Are There Drawbacks to Selling your Home to an Investor?
Daniel Medina

Lives change and with them, lifestyles. If you’re thinking it’s time to sell your home, you might be wondering if there are there drawbacks to selling to an investor. Dynamic market conditions make the decision to sell an easy one. Even if you haven’t thought much about selling your property before reading this article, and depending on your plans for the future, it might be a good idea.

Before you call your brother-in-law, the Realtor®, stop to consider the best direction. Different goals call for different paths and today you have choices. In these modern times sellers have many options.

Working with a Realtor®

Years ago, when it was time to put a house on the market, owners would have listed it with a Realtor® or real estate brokerage. Unless they chose to post a “For Sale by Owner” sign in their front yards that was pretty much the first thing people thought of.

The old school method of working with a Realtor® isn’t always quick but it is simple: just sign a listing agreement and agree to pay a percentage to your Realtor® when the house sells. Keep the house clean for open houses and within a few months to a year an appropriately priced property should sell. If it doesn’t sell, you adjust the price or add to the value.

Even though today’s seller has options, some still go the traditional route because it’s the only way they know. Does that mean it’s a bad idea to have someone petition buyers on your behalf? Not really. It can and does work for some—especially for those not in a hurry to sell.

A Realtor® acts as your outside sales agent. He or she can be a big help, but depending on the sale price of your property, it might end up costing thousands of dollars in commissions.

Who Pay’s the Realtor®?
Realtors® earn their keep by marketing your property to potential buyers with hopes of selling at full price. Their commission comes out of your pocket when the house sells. Marketing efforts include listing your property in the MLS; the Multiple Listing Service.

MLS enables real estate brokers to establish contractual offers of compensation among brokers. It also circulates information about all the properties listed. This brings together Realtor® representing sellers and Realtor® representing buyers.

A Realtor® is also responsible for holding open houses for potential buyers. They conduct private showings for those who want a closer look. Advertising tools, both online and in print are methods Realtors® use to get the word out about your property.

Some Realtors® blog about the properties they represent. The expectation is they’ll do whatever they need to do in as short a time as possible to sell your property at or above the asking price. Unfortunately, that doesn’t always happen. You can’t take hope to the bank.

Selling to an Investor
The hassle and expense of listing a property for sale with an agent doesn’t necessarily make financial sense. Some sellers want to close on their properties quickly. For these sellers another option is becoming increasingly popular: selling to an investor. You might see it as a compromise of sorts in a majority of circumstances.

Are there are drawbacks when selling to an independent investor?

For those unfamiliar with the process, the idea of selling a property to an independent real estate investor is stigmatized at best. However, once a seller fully understands the process of selling to a reputable investor, they often discover it can be the solution to a number of potential issues.

Seller’s First Steps
Your first and most important step as a seller is to learn how to distinguish investors. Not all are created equal! Just as you would interview a real estate agent or a banker, interview potential investors to make sure you are comfortable doing business with them.

Are You Sure You Understand the Probate Process?
Daniel Medina

When someone is deceased, probate is the court-supervised process of gathering that person’s assets, paying taxes and distributing the remainder of the estate to heirs. It’s important to understand the probate process.

Probate is different from state to state and mostly involves paperwork. If family members or creditors are handling things peaceably, there’s usually very little court supervision. In states that have adopted a set of laws called the Uniform Probate Code, the process is simpler and quicker than in those still using the antiquated methods described in this article.

Does Every Estate Go Through Probate?

The answer is no. Many estates can avoid regular probate by qualifying as “small estates” under state law; even if they have valuable assets. In these cases, heirs may use a simplified probate procedure. Sometimes they can even transfer property without ever setting foot in a courtroom.

Using summary probate can save surviving family members time and money. Delaware and Virginia are the only states that do not offer a summary probate procedure. In all other states a summary provision that can be used under certain circumstances. Every state has its own rules about when summary probate is allowable or when survivors must use regular probate.

Eligibility for summary probate is determined by the size of the estate, and that number is again, different state to state. Property held in a living trust, in joint tenancy, or in a retirement account for which a beneficiary has been designated don’t go through probate. In these cases, sometimes a summary probate is used for anything not included.

