home financing

What is “Highest Use” in Real Estate Appraisals?

1000 500 Taylor Witt

When appraising real estate, appraisers are trained to determine a property’s market value according to its “highest and best use,” regardless of how the property is actually being used at the time of valuation. The historical reason appraisers consider highest and best use (HBU) when performing a valuation ties back to the 19th and early 20th-century real estate concept of maximum productivity. 

This concept is still very much in play in today’s real estate market. But how does an appraiser determine the highest and best use of a piece of land? This article will explore the philosophy and practical application behind the highest and best use in real estate valuations.

How to Determine Highest and Best Use

Appraisers have certain constraints when determining the highest and best use of a property. These constraints—sometimes referred to as tests—are practical, legal, and financial in scope.

A property is tested against these constraints to determine what maximum productivity is actually practical—i.e., compliant with the law, affordable, and physically doable considering the land itself. 

There are generally four tests appraisers will use to determine the highest and best use of property: 

  • legally permissible
  • physically possible
  • financially feasible
  • maximally productive

Legally Permissible

The highest and best use of land must be legally permissible. This means appraisers must work within the existing legal framework when considering the HBU. Certain legal considerations include:

  • Zoning laws
  • Local ordinances
  • Environmental protections
  • Regulatory laws

However, what is legally permissible at the moment might not preclude future legal permissibility. For example, if a property isn’t zoned for commercial use, an appraiser can still consider it for commercial use if there is a greater than 50% chance the property would be approved for commercial use. 

Appraisers can creatively work within the legal restrictions on property to reach an HBU. 

Physically Possible

Appraisers are also constrained by what is physically possible on the property. One property’s environmental and topographical characteristics will vary considerably from another property with the same square footage. 

A 10,000 sq. ft. facility might fit well on one 20,000 sq. ft. property but won’t fit feasibly on a comparable property for various reasons. Perhaps one property is marshy or sandy or contains hazardous waste. These restrictions will affect the highest and best use of that property.

Financially Feasible

The highest and best use of a property must also be financially feasible. In other words, the projected use of a property must generate enough profit to justify the development of the property. 

If the costs of repurposing property exceed the projected revenue of the property, then that particular use of the property is not financially feasible. As a result, that particular use is not the highest and best use by default. 

Maximally Productive

The use of a property is maximally productive when it generates the highest return for its developers. One property could have several potential uses, but only one option will generate the highest profit for developers.

For example, let’s say developers just purchased a 10,000-square-foot plot of vacant land for $100,000. They have several options for generating profit with this land, but only one option will produce the highest returns. 

Option 1: Commercial Warehouse Space

Let’s say that the cost to develop this space into a commercial warehouse would be $600,000, and the market value upon completion is $800,000. When the purchase price of the vacant plot is considered, the return is only $100,000. 

Option 2: Commercial Retail Strip Mall

Let’s say the cost to develop this space into a retail strip mall would be $1,000,000, and the market value of this particular use of the property is determined to be $1,500,000. Here, the return is $500,000. 

Option 3: Luxury Apartments

Let’s say the cost to develop this property into luxury apartments is $1,500,000, and the market value of the completed project is $2,500,000. Here the return is $1,000,000. 

The maximally productive option might first appear to be option 3, as it nets a return of $1,000,000. However, the initial cost to develop this property is $1,500,000. Whether or not option 3 is actually the maximally productive option depends on the initial capital investment of the developers. This option might not be financially feasible for some developers.

Whether or not the use of a property is maximally productive is contingent upon the other constraints, too, like its financial feasibility and legal permissibility. 

Understanding Highest and Best Use

According to Roni Davis from First National Realty Partners, a commercial real estate investing company, “Calculating the highest and best use of a property is more complicated than it appears on the surface. Not only do the physical limitations of the property factor into the valuation, but the financial limitations of the developers, as well as legal restrictions ultimately determine the highest and best use of a property.”  

Guide – Purchase and Sale Agreements (PSAs)

1000 500 Sam Radbil

If you are gearing up to buy your first home, you’ll soon come face to face with an overwhelming number of legal forms, documents, and certificates. This article will guide you through one of the more important of those documents—the purchase and sale agreement. 

By the end of this article, you’ll know exactly what’s in a PSA, why PSAs are an essential part of purchasing a home, and who’s responsible for drafting it. 

