Month: September 2014

Protect Your Lease Agreement with an Option to Purchase

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about the lease to own homes business model but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

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Buying a House – The Time is Now

Posted on September 22, 2014August 26, 2019 by Wendy Patton

Whatever method you decide is right for you, the time for buying a house is NOW! Over the years, I’ve shared many ways that homeowners and investors can use to realize the American dream of homeownership. A few of the ways I’ve shared for buying a house include:

Rent to own
Buying a house subject to existing financing
Lease options
Sandwich lease options
And many other options

The point right now is that mortgage rates have surprised many market observers that expected them to start heading up during the busy summer buying season but they have remained relatively stable. But the fact remains that mortgage rates only have one direction to go and that is up. And there are other reasons for buying a house today for yourself or as an investment.

Buying a House is Getting Easier

With that said, the best news is that lenders are beginning to loosen the qualifications that borrowers must meet when buying a house. The requirements haven’t retreated to when all you needed to do was fog a mirror but they have become easier to meet.

Although the FHA doesn’t actually make loans, they do set the standards for guaranteeing loans that most lenders follow. A short time ago, the FHA lowered the credit score requirement from 640 down to 600. Other requirements have changed as well. The FHA required down payment is now at 3.5%. Additionally, the FHA is also allowing loans to be made in as little time as 12 months after a short sale, foreclosure, or bankruptcy, (with extenuating circumstances such as a job lose or medical cause).

Lenders Move Away From Federal Standards So More People Qualify for Buying a House

Earlier this year, the U.S. Consumer Financial Protection Bureau issued revised the “Qualified Mortgage Standards” for buying a house as a result of changes made to the Truth in Lending Act. It has taken lenders some time to understand what these new rules mean to the industry. The initial response was to over-tighten requirements to be sure that the new rules weren’t being violated when making loans for buying a house.

Today, some lenders have gone in the opposite direction. Some lenders are now making loans for buying a house that don’t meet the qualified mortgage standards. Qualified loan standards only need to be met for loans involving the GSE, FHA, VA, and USDA.

Not many, but some lenders are also seeing business opportunities making loans for buying a house to reliable lenders that otherwise wouldn’t qualify under the new standards. Of course, you can expect the interest rate on these loans to be higher. That’s where the lenders are seeing a better business opportunity.

Other Government Changes for Buying a House

The FHA is making other changes so it’s easier for people buying a house. The HAWK program (Homeowners Armed With Knowledge) has been announced and is expected to roll out later this fall. What is known now is that borrowers willing to take “homeownership counseling” will receive loan fee discounts that can be worth thousands in both lowered closing costs and mortgage insurance premiums. Buying a house worth $200,000 will result in a closing cost savings of about $1,000. Mortgage insurance premiums will be lowered from 1.35% annually to 1.25%, a monthly savings of about $17.

What this all means is that mortgages are becoming a little easier to qualify for. As long as interest rates don’t begin rising, buying a house will be within reach of more people.

If you want to work directly with me on the buying a house or investment business model or any of the other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about buying a house or investment, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Rent to Own Homes

HUD Homes for Sale – Flipping Investors

Protect Your Lease Agreement with an Option to Purchase

HUD Homes for Sale – Flipping Investors

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about the buying a house or investment business model but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

What did you think of this article? Please leave a comment below.

Rent to Own Homes

Posted on September 17, 2014August 26, 2019 by Wendy Patton

Rent to own homes is a great alternative for locking in a price when they are going up but you don’t have a down payment and your still a year or so away from having your credit repaired. Rent to own homes are a good option to buy the right house at the right time, even if the buyer can’t afford to buy right away. Rent to own homes work for both the seller and the buyer when the contract is well written. Rent-to-Own-EBook-Cover_medthumb

A recent rent to own homes buyer was in the market for a traditional purchase when she saw her dream of home ownership dashed by high prices and an out of reach down payment. She found a $210,000 home she really wanted to live in but just couldn’t get over the idea of spending $2,000 in monthly rent without having anything to show for it. That’s when she approached the seller with the idea of doing a rent to own homes deal.

She decided to take a different approach and asked the seller to consider a rent to own homes arrangement. The seller needed immediate cash flow to cover the mortgage and agreed to the deal. The seller even agreed to credit each month’s rent to the down payment for the first year. Twelve months later the buyer had more than $20,000 credited to the down payment and qualified for a traditional loan.

When Rent to Own Homes Works for Sellers

This method works well for sellers almost any time but becomes particularly attractive when they are having trouble selling the property, are living out of the area, or who have bought a new house before selling the old one and therefore face two mortgage payments. The seller immediately begins collecting rent from a tenant that has a vested interest in maintaining the property and completing the purchase. The deal also locks in a sales price that enables the seller to plan a financial future.