Are There Rules About Who Can Use Summary Probate?
There are conditions imposed by some states as to who can use summary probate. For example, in some cases, the surviving spouse must inherit everything or there must be no will. If there are several heirs, all the heirs must agree on how to divide property.

How Does Probate Begin?

In the event an estate goes to probate, someone must be appointed executor or personal representative. Different terms are used by different states. If there’s no will, in some states your title will be “administrator.”

The representative will usually need to file an application or petition with the local probate court in the county where the deceased person was living at the time of death. This is filed along with death certificate and the original will if one exists and hasn’t been deposited it with the court already.

Every probate court has its own rules about the documents it requires. The document may include information such as the date of death, names of surviving family members and of beneficiaries named in the will. If the state doesn’t offer a fill-in-the-blank, the petitioner will have to type something up from scratch.

The petitioner is required to:

 

Send formal legal notice to beneficiaries named in the will and if there is no formal will, to heirs under state law.
Send notices to known creditors.
Publish a legal notice in a local newspaper to alert other creditors.
Prove that a will (if it exists) is valid.

The court will schedule a hearing, to give interested parties a chance to object to the applicant’s appointment as executor. The applicant/executor is not usually required to attend the hearing.

Probate cases must stay open for several months to give creditors a chance to come forward.

How is Real Estate Handled in Probate?

What if the deceased person owned real estate in more than one county in the same state? Good news: it can all be handled in one probate. As long as there’s no crossing of state lines, there’s no need to conduct a separate probate proceeding in more than one county.

If an executor wants to sell real estate, they may need to get court permission. A law called the Independent Administration of Estates Act gives executors freedom to pay creditors’ claims and sell estate property without prior court approval.

Once the creditors claim period has passed, debts are paid, tax returns are filed, and disputes settled, remaining property may be distributed to the beneficiaries and the estate may be closed.

Dealing with Investment Property in Probate: How Long do you Have to Wait?
Daniel Medina

Can you deal with investment property when it’s in probate or do you have to wait for the process to unfold? When someone dies without making legal arrangements for property to pass to heirs, the estate is usually subject to probate. The representative of an estate has no power to act probate is opened and the court grants such authority. If there’s a will and you’re connected with the person in charge (or executor), in most cases you might be able to begin after the probate process has begun—depending on the state in which the property is located, and as long as you follow protocol.

Please know that the information shared in this article is meant to provide a basic understanding of the probate process as it relates to real estate. Guidelines vary from state to state and may change over time. Probate is no picnic and can be avoided by drafting a living trust or will. Even when you think your assets are minimal, planning ahead will save your loved ones the stress of dealing with probate when they are also grieving. Click here to learn more about probate.

Back to the client…
If an executor wants to sell real estate, they may need to get court permission. A law called the Independent Administration of Estates Act gives executors freedom to pay creditors’ claims and sell estate property without prior court approval. When there is a trust, the trustee, can sell the property without court approval, provided the decedent’s wishes don’t disallow it.

Does this mean the executor can purchase the property? Not unless this is stipulated. In any case, they are still required to notify all interested parties of the sale.

Before the sale can take place, a list of creditors should be compiled. This would include high priority expenses, such as medical bills or delinquent taxes as well as other claims filed by creditors. Sometimes the property being sold is earmarked to cover these expenses. This phase of the probate process can take about four to six months.

A best case scenario would mean no disputes between heirs or family members. Emotions run high when it comes to issues of ownership and money, and even amicable relationships can be tense after a death in the family. Usually a property sale is seen as favorable when the income can be divided between heirs.

Once the creditors claim period has passed, debts are paid, tax returns are filed, and disputes settled, remaining property may be distributed to the beneficiaries and the estate may be closed.

5 Reasons to Avoid a Reverse Mortgage
Daniel Medina

Over the last several years the reverse mortgage has caught the attention of retirees looking for an income. At face value, it seems like a good idea.

It also seems really simple: You get access to the equity in your home and the bank makes a mortgage payment to you. If that doesn’t make sense, keep reading. It gets worse. A reverse mortgage can have detrimental effects at a time in life those seeking it can’t afford bad luck.

There are 5 main reasons a reverse mortgage should be avoided at all costs. Most people don’t know this type of income stream is actually a loan against your home’s equity that has to be paid back.