Let’s begin with a definition.

Defining Purchase and Sale Agreements (PSAs)

In essence, a PSA is a legally-binding document that describes the terms and conditions of a real estate transaction. PSAs are drafted by a real estate agent or a lawyer—depending on which state the transaction takes place in—and signed by both the home seller and home purchaser.

Note that signing a PSA does not complete the purchase of a property. Instead, it simply outlines the terms, conditions, and contingencies both parties (the buyer and seller) must meet to avoid the risk of legal action.

Therefore, PSAs are like an official outline of the closing process. Signing a PSA starts the countdown toward signing the purchase agreement, which is the final document that completes the transaction. If the PSA is like the shot that starts the race, the purchase agreement is the finish line.

Now that we know what PSAs are, we can explore what’s in them.

What’s In a Purchase and Sale Agreement?

Different states will have slightly different requirements for what needs to be included in a PSA. Also, buyers and sellers might propose additional contingencies unique to a specific transaction. 

Usually, a PSA will contain the following items:

The Purchase Price

The purchase price establishes the amount of money the buyer will pay the seller in the transaction. However, most PSAs allow the purchase price to be changed if an appraisal comes back lower than expected or if an emerging issue with the property gives the buyer grounds to negotiate a lower price.

Barring a poor appraisal or sudden damage to the property, most purchase prices end up being the closing price.

Information Regarding the “Good Faith” Deposit

The “good faith” deposit is a promissory deposit that establishes the buyer’s intent to follow through on the purchase. PSAs outline specific details of the “good faith” deposit, also known as earnest money

PSAs will establish—

  • how much earnest money the buyer must pay
  • when they must pay it by
  • who manages the payment 

Additionally, the PSA will establish how much time the deposit holds for the buyer to complete home inspections and appraisals. It also outlines what scenarios allow a buyer to get their deposit back.

The Closing Date

The PSA will also establish a closing date,  which can be thought of as the finish line for the home buying process. Many affairs need to be completed before the closing date, such as the home appraisal, the home inspection, and the title search, among other things. 

Essentially, the closing date is a legally-defined deadline both parties must adhere to once the PSA is signed.

Information Regarding the Title Condition, Title Insurance Company, or Escrow Company

PSAs will also contain information on the title, how it must be transferred, how it is insured, and which company is overseeing this process. Title insurance companies or escrow companies can handle the transfer of the title. 

Depending on the state where the transaction occurs, the title’s transfer might occur at the agency or the property. All of these details are clearly outlined in the PSA.

Other Items That May Be Included in a PSA

Various Contingencies

PSAs will also outline how either party can legally back out of the contract at no additional cost. Usually, these contingencies involve appraisals or home inspections that reveal a lower price than expected or reveal a fundamental issue with the property. 

Other Documents

Certain addendums are often added at the buyer or seller’s request. These cover issues that a standard PSA might not address. For example, if the property has a septic tank, the buyer might request an addendum that requires the seller to perform a septic inspection by the closing date.

How Does the Signing Process Work?

According to Roni Davis, from commercial real estate investing company First National Realty Partners, “Usually, the buyer will send a signed PSA to the seller that contains all of the terms and conditions outlined above. If the seller likes the terms and conditions set out in the PSA, they will sign and return the PSA.”

However, buyers and sellers often negotiate on specifics back and forth by sending counteroffers until an agreement is reached.

How To Get Started in Passive Commercial Real Estate Investing

1000 500 Sam Radbil

Commercial real estate investing can be much hairier than residential. This we know. Permits, zoning issues, equipment, and material headaches, contractor disputes–it can be a lot to deal with. Thankfully, commercial real estate investing returns are normally much higher than residential real estate investing returns, making the slog to selling a property worth it in the end.

But, commercial real estate investing doesn’t need to be an active, all-encompassing part of your life. You don’t have to necessarily deal with all the paperwork, problems, and people associated with purchasing and managing a commercial property. If this sounds like something you’d be interested in, let me tell you about passive real estate investing.

What is Passive Real Estate Investing?

As an active real estate investor, you may be buying and rehabbing properties, managing tenants, handling maintenance, collecting rent, or any number of duties associated with managing a property.