Every month a house sits empty is a lost opportunity for the seller. Making two mortgage payments each month will strain almost any homeowner’s budget. It doesn’t need to be that way when rent to own homes are a viable sales method.

Rent to Own Homes Have Flexible Contracts

Buyers should treat rent to own homes as any other purchased agreement. They should have an appraisal done and have the home inspected. Then the buyer needs to take the step of working with a mortgage broker to develop a plan that will have them qualified for a mortgage before the option period expires.

By working with real estate professionals, including an attorney, rent to own homes can have contracts drawn up to satisfy both the buyer and the seller. The seller no longer has a vacant house to deal with and the buyer is able to overcome down payment and mortgage hurdles.

If you want to work directly with me on the rent to own homes business model or any of the other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about rent to own homes, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Protect Your Lease Agreement with an Option to Purchase

How a Land Contract or Owner Financing Can Work for You

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about the rent to own homes investing model but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals

By Wendy Patton

What did you think of this article? Please leave a comment below.

HUD Homes for Sale – Flipping Investors

Posted on September 12, 2014August 26, 2019 by Wendy Patton

HUD Homes for Sale – Flipping Investors

Realty Trac reports that institutional investors have bought more than 386,000 single family houses across the country since 2011. Today, their robust buying pace is slowing substantially as they move to profit from their investments. Now, most of their effort is towards stabilizing their property management operations and bundling houses into investment packages to be sold to investors on Wall Street. This means less competition for individual investors for the remaining foreclosed HUD homes for sale.

These institutional investors are now even selling off some of the homes they bought. Homes being sold are ones that need substantial repairs. It’s not likely these will be bought by owner occupants, which means there is potential for investors here to rehab and flip these HUD homes for sale. Because individual investors don’t have to deal with the bureaucracy that institutional investors have and are much more efficient at rehabbing and flipping houses, there may be opportunity here. Still, the better opportunity is probably in the less competitive market for houses still for sale directly from HUD.

HUD Homes for Sale – the Investor Buying Process

HUD has two major categories that determine when an investor can bid on a foreclosed house. HUD does favor selling to owner occupants. If the home is insurable by the FHA there is a 15 day waiting period during which only owner occupants are allowed to bid on HUD homes for sale (this has been reduced from a previous 30-day waiting period). If there are no bids or no acceptable bids, investors are welcome to make bids. If HUD homes for sale need more than $5,000 in repairs, they are not considered FHA insurable and investors are allowed to submit bids 5 days after owner occupants are allowed to. With these HUD homes for sale, the only way you can get FHA insurance is through a FHA 203K loan.

HUD does prosecute investors that claim they will be owner occupants and the penalties can be 2 years of prison time and a $250,000 fine. HUD homes for sale are considered owner occupied if you or anyone on the deed lives in the home at least 50% of the time and are not buying a second home. Additionally, you must live in the home at least 1 year before you can sell or rent it. These conditions make it difficult for most rehab and flip investors to qualify as an owner occupant buyer of HUD homes for sale.

Are HUD Homes for Sale a Good Deal for Investors?

Of course, that depends on many things. Those needing more than $5,000 in repairs can be good investments because few owner occupants want a home needing immediate repairs. Additionally, owner occupants often can’t obtain a loan for these homes.

After that, it becomes a situation of how many HUD homes for sale are on the market and how many other investors are bidding on them. HUD has an appraisal done on the home before listing it. For unknown reasons, the appraisals on HUD homes for sale typically come in well under market value. HUD will take less than the asking price and HUD homes for sale typically have the price reduced after being on the market for 35 to 50 days. There are good reasons that investors should look into HUD homes for sale.

If you want to work directly with me on the HUD homes for sale business model or any of the other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about HUD homes for sale, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Protect Your Lease Agreement with an Option to Purchase

How a Land Contract or Owner Financing Can Work for You

Real Estate Q&A – Lease Option -V- Lease Purchase

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about the HUD homes for sale investing model but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

What did you think of this article? Please leave a comment below.

Land Contract for Profits

Posted on September 9, 2014August 26, 2019 by Wendy Patton

Whether you’re new to real estate investing or looking for a creative way to sell or buy property, you need to be aware of the many options you have. A land contract is one of the most flexible ways for buying and selling real estate. Essentially, a land contract is a private agreement between the buyer and seller that doesn’t involve a third party lender (no banks are involved).

Before we go any further, there are provisions from the Dodd-Frank Act that greatly restrict who can engage in a land contract. These mostly concern the seller but you should be aware of them as an investor. The Dodd-Frank Act might not apply if the seller does not sell more than one property using seller financing during a 12 month period. Also, the seller cannot have built the property and cannot sell it through a legal entity such as a partnership, corporation, or LLC. These regulations are still going through the interpretation stage and could possibly change in the future. It’s strongly recommended that you consult with a real estate attorney before becoming involved with a land contract.

