Technically,
every home on or off the market is a potential investment property, no matter
what use or purpose you have in investing.
But, what about the deals that look too good to be true, are those
properties a great deal or the next scam? It could be the case for either, and
much should be taken into consideration before deciding whether or not to
invest.
As
described by USNews.com, “A generation buried in debt must be careful when
purchasing a home.” With a Home Fax Report from Nationwide Home Fax, you can always
Know the Home Before You Buy, as due
diligent research and investigative techniques should always be exercised in
cheap investment properties.
Take
this example for instance, a home recently posted on eBay.com. Here is how it was found and, in brief, what to consider through a potential
purchase similar to this:
eBay
Property Description: 3 bed 1 bath valued at $50k
Posting Content: Auction Format Starting
at $1,200
1
1.
Note
the top portion: “Seller assumes all responsibility for this listing.” When purchasing
properties on eBay, their terms and conditions do not protect buyers from their
purchase (like normal listings for most products) as transactions are handled
outside of eBay (ex: no PayPal payments). Most sellers will expect cash, money
order, or certified check.
2.
Take
into consideration and read how they accept payment for the property and the
process the seller follows. In this case the seller states:
“Deed preparation and
processing fee included with the winning bid. Deeds will be prepared and
transferred as soon as possible after receipt of total funds and your vesting
deed information. Seller will submit the buyer's deed to be filed through the
appropriate county recorded office. Due to several non-performing bids, a 150.00
processing and listing fee is being added to the final bid price. Remember,
bidding is a commitment to purchase the property!”
3.
Before
actually researching the property, research the seller. This seller had 8 total
feedback ratings (all for properties sold, most of which were sold to buyers
with 0 feedback), and their seller rating was 83.3% positive (that’s horrible
on eBay, FYI). After using some brief search engine keywords, no noticeable
scams associated to this seller were found.
4.
Find
the current owner and ensure no liens exist against the property by locating the
county tax assessor records. In this case, records
showed that $7,190.26 in delinquent taxes were currently owed on the
property.
5.
After
identifying the owner of the property, and finding any discrepancy with the tax
records, contact the seller and the county to verify whether or not they still
exist as a lien on the property.
6.
Upon
contacting the seller we inquired about the current liens, asked for the
sellers name and, or company, and provided our phone number to be contacted
directly. We received a response (to a
rather descriptive inquiry) which stated, “I’m a private owner. The tax bill
has already been negotiated with (the) County. I’m a wholesaler that buys
properties in lots of 5 and 10.”
7.
Next,
contact the county assessor and determine in the liens have been cleared or
not. (In this case, the county office was not open and we continued our
research before declining to even contact the assessor).
8.
Locating
the deed. After identifying the seller, we located the deed which currently
listed the seller as the most recent grantee of the property, but the
information did not corroborate with the current eBay seller or his business,
which we found through additional eBay.com listings and further research. However,
remember that the seller stated he was a private owner. This did not appear to
be the case, and the seller wouldn’t identify his name, nevertheless which was
listed on tax records as public information.
9.
After
additional research, we found the eBay seller to have other properties
associated to a business that owned many deeds in the same county for similar
properties. The seller wanted to transfer the title on a quit claim deed, not a
warranty deed, and as the seller’s information did not corroborate with the
current owner and deed holder, we declined to purchase the property. Note: we are not saying this seller is
fraudulent, nor is every cheap property listed a scam, but rather the totality
of the circumstances did not warrant further investigative research due to the
findings to that point.
This
is a very brief example of how to
identify and research cheap investment properties. If no issues would have been
discovered, or very few pertaining to the actual acquisition, here’s a few
other brief examples of research to be completed or what you can do to ensure
you’re dealing with an honest seller who truly owns the home:
· Drive
by the home and compare current condition to the provided photos
· Contact
previous buyers and ask for their feedback regarding working with the seller
· Many
sellers who do purchase in bulk have not seen the property. Find photos of the
inside of the home (or attempt to view the inside when driving by the
property). With a quit claim deed, there is no guarantee that the property is
in livable condition, let alone a wise investment.
· Contact
the county assessor and deed record office to confirm the liens, current owner,
deed holder, and verify the property is actually for sale.
· Contact
people who have been involved with any other previous property transfers with
the same company (find pre-existing deed transfer records for other properties
in the same area).
· Contact
the seller listed on the tax record by phone to speak with them directly.
· Contact
the business owner (if any) and confirm that they are currently selling the
property.
· Speak with neighbors near the potential home and gather their thoughts on neighborhood
activity, vacancy rates, and safety (for example).
· Contact
a real estate agent or appraisal office to determine potential value.
· Follow
up accordingly based on your findings through supplemental research.
· Establish
an action plan of what you will do with the property. Are you going to fix and
flip, straight flip, rent out, or live in the home yourself?
· Have
your cash or payment lined up for yourself after detailed communication with
the selling property.
That’s
all for this post. Hopefully these tips will help you along the way in your
next potential property investment purchase.
Remember to always Know the Home BeforeYou Buy with a Home Fax Report from Nationwide Home Fax! See how we can
help you in your next purchase, investment, or rental property today.