As a passive real estate investor, though, you do little more than move money along from investment to investment. In passive investing, you do not actually work with the property you invest in, much in the same way people buying Coca-Cola stock do not gain employment at one of their bottling factories.

Passive real estate investors simply buy into a property as a silent partner. A real estate syndication company (more on them in a bit) handles the property, including selling, renting, and managing tenants. Passive commercial real estate investing, then (obviously), is passive investing principles applied to commercial real estate. 

Why Passive Real Estate Investing?

If you believe that time is the most expensive thing in the world (i.e., you can spend it but never get it back), then passive real estate investing may be the strategy for you. 

With passive investing, you do not have to: slog through hours of permit paperwork, deal with unruly tenants, rush to find maintenance men capable of fixing a leak, or deal with contractual issues regarding a property’s structural capabilities. The only thing you have to do is open your wallet in the right direction.

That doesn’t mean you can be hands-off with your investment strategy. Investors still need to practice due diligence when aiming for the right property. This means asking the right questions to the right people. 

Another reason you should consider investing in passive commercial property is the high cost to enter. Commercial real estate is pricey, and if you’re simply one individual attempting to purchase a property, you may find your money isn’t long enough to play the game. 

In this case, it’s almost essential to partner with a commercial real estate syndication company. These companies pool groups of investors just like you into one massive investment fund to purchase a property you usually couldn’t get on your own.

Additionally, if you have little knowledge of the housing and commercial real estate market, a syndication company may be a great way for you to dip your toes in the waters of commercial real estate investing. 

As an outside investor, you won’t be able to make major decisions regarding renovations and rental policies, for example, but you’ll be privy to the syndication company’s strategy. You’ll get inside baseball on what works and doesn’t work. Consider this your MBA in passive commercial real estate investing. 

Real Estate Syndication Companies 

A real estate syndication company is funded by a group of investors, like yourself, who pool their money together to purchase a commercial property. The real estate syndication company manages the commercial property, and the investors act as the silent partners.

There are several types of real estate syndication companies. It pays to understand the differences between them before deciding which fits your lifestyle and budget better. 

REITs

Real estate investment trusts (REITs) are specialized syndication companies. These trusts are not taxable at the entity level. That means that you’re taxed at the individual level at a much lower rate. If you invest in REITs, you reap the added caveat of tax benefits as long as the company complies with the requisite IRA rules.

There are two types of REITs: publicly and privately traded. 

  • Publicly traded REITs can be bought and sold by any investor with a brokerage account. The minimum investment is the cost of one share. These REITs are coveted by investors for their liquidity, low minimums, good returns, and passive income ability. 
  • Privately traded REITs offer the same tax advantages as publicly-traded REITs, but only “accredited investors” are welcome to purchase them. Accredited Investors must meet a minimum income, and net worth requirement before access to share purchases is unlocked.

Private Equity Commercial Real Estate Investments

Private equity firms are similar to REITs in that they pool investor resources to purchase commercial properties. But, they do not have the same tax benefits as REITs. Private equity firms also are not responsible for distributing a high percentage of income and profits. 

There are two kinds of private equity commercial real estate investing groups:

  • Funds are contributed to by investors, but that’s where their input ends. The private equity company decides what property to buy while investors stand back and hope for the best.
  • Deals are different than funds in that they include the input of the investors. Investors decide on the property first, then pool together their resources for the sole purpose of a commercial property purchase. 

Strategies for Passive Commercial REI

Here are a few tips and tricks for exploring a passive income commercial real estate investing strategy using a syndication company:

