I just got this blockbuster update from my buddy; Scott “Spidey” Smith. Hopefully you saw my recent video blog post where I talked about the extreme difficulty of selling houses. Now hold on…we’re getting buyers, and contrary to what the news reports, those buyers are getting financed, but the lenders and title co’s are making us (the Seller) jump through a Ba-Zillion (that’s a lot) hoops.
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Always on the bleeding edge, I give you the following article from The New York Times by David Streifeld, entitled “Company Stops Insuring Titles in Chase Foreclosures.” And as you read it (you damn site better read this one) ask yourself, how soon until all title co’s stop insuring any foreclosures until these lenders can prove that they followed the letter of the law in all 2 million foreclosures (thus far).
Find out what bank you’re buying your next REO from, and make sure they are not on the “shit list!” And Realtors – you better be careful too.
Interesting Flip Tip: There are a ton of title companies out there. Hell, there must be several hundred in my little state of Maryland, alone. But did you know that each title company writes policies for only a VERY small handful of TITLE INSURERS? The title companies are basically insurance brokers who in most cases write exclusively for one title insurer. A list of the top-5 is above. Given the new above – you BETTER know who your title co is writing for.
Here’s another related CNBC article on what the media is referring to as RoboSigning Scandal.
Here’s a bunch of articles on RoboSigning and how its affecting foreclosures
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I received more comments on my last post than any previous post. Looks like I struck a cord, huh? I could (and should) write a book on how to not get taken by contractors, but before I do, I’ll just share all my info here. Just call me, Mr. Good Karma! So this will be the kick off post; Part One of a series of posts on How To Sucessfully Work With Contractors so that you can (one day) be a Professional FullTime-Rehabber like your old pal; Craig Fuhr.
Let’s begin our journey with what NOT to do.
As an example, let’s say you’ve just purchased a crappy house for $68,000. Because you’re smart, you did your homework and have a pretty good idea that the rehab should cost about $65,000. Comps in the area suggest a back end (ARV) of $215,000. Sounds like a sweet deal, huh? <Shyly> Yeah, its one I just did.
You close on the purchase, and like every rehabber, you’re just busting at the seams to see some dust fly. So you set up a meeting with a contractor. If you’ve been doing this as long as I have, you’ll want to to swing some hammers THAT day! Time is money, right? Hold on there, Speed Racer. First thing you need to do is, get out a fresh pad of legal paper and a shiny new pencil. As you walk through your crappy house, understand (I mean, really internalize) that EVERY rehab no matter how big or small has a rhythm and rhyme. It has a flow. And, you can never go against the flow. Like the Ten Commandments hewn into stone, so is the precise logical workflow of a rehab. Do ya’ hear me? Don’t mess with the flow! You wouldn’t start drywalling before the plumbing was done, right? So, go through each logical step of the flow – and associate each step with a precise cost.
Something like this: demo will cost $7000.00, framing will cost $5500.00, roof $4500, mechanicals $21,000.00, doors & trim; $2500.00, windows… You get the picture, right?
If you follow my directions, at the end of this process, you will have a very basic Scope of Work (SOW). Now, let’s say you’ve decided to let a General Contractor handle the whole process for you, and miraculously, he agrees that you were right – the cost of the rehab will be $65,000.00. The first thing he’ll want is money. Like most greedy penniless bastards, he’ll have the balls to demand 1/3 of that $65,000.00 up front before the first hammer is swung. Get out your calculator. Mine says, “Are You CRAZY? OUCH! Don’t do it! That’s $21,400.00!”
I have a really fancy calculator.
First things first; how about getting something in writing? I’ve never been a fan of a written contract with contractors mainly because I know you can’t take blood from a stone. 99% of these guys have no money, so even if a judge finds them in breach of even the best contract – how do you suppose he’ll make the contractor pay you if the contractor has no money! What I do do (I said, “do do”) is make the basic Scope of Work (from above) into a much more detailed document. This post is not about writing a detailed SOW, so I won’t get into all the gory details here – but know this – once the formal SOW is developed, the contractor then signs it, and it becomes the work blueprint and best contract you’ll ever have.
So you have a signed SOW, and there he is; Mr CON-tractor standing there with his hand out waiting for a super-fat $21,400.00 check. You’re ready right? You’ve got your SOW and you’re swollen checkbook is burning a hole in your pocket. Wait! Hole on! You’re still not ready to go! You can not give him a dime yet. Doing so would be a GRAVE error and would be going against the natural work flow!
Stay tuned. I’m just gettin’ started here. I’ll tell ya more in my next post!
I want to hear what you have to say about Part 1 of How to Successfully Work With Contractors.