Know the Players Involved in a Real Estate Transaction

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It has been an interesting day already. We have decided to drop the single family home and just buy the two duplexes. With 4 units, and the total contract price dropping significantly, we will still cash flow very well on this deal. But the interesting part came today, when I heard from my investor that the title company called, asking for release of earnest money on the single family home and the adjoining duplex. This came as a surprise because we are not even out of the option period on this contract. Luckily, my investor called me to ask me about before taking any action.

The escrow agent at the title company has an established relationship with the sellers, and handles all of their transactions. This is why you have to be very cautious when dealing in real estate. You can get stabbed in the back very quickly if you aren’t extremely careful. Question everything. They have no right to release earnest money until the option period expires, which isn’t for another 3 days. So today’s tip is, question everything, trust no one. This policy probably saved us over $3,000 today.

Until next time, sign up for my RSS feed to get automatic updates as this transaction progresses, and all other posts as they become available here at Personal Finance Resources.


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Real Estate Deals: Knowing When to Walk Away

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On my current 5 unit real estate deal, we discovered that the single family home that was a part of the deal had serious structural damage. This is the value that a quality home inspector will bring you. The damage could easy cost $30-40k, and the deal just doesn’t have enough built into it to support that kind of a campaign.

Now, the 1 bedroom apartments that are next door have been locked by the contract. Because of one water meter servicing the 1 bedroom duplex and the single family home, the seller can’t really sell them separately. So since we are still in the option period on this contract, we will have to drop those 3 units. Now, what I will likely be proposing to the seller, is to provide us with a separate water meter, and we will proceed with buying the duplex.

The key take away from this article is that you must not get emotional when dealing in real estate (really any kind of business for that matter). Getting emotional will get you burned. The house is too far out of line with numbers that make the deal work, so we will have to walk away from it. So if we only end up with 4 units out of this deal, that will be perfectly fine, and it will still provide strong cash flow.


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