  • Utilize Facebook & Meetup. Facebook Groups & Meetup are great places to find real estate syndication groups. Peruse top posts, rules, and past meetups to get a sense of each group’s flavor. Once you find one you vibe with, connect with the group’s leadership to ask how you can get involved in future deals.
  • Try public records. CoStar public record lookup is a good resource for finding companies that own properties you prefer. Once you find the companies, you can Google their names to vet the list for companies you’d rather do business with.
  • Attend networking events and conferences. Networking events (online and offline) are great ways to find like-minded investors already locked into a syndication company. Pick their brains on which company is best for you or jump into their shared fund and start reaping the rewards. 
  • Ask questions. Some of the questions you should be asking your potential real estate syndication company:
    • Do you have testimonials from previous investors?
    • Have any syndication deals underperformed and why?
    • What class of properties do you deal with?
    • What is the average ROI (return on investment)?
    • How many years of experience in underwriting commercial properties does the company have?
    • What is the company’s investing model, and why?
  • Watch for warning signs. There are a few red flags you should be on the lookout for when vetting syndication companies:
    • Comps are unreasonably distant from property
    • Set aside reserves are not budgeted
    • Decrease of population growth
    • Decrease of rental growth
    • Absorption rates are low
    • Revenue growth is unnaturally over 2% to 3%
  • Compare offerings. When studying the “offering memorandum” of each company, compare fee and profit return structures. These vary from company to company. Asset Management and Acquisition fees should fall anywhere between 1% to 5%. Compare offerings, choose the company that best fits your pocket and financial personality, and off to the real estate races you go. Godspeed, young investor. 

Extra Costs of Buying a Home in 2021: What You MUST Know

1000 500 Taylor Witt

When buying a new home, it’s essential to factor in all the possible additional costs. These can add up quickly, so you should familiarize yourself with them as soon as you decide to search for a new home. Accounting for additional expenses in your budget will make the already stressful process of buying a home a bit easier. These are the extra costs of buying a new home that you need to know about. 

Property taxes

person holding paper near pen and calculator

As a homeowner, you’re required to pay property taxes. The property tax is determined by the city, township, or country where your new property is located (the effective average rate is 1.1% of the home’s assessed value).

Sometimes property taxes are easy to forget to include in your budget calculations as they’re often rolled in with your mortgage. 

Closing Costs

When the real estate transaction comes to an end, you’re required to pay a plethora of fees known as closing costs. To avoid unpleasant surprises, you should talk to your realtor and ask them about the specific closing costs. They usually include:

  • Lawyer fees
  • Cost of inspection
  • Document fees
  • Appraisal fees
  • Surveyance fee
  • Sales brokerage commission
  • Title cost
  • Mortgage application
  • Home warranty

Paying For The Escrow

Making escrow is an important part of the budget you need to buy a new home. Generally, buyers are asked to pay for escrow upfront to cover some costs (insurance, property taxes, etc.). 

Earnest Money

Earnest money, a form of security deposit made in large transactions such as real estate dealings, is paid upfront before filling out the paperwork. Since it’s a deposit, home buyers will receive the money-back once the transaction goes through. If the buyer should back out of the deal, they probably won’t get their deposit back. 

The amount of earnest money ranges from a few hundred to thousands of dollars; the precise amount ought to be listed in the contract. 

School Taxes

Homebuyers that have children who go to or about to start school are probably happy to pay more in school taxes if it ensures high-quality education for their children. Those who don’t have school-age children might want to look into what school taxes they’re expected to pay because it could be a deal-breaker. The amount of school taxes varies from district to district. 

Homeowner’s Insurance

Homeowner’s insurance is not that much of a surprise expense since banks and mortgage companies require it before issuing a loan.

Oftentimes homeowner’s insurance is included in monthly mortgage rates. It’s essential not to overlook this expense as it could go up or down depending on your needs. For instance, most basic homeowner’s policies don’t provide coverage against natural disasters like hurricanes, floods, or earthquakes. If you’re buying a house in an area prone to disasters, you’ll probably want to pay for extra insurance.

Interest Rates

There is no way around interest rates – they’re the inevitable part of buying a new home. The good news is that having a good credit card rating will get you a lower interest rate. 

Moving Costs

Don’t forget to account for all the moving costs. Moving vans are usually expensive, depending on how far your new home is. If you’re making a long-distance move, you have to think about moving costs upfront as they will likely cost you an arm and a leg. 

Utilities

Those who are moving to a bigger home need to consider that the utilities might cost a lot more than they’re used to. It’s important to consider costs for: 

  • Gas
  • Electricity
  • Sewer
  • Water
  • Cable 
  • Internet

Costs for installing Internet, cable, and other services can add up quickly, so you need to be aware of these expenses beforehand and make sure to include them when you’re planning your budget. 

Home Maintenance and Repairs

Depending on the state of the home you’re buying, you will need to invest a substantial amount into repairs and renovations. This is particularly true if you’ve purchased a fixer-upper. Even if your new home is in somewhat good condition, never underestimate the possibility of an extra cost appearing out of nowhere.