Think twice—here’s why:

#1 You’ll Pay High Fees

Since a reverse mortgage is actually a loan, expect to have loan-related fees. How is it a loan?

Because a reverse mortgage is actually a home equity loan, usually the lender has income or credit score to lessen risk. Because the borrower is retired this type of loan, isn’t based on income verification or credit score.

What this means is the lender must assume additional risks, and some of those risks must be offset by charging higher fees.

#2 Your Interest Rates Will Be Higher
Expect that with a reverse mortgage your interest rates will often be higher than that of a traditional home equity loan. Add this to the high fees you’ll be paying and you will be surprised how much of your equity the bank gets to pocket.

#3 Your Home Might Cease to be Part of Your Estate
Many people expect that their heirs will get the house when they pass on, but in the case of a reverse mortgage, this might not happen.

When you get a reverse mortgage, you aren’t expected to make payments on the loan. The home is supposed to be sold so that it can cover the loan amount. This means your house doesn’t go to your estate. Your kids can’t have the house.

Of course it is possible for your heirs to keep the house if after you die, they pay the reverse mortgage debt. In most cases the money has to come out of the estate, reducing the total assets that your heirs end up with.

#4 If You Move, You’ll Have to Repay the Loan
In order to avoid making payments on the loan, you have to spend most of your time in your primary residence. If you haven’t lived in the home for a year, you’re considered to have moved out. If you go into long-term care and plan to come back home, someone had better make sure you’re gone less than 12 months or else you’ll be required to repay the loan.

Imagine having to start repaying your reverse mortgage at a time when money is probably already tight. Doesn’t sound so good any more, does it?

#5 You’re Still Financially Responsible
Yes, hang onto the check book. There are still certain costs you’ll have to pay. For instance, you still have to pay property taxes and keep up with your homeowners insurance. You’ll also need to pay for regular maintenance on your home. For someone hoping to leave an inheritance to family, a reverse mortgage can be a real disadvantage. Your best option is to sell your home outright and use the equity to fund your retirement in a modest home. Talk to an attorney about a living trust and your legacy will be protected.Imagine having to start repaying your reverse mortgage at a time when money is probably already tight. Doesn’t sound so good any more, does it?

Should you List with a Realtor or Sell to a Real Estate Investor?
Daniel Medina

If you’re thinking of selling your property, you have choices. Before you choose, know the difference between selling to a real estate investor and working with a Realtor®.

 

Hiring a Realtor®

 

Hiring a Realtor® has benefits in that the agent will assist the seller in all aspects of selling a home. Reputable agents know their markets well and use MLS (Multiple Listing Service) for advertising the property to the largest source of retail buyers.

If this is the route you choose to take, it’s important to work with a Realtor® you can trust. Everyone knows at least one or two Realtors® and it can be tempting to work with a friend or family member. However, be sure the person you choose is able to do the best job. Your home is likely your largest investment and going with the wrong person because you feel obligated can cost you tens of thousands of dollars.

If you’re in a hurry to sell, working with a Realtor® may not be the way to go. The process can take 6 months or more with a financed purchase. Consider that during a retail sale you are still responsible for paying the monthly cost of the house while it’s under the agreement and in the financing, title and inspection stage. Depending on what your monthly expenses are, that could be a pretty healthy sum.

Don’t Realtors® work for FREE?

Engaging the services of a Realtor® is very expensive. You don’t pay if you don’t sell, but when you pay, you really pay. Let’s say the commission you’ll pay the agent is 5%. Depending on the price of your home, that could set you back thousands.

Some sellers believe they will receive a higher price and ultimately make more money on the transaction if they hire a real estate agent. That may be true on the front end, but often times the net amount is much when closing costs, carrying costs and commissions are considered.

The bottom line is this; hiring a Realtor® can be beneficial in the right situation. Ask yourself:

Is there enough room in the price to pay the fees?
Can you afford to maintain the monthly overhead while you wait for your home to sell?

 

Working with an Investor

There are advantages in working with an investor depending on your situation. There are no contingencies or inspections so you won’t have to worry about what the home inspector will find after they’ve been through your home. The best part of this is that you won’t have to go back and fix anything in order to sell. Sell as-is.

You won’t lose sleep wondering if the bank is going to approve the buyer’s loan, only to discover in the eleventh hour that the deal has fallen through. You also maintain flexibility with your closing date. Selling to an investor means you can close when you’re ready. Many investors pay all of the seller’s closing costs as well.