Because a land contract is strictly between the buyer and seller, it can be written to benefit both without consideration of lender requirements. The use of a land contract became very popular back in the 1970s and early 80s when interest rates soared as high as 18% and many people couldn’t qualify for a loan. As lending requirements softened, the use of a land contract became less popular but never completely went away. The land contract has seen a resurgence in popularity since 2006 when loan qualifications tightened significantly.

Basics of a Land Contract

Although a land contract can be written in many ways to benefit both the seller and the buyer, there are a few things most have in common.

A land contract (also called a contract for deed) is an agreement between a seller, called a vendor, and a buyer, called a vendee.
The seller agrees to sell the property by carrying the contract (seller financing).
The seller retains legal title until the full purchase price has been paid. The buyer gains equitable title, meaning he or she has ownership in proportion to the amount that has been paid.
The seller can have an existing mortgage on the property, in which case the seller financing becomes known as a “wrap around mortgage” because the seller must continue making payments on the existing mortgage.
Or the property can be paid off in full in which case the seller pockets the entire payment made by the buyer.
Upon full payment of the purchase price and interest, the seller signs over the title for the property to the buyer.

Land Contracts are Great For Investing

As an investor, you can use a land contract to either purchase a property or sell a property. Both have benefits. Clearly, you won’t find a lot of sellers looking to carry the contract but they are out there. Typically, what you want to look for in a seller that can be motivated to carry a land contract is:

Has a non-conforming property that most lenders won’t make a loan for.
Wants to defer taxes through installment payments.
Wants a return on his or her money that is higher than money markets.
Wants to make a sale for a higher price than an appraisal will support.
Wants or needs a fast closing.

As a seller on a land contract, those are the same benefits that you’ll receive. As a buyer on a land contract, you can benefit from:

Not needing to qualify with a lender.
Avoiding all of the fees that major lenders charge to originate a loan.
Down payment flexibility.
The length of the contract, interest rate, and amount of payments is negotiable.
Fast closing.

As an investor, if you haven’t looked into a land contract, now is the time to do it. State laws governing these transactions vary so it’s always a good idea to consult with a competent real estate attorney.

If you want to work directly with me on the land contract business model or any of the other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about a land contract, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Protect Your Lease Agreement with an Option to Purchase

How a Land Contract or Owner Financing Can Work for You

Real Estate Q&A – Lease Option -V- Lease Purchase

Rent to Own Continues Flourishing

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about the land contract investing model but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

What did you think of this article? Please leave a comment below.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

Can landlords break a lease deal?

Posted on September 4, 2014August 26, 2019 by Wendy Patton

Can Landlords Break a Lease Deal?

Recently, I had a student ask if it was possible to break a lease deal when someone else showed an interest in a property that was already under a two-year option lease deal. I’m not an attorney so I can’t give a legal opinion but my professional opinion is that it’s not a good idea unless he wants to first make an agreement with the current tenant to break the existing lease deal in exchange for returning the option fee and any additional payments that would apply towards the purchase.

Breaking a Lease Deal

Another (bad) option is to become the dreaded and not respected landlord that scours the lease deal contract in search of a clause that allows the lease deal to be broken in favor of the landlord. This could be one payment that was five days late, a little too much garbage in the yard, or something else that you would otherwise overlook if it weren’t for the fact that you have a quick sale in the wings.

Breaking a lease deal in this manner can have repercussions for the seller if the tenant/buyer does plan to go through with the purchase. Or if the house is now worth more than the lease option purchase price. What it all means is that the tenant/buyer has equity via the existing lease deal. If he or she takes the seller to court, there is a good possibility that a judge will force a foreclosure rather than an eviction. Foreclosures take time and money and the second buyer will probably lose interest at that point.

Check on Your Existing Lease Deal

If you find yourself in a position of having another offer to buy that you want to go through with, the place to start is by asking your current tenant/buyer if they still plan to execute the purchase portion of the lease deal. It’s a fact that some lease deals to purchase the home never are executed. It could be that your tenant has decided not to purchase. You may be able to work out a simple deal to cancel the old lease purchase deal so that you can proceed with the new buyer.

Or the existing lease deal could move forward a little faster if your current tenant intends to purchase. Either way you could get your money sooner and without the hassle of going to court.

Don’t hire the lawyers. If you try to force an eviction and the tenant has filed a Memorandum of Agreement with the county or otherwise clouded the title to show an equity interest, you’re likely to have a legal fight on your hands. The laws vary from state to state but almost certainly you’re going to have to hire an attorney to resolve the issue. You’ll be much better off trying to directly negotiate a resolution with the tenant than going the expensive legal route of hiring an attorney to force them out.

If you want to work directly with me on a lease deal business model or any of the other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about a lease deal, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Protect Your Lease Agreement with an Option to Purchase