Some repair costs are not so expensive, while some might require you to cough up thousands of dollars. Furthermore, some are not that urgent, and some require immediate renovation, for example, if the roof is in poor condition, you will need to get on that as soon as possible. Repairs that cannot wait can end up costing you a lot more than you’ve hoped. 

That’s why it’s smart to always have a portion of your budget dedicated to the expenses that cover home maintenance and repairs. 

The Takeaway

Buying a new home will undoubtedly carry a myriad of unplanned expenses. By doing research and preparing yourself for additional costs, you’re staying ahead of things.

If you hadn’t thought about all the extra costs and how much they will take out of your pocket, perhaps you’re not quite ready to buy a new home yet. While you’re saving up more money, looking at homes in Minnesota, New York City or Las Vegas it’s the perfect time to take a look at some homes for rent.

Forever Home: A First-Timers Guide to Understanding Home Loans

1000 500 Taylor Witt

If you are considering buying your first home and have no or low credit, you may still be able to procure financing. This article will explain five loan programs for first-time buyers. Read on to find out whether you qualify!

Federal Housing Administration Loan

housing loan blocks on brown wooden surface

First-time homebuyers and those with no or low credit may be eligible for a loan that is guaranteed by the Federal Housing Administration (FHA). The FHA program was created in 1934 to allow lenders to relax certain criteria to broaden the pool of eligible home loan borrowers. 

Borrowers must have a steady income and provide proof of employment for the last two years to qualify for an FHA loan. That proof may take the form of pay stubs, income tax returns, and bank statements.

Currently, those with a credit score of at least 580 can qualify for an FHA loan with as little as 3.5% or the purchase price as a down payment. Those with a credit score between 500 and 579 will still qualify for an FHA loan but must come up with 10% of the purchase price as a down payment. All borrowers regardless of credit score must have less than a 43% debt-to-income ratio.

While the FHA makes mortgages available to more people, it imposes more requirements on the property purchased. For example, the property must be inspected and meet certain standards. It also must appraise for the purchase price. The borrower must certify that the property will be their primary residence. The FHA will not guarantee loans to purchase rentals or vacation homes.

There is an additional cost for those with low or no credit to procure a loan through the FHA. The FHA requires that borrowers purchase and maintain mortgage insurance. Mortgage insurance pays the loan should the borrower default. 

Veterans Administration Loan

A borrower who is serving or has served in any branch of the military and their eligible spouses may qualify for a home loan through the Veterans Administration (VA). 

Like FHA loans, VA loans are provided by private lenders such as banks and mortgage companies. The VA guarantees a portion of the loan, enabling the lender to provide eligible borrowers with more favorable terms such as a lower interest rate or a low or no down payment.

Home Purchase Loans through the VA

VA-guaranteed loans are available for homes for a service member’s or a veteran’s occupancy, as well as for the occupancy of an eligible spouse and/or dependent of active duty service members. 

To be eligible for a VA home purchase loan, a borrower must have a satisfactory credit score, sufficient income to meet their mortgage payments and other monthly obligations, and a valid Certificate of Eligibility (COE). Borrowers can apply for a COE here.

VA Interest Rate Reduction Refinance Loan 

An Interest Rate Reduction Refinance Loan (IRRRL), also called a Streamline Refinance Loan, helps current VA borrowers obtain a lower interest rate by refinancing their existing VA loan. 

Native American Direct Loan Through the VA

The Native American Direct Loan (NADL) Program helps eligible Native American Veterans finance the purchase, building, or renovation or improvement of homes on Federal Trust Land. NADL also can reduce the interest rate on an existing VA loan for eligible Native American Veteran borrowers. 

Adapted Housing Grants through the VA

The VA’s Adapted Housing Grants help veterans with a permanent and total disability incurred while in service to purchase, build, or adapt an existing home to assist them in living with their disability more independently. Common modifications to homes include building ramps and widening doorways to accommodate wheelchairs. 

In 2021, veterans with qualifying service-connected disabilities can get up to $100,896 through a Specially Adapted Housing Grant. Qualifying injuries include:

  • The loss or loss of use of more than one limb
  • The loss or loss of use of a lower leg;
  • Blindness in both eyes (with 20/200 visual acuity or less)
  • Certain severe burns
  • The loss or loss of use of one lower extremity (foot or leg) causing the inability to walk without the help of braces, crutches, canes, or a wheelchair

Only 120 veterans and service members can qualify for an Adapted Housing Grant based on the loss of one extremity each fiscal year. Those who apply but are turned down because the quota was met are encouraged to reapply the following year.

