Does it matter who you sell your properties to as an investor?

Is there an ethical and legal responsibility sellers have when signing contracts with real estate buyers? If so, what does that mean for your career in real estate, or as an investor and real estate business?

Institutional Sellers Have Been Increasingly Selective

Since the 2008 crisis institutional sellers of nonperforming mortgage notes and REOs have become increasingly selective in who they will sell to.

They have created stringent rules for who qualifies to buy their properties and note assets. In some cases also writing in provisions guiding what those buyers can do with the properties within a specific time window. Such as not foreclosing or evicting for a set period of time.

Aside from the regular issues of making sure they are contracting with buyers who can actually follow through and close on the deal, this is being done to limit their own liability from the actions of those they sell too.

They don’t want to be held liable for negative impacts from the new buyer acting aggressively or harming the market.

Why It Matters Who You Sell Your Property To

While it may not be written in black and white, or even a hard law, sellers may end up bearing some responsibility for the outcomes of who they sell to.

Such as how the new owner:

• Treats occupants of properties

• Does a quality job on rehab work and creating new affordable and healthy housing

• Impacts the immediate neighborhood

• Operates ethically, and impacts the financial and real estate ecosystem

One of the great parts of the financial freedom that comes with being your own boss in real estate, or simply as an investor is that you now have the choice not to work for people and companies that are taking advantage of people and are treating their customers poorly, or even committing fraud.

It’s important to hold onto that, and flex that freedom in real estate too. You don’t want to be involved with someone who is going to just skim equity from the properties and allow them all to be foreclosed on. Or who may just cover up mold or other toxic health issues with paint and resell them to unsuspecting families with kids.

What It Means For Buying & Selling Properties

For acquisitions today, this means you need to build up your own resume. Show the good work you’ve done, and how you are a strong buyer. If you don’t have the reputation and track record yet, you may need to partner up with someone else who does to gain access to the best discounts on bulk deals.

On the flip side, you may want to carefully curate partnerships for liquidating and flipping properties to those you trust will do a good job.

Or have some parameters that you are looking for when selling high volumes of properties to individual buyers and companies. How many deals have they flipped? How good was the work? How happy are their end buyers or renters? What is their online reputation? Just make sure these are written out and uniform to avoid anything which could be misinterpreted as discrimination.

 

Low priced homes aren’t always cheap deals. Watch out for these factors that can turn cheap houses into really expensive investor nightmares.

Trees

This California couple just got hit with a $600k fine for moving an oak tree on their property. In other cases storms have knocked down trees, that the city has hauled away before hitting owners with fines for not obtaining permission to remove them. In order to sell owners have had to get permits for removed trees, and plans and permits and plant new trees before they can sell or refinance. It’s not the kind of quirk you want to find out on the day of your scheduled closing.

Mandatory Renovations

From Sicily, Italy to Ohio, you can find homes for sale from as little as $2 to under $20,000 from the government. While there may be good deals to be found in cheap properties like this, many come with the requirement of investing over $10,000 in rehab within a very tight timeline. Or you lose it all. Make sure you know the details and can follow through before getting in.

Moving Costs

There are even free homes out there. The catch is that many need to be moved and can cost more to move than they are worth. That’s certainly the case with this inherited home in Minnesota. There are also many mobile homes out there for sale for under $20,000, but which may cost just as much to move and setup and renovate on a new lot.

Illegal Use & Code Violations

New investors are often fooled into buying properties that have major code violation issues. Often they slip through the cracks until after you close on them. This can be failing to have permits to block up a window or door, illegally separating rooms for Airbnb rentals, and garage conversions, as well as landscaping violations. In Estero, Florida, some homeowners are now being fined more than their properties are worth for simply failing to cut their grass. Those are six figure fines. If you have to go get permits and do construction to change a property, it could easily set you back over $10,000. A lot of these properties end up in foreclosure.

Holding Too Long

From freak blizzards to hurricanes, to rezoning, squatters, vandalism and changing market dynamics, there are many issues that can hurt investors to hold onto properties for too long.

On the bright side, investors who do their due diligence upfront can typically spot most of these issues and use them as great negotiation tools to bring down their costs. Using Best Transaction Funding, they can then be flipped instantly for great profits, without the risk of holding.