Are there no drawbacks when selling to an investor? There is one: when you sell to an investor, you are selling at a discounted price, but you do that in return for convenience and flexibility.

When selling, take your time and make wise decisions. Before you choose, know the difference between selling to a real estate investor and working with a Realtor®.

Downsizing: Helping Empty-Nesters Move to the Next Life Stage
Daniel Medina

As families grow, parents are busy keeping up with their kids’ lifestyles: school, birthday parties, and managing households. They often don’t notice their little ones have become teens. Play dates turn into parties—often requiring just as much supervision.

And then things change…

Those rebel-rousing teens no longer ask to borrow the car, but instead heading off to college or moving out on their own. Unless they’re paying close attention, Mom and Dad literally wake up one day and realize their kids are gone and the house is empty. They’ve joined the ranks of empty-nesters.

Some parents find themselves wondering what to do with themselves. Where does that leave them?

Empty-nesters can’t be bundled into categories and handed a road map saying, “Here’s what to do next.” Depending on their goals, finances and lifestyles, there are a lot of choices. Many choose to downsize.

What does downsizing mean? Again, it’s different for everyone. Basically, downsizing refers to a plan of action that includes making BIG changes. For empty-nesters, those changes often begin with garage sales and trips to Goodwill, carting away truckloads of “stuff” the kids left behind. Once those outgrown toys and boxes of school papers are cleared out, there’s a lot of empty space and many homeowners see the value in downsizing.

They’re ready to sell the house.

Some people choke back tears at the thought of it. Others can’t get the sign up fast enough. These are the motivated sellers. They’re ready to cash in on all that equity they’ve built over the years and apply it to something they really want: a condo, a European cruise or both. The point is, they’re ready to sell and they want to move fast.

For those who want to sell quickly, working with Realtors® isn’t the quickest way to reach goals. It can take months and even years to sell a property this way. It also requires an investment at the onset.

Realtors®, who are paid by commission want to get the best price for the properties they represent. They are aware that buyers act partially on appearance so they often suggest owners put some money into renovation before showing the house.

This isn’t what every seller wants. Some just want to get it over with. As an investor, you can offer attractive solutions. One of those solutions is a quick sale.

As a real estate investor, you’re wise to look for empty-nesters. Tell them about a way they can speed up the sales process by selling to you or your team, and you’ll have their attention!

Selling Your Home As-Is to a Real Estate Investor
Daniel Medina

Why would you sell your home to a real estate investor A-Is when you could increase the value and sell higher if you made renovations? Even cosmetic improvements put more dollars in your pocket. If you have time and a few extra bucks, this would be a no-brainer.

Bringing a home up to code and/or making it pleasing to the eye takes money—sometimes lots of money. Unfortunately, some property owners don’t have the time or extra money to put into a property they plan to sell. Selling a home As-Is can be an attractive opportunity. There are several scenarios in which this might be the case. The following is a common one.

Statistics say most millennial Americans move into a new-to-them home every three to five years, yet many older baby boomers—often the parents of younger boomers or millennials— are still living in homes they raised their families in. Let’s face it, living mortgage-free has its benefits.

The time comes when some older folks want to move into a smaller, more manageable home or a condo. Their home is pure equity they can use to make this possible. Selling their homes As-Is to a real estate investor expedites the process.

Oftentimes, heirs to family estates must deal with property needing to be sold so that resources may be divided among siblings. If the home has been occupied by less-than-able aging parents, chances are it may require maintenance (on the lower end) or repairs and replacement (on the higher end). If heirs decide not to invest in the property to bring up the ARV, the home may be sold As-Is.

How about you? Investors can help relieve the sense of overwhelm that comes from having a property to sell and not knowing which way to turn first. If for whatever reason, you want to sell quickly, consider working with a real estate investor. They have a ready list of contacts waiting to buy. Unlike a Realtor® they don’t work on commissions. Keep that money in your pocket and add it to the cash you’ll receive when the deal is done.

5 Tips for Buying a Second Home
Daniel Medina

As the real estate market recovers, it has become easier for homeowners to buy second homes. Some of these second homes will be vacation properties in attractive getaway areas and others will generate income. Depending on their goals, second home buyers are considering investment properties they intend to flip (buy cheap, refurbish and sell at a higher price), or properties they plan to lease to generate residual income.