U.S. Department of Agriculture Loan 

According to David Offen, Esq., bankruptcy lawyer in Philadelphia, “The USDA Rural Development Guaranteed Housing Loan Program was created in 2017 to develop, maintain, and occupy eligible rural properties. Urban properties are not eligible, but there may be some opportunity in some suburban areas.”

The USDA issues mortgages to low- and very-low-income applicants purchasing eligible properties at interest rates as low as 1%. The income threshold for eligibility for direct loans from the USDA varies by region.

The USDA also guarantees mortgages issued by participating local lenders, similar to the way the FHA and VA guarantee home loans. The interest rate will be low as will the required down payment, however, those putting little to no money down will have to purchase and maintain mortgage insurance. 

Federal Home Purchase and Renovation Loans

There are four federal programs that allow borrowers, even first-time home buyers, to extend the amount they could otherwise borrow by the amount needed to renovate or improve the property.

The Energy Efficient Mortgage Program

The Energy Efficient Mortgage Program (EEM) allows a borrower to borrow more to purchase a home with energy-saving upgrades and green renovations.

203(k) Loans backed by the Federal Housing Administration

The FHA backs loans to borrowers who want to purchase a fixer-upper. 203(k) Loans are guaranteed in the amount the property will be worth once improvements have been made.

CHOICE Renovation Loan

Guaranteed by Freddie Mac, this conventional loan program allows borrowers to finance both the purchase and renovation of a property with a low down payment.

HomeStyle Loan

This is a conventional loan offered through Fannie Mae to finance the purchase of a fixer-upper as well as needed improvements with just 3% down for first-time buyers.

Visit the websites of the programs you may be eligible for, and talk with a local lender. Obtaining financing through one of these programs may allow you to purchase the home of your dreams.

Selling a Manufactured Home in a Tough Market

1000 500 Taylor Witt

A manufactured home is also known as a mobile home, depending on the year it was built. Basically, one can move a manufactured home or a mobile home around as they wish from one piece of land without breaking it up. While such a home might be useful for many people (a young couple, small families looking for a starter home, or someone who just loves traveling around), there might come a time when you want to move on from your mobile home by selling it. 

white camper trailer in between green trees

Selling a manufactured home shouldn’t be a difficult feat but the real estate market for selling such homes is still unpredictable. There are also loans and mortgages involved which many sellers may want to avoid. You can choose a cash buyer if a quick process is a goal but there are many options and avenues available today for transferring mobile homes from one land to another. 

Let’s discuss some of these now: 

Selling for Cash

It’s especially tempting to sell a manufactured home or a mobile home for cash. You get the money right away and will probably avoid a lot of legal trouble as well. However, you still have to verify that your mobile home buyer has the required funds before signing anything. Once both parties agree, you should get a deposit in hand. 

Approval from the community

The same precautions apply to other real estate aspects of selling a mobile home. For instance, if your buyer might need to obtain approval from the relevant manufactured home community, they should take that step as soon as possible. Make sure to structure the approval so that the deposit can be refunded if their application process is not successful. 

Moving the home from the land

The buyer might also plan to move the manufactured home away from the current land. In this case, you’ll have to get in touch with the park management to start the procedure. Most communities will require a notice of thirty to sixty days if someone wants to move a home out of their land. No matter what the situation is, you should ensure that your collaboration is with a trustworthy and sincere mobile home buyer. 

Selling through Payments

If you’re selling a manufactured home but don’t need all that money right away, selling a mobile home through payments is also a good idea. This step will turn you into a sort of bank but it’s still important to get a significant amount as the down payment from your buyer. 

The terms for this real estate agreement should also be outlined and understood by both parties well in advance. In the contract, make sure you state the amount of the payment and the duration of the payment terms. 

Staying away from risks

You might also choose to sell one or more homes to a housing community instead of any particular individual. In that case, you don’t really want your manufactured home moved away until the payment is completed in full. See that your agreement contract states this condition in no uncertain terms. A mobile home or manufactured home is at risk when it’s moved from the actual land. A lot can go wrong which is why you should practice some caution and ask a real estate professional for help. 

