multi-millionaire. Les, the guy who I partnered with on my previous hard money deal in Louisiana, has known the buyers for over a decade and has found them to be very honorable.
The loan is for 1 year with interest only payments at 12% with a balloon payment for the entire principle due at the end of the term. No prepayment penalties, standard late fees. The net to me is 10% since 2% is taken for the servicing of the loan. The first mortgage is for $156,000, so the loan to value ratio is between 45% and 48%, depending on which appraisal you use.
I'll refer to this investment as Hard Money #3, with #2 being the Louisiana deal and #1 being the small loan I did about three years ago.
The loan is for 1 year with interest only payments at 12% with a balloon payment for the entire principle due at the end of the term. No prepayment penalties, standard late fees. The net to me is 10% since 2% is taken for the servicing of the loan. The first mortgage is for $156,000, so the loan to value ratio is between 45% and 48%, depending on which appraisal you use.
I'll refer to this investment as Hard Money #3, with #2 being the Louisiana deal and #1 being the small loan I did about three years ago.