 

Even if you can afford to buy a second home, why would you send more than you have to? The following tips will help you get the most value at the best price.

 

1. Be Flexible with Location
You may love the ocean, but an oceanfront beach house might be out of the picture. Yeah, pretty expensive. If you look a mile or so from the shoreline you’ll still be close to the beach but you’ll probably find something more within your budget.

Do you enjoy a forest setting? There are cabins and homes in rural areas in mountain communities that sell for 30% less than those in the city or in areas that target tourism. Scale down the square footage and you’ll find even better deals.

2. Look For Fixer-uppers
Let’s talk again about investment properties. Are you handy with a hammer? You might want to consider looking at dilapidated or abandoned properties. There are plenty of homes on the market that could use a little love.

Know what you’re looking for, where you want to locate and stick to your plan. Don’t be tempted to buy something that doesn’t fit the profile of the property you’re looking for. The next section is one in which you’ll really want to stick to the plan. Phenomenal deals can come your way.

 

3. Check Out Tax Defaulted Properties
What is a tax-defaulted property? When property owners fail to pay taxes, their homes are said to be tax defaulted and are at risk of having the county seize the home to pay for delinquencies. Homeowners are given a period of time called the redemption period, in which to pay their taxes and fees and if they don’t, these homes are auctioned off to the highest bidder.

Many people purchase investment properties and second homes this way. You will come across some great deals. In fact, you might be able to purchase properties for pennies on the dollar. Resist the urge to risk purchasing anything that doesn’t fit the profile. We’ll talk more about this in a future article.

 

4. Think About Abandoned or Condemned Properties
If you come across an abandoned home or one that has been vacant for a while, it’s a good bet the property is attached to a motivated seller. When a seller is motivated, it means they’re willing to negotiate a lower price for their home. They probably want to get this property off their hands—quickly.

This means the deck is likely stacked in your favor. There are many ways you can generate income from a property such as this. Even if you’re not interested in buying, you might be able to work out a property management deal in which you agree to help the owner lease the property and pay you a fee for managing it.

 

5. The Family Trust
Most of the assets of an inheritance stay within families. Mom and Dad or Grandpa and Grandma buy vacation properties, fishing cabins in the woods or other types of real estate that are then passed down from generation to generation. Families gather for holidays or share use of the homes during summer vacation. But there’s another way everyone can benefit.

A good deal can be enjoyed by siblings or other family members by being made part of the family trust. Individual families that may not have been able to purchase on their own can share the expense of a home.

There are many ways to own a second home. Use your imagination or connect with a real estate investor to help you find the best case scenario in a prime location

 

Are you an Out-of-State Landlord? It Could be Time to Sell to Another Real Estate Investor

Daniel Medina

Why would anyone choose to be an out-of-state landlord? Wouldn’t it be easier to manage properties locally? The answer is always yes, however, most out-of-state landlords don’t become so by choice.
Some properties are inherited as assets of an estate after a family member passes. Unless these homes are sold and assets are liquidated, the properties remain in the hands of heirs. Other times the once-local homeowner moves to another city or state but for any number of reasons, holds onto the property.
If a homeowner is unable to sell an existing property before escrow closes on a new residence, he or she is left with decisions about what to do with it. Not too many people want to pay two mortgages, so rather than leave the home vacant many decide to lease it for income until they decide what to do with it. The income generated will at least to pay the mortgage.
Are you in this position and ready for some relief? If you’d like to capitalize on the equity of an income property, talking to a real estate investor is one of the quickest ways to free yourself from the responsibility and stress of managing it.
Selling to a real estate investor is the quickest way to get out from under the weight of managing a rental property from a distance. Investors either purchase homes or sells them to one of their associates, getting you the best possible deal in the shortest time possible.
How is a real estate investor different than a Realtor®? Working with a Realtor® can take many months if not longer and that mortgage is going nowhere while you wait. Even if you owe nothing on the property it can be stressful.
Because many real estate investors work with cash buyers they can often sell your home in a matter of weeks. In some cases, you can sell in days. There will be no out-of-pocket costs and you won’t have to pay commissions as you would with a Realtor®.

 

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