Selling to the Manufactured Home Community

Another avenue for selling a manufactured home is to have the manufactured home community as the buyer party. This is a logical option if the residents of your home want to move away. Most manufactured home communities would prefer that their homes stay in place, so they’ll probably be willing to buy you out. However, you still have to consider the pros and cons of choosing this process.

Pros of selling to the manufactured home community

If there are any manufactured homes for sale on their land, the relevant community would probably be willing to buy it very quickly. You get the money fast, and the buying party is a reliable one. It’s the same land you’ve probably dealt with before so you know that the home and the land are in good hands. 

Another upside is that the community will usually be the one taking care of any paperwork. The title transfer and other nuances can be bothersome. So, it’s nice to have a real estate manager who can take the responsibility off your hands. 

Cons of selling to the manufactured home community

On the other hand, selling a mobile home or manufactured home has many aspects. With the community, you might get a much lower offer than with some other party. If you’re in a hurry, you might have to make this compromise. 

If you do have time on your hands, it’s probably a good idea to hold off on the sale as much as you can. 

Selling to a Manufactured Home Dealership

Mobile home dealerships or manufactured home dealerships are familiar with selling and buying new or used manufactured homes. They might even take a used manufactured home as a trade-in for credit to purchase a new mobile home or manufactured home. In a way, it’s much like a car dealership that could exchange your old car for a new one at a reduced price. 

You might be on the lookout for a new mobile home. So, check out any local manufactured home dealership to see if they’re interested in a trade-in. Such dealerships might also consider buying used mobile homes and putting them on sale for their buyer list. This list usually includes investors or other homeowners like yourself. 

Pros of selling to a manufacturing or mobile home dealership

Just like selling to a manufactured home community, the main advantage you get by selling a mobile home to dealers is that it’s a quick process. You get the deal done and the money in hand relatively quickly. 

Cons of selling to a manufacturing or mobile home dealership

The main disadvantage of this step is that you get a lower offer than you initially expected. However, make the final decision after getting both the bad and the good about such a deal. 

Selling the mobile home to an Investor

If a manufactured homeowner is in a hurry to sell their property, whether attached to land or not, an investor might be the best way to go. 

Before you make up your mind, though, remember that investors are also interested in profits just like the communities and dealerships out there. With an investor, though, there might be some leeway to make the situation work for both parties concerned. 

Precautions about working with an investor while selling a mobile home

First of all, make sure that any investor you deal with is trustworthy. If they’re reliable and follow up on what they say or promise, that’s generally a green signal. 

In any case, you have to make it clear that the investor needs to get approval from the manufactured home community before taking ownership of the home. If they want to move the home away from the park, the management concerned should be on board with that decision. 

Finding Buyers

If you’re looking for mobile home buyers other than your own manufactured home community or a manufactured home dealership, you’ll have to be a bit proactive. Buyers for manufactured homes or mobile homes are certainly in the market. However, you’d probably have to go through at least one of the following steps to find them: 

Advertising offline

Once you understand the different kinds of buyers in the real estate market, decide how you want to sell. You can then start making signs and advertisements to find buyers. 

First of all, the front window of your manufactured home should have a ‘For Sale by Owner’ sign in it. The sign should have a valid number on it. 

Second, advertise through flyers, billboards, and any other physical form you can afford. You can also ask your social circle to spread the word. 

Advertising online

Your next step is to go online and list your manufactured or mobile home for sale on the relevant selling sites. Facebook is one good platform, Craigslist is another. Try out any other site that has good reviews about a mobile home and has worked for other manufactured homeowners in the recent past. 

Make sure you advertise in the right departments; if you’re selling the manufactured home on a payment contract, advertise your mobile home within the ‘For Rent’ section. The description could include a statement about rent to own mobile homes.

For a cash sale, advertise in the ‘For Sale’ sections on your chosen websites. 

The Takeaway

Selling a manufactured home requires a bit of know-how. So, it’s best to research your requirements and needs as much as possible. Several factors will contribute to this sale and taking a good look at your particular situation is essential. Get a real estate agent with the relevant experience to start with. That way, you’ll hopefully be sailing along to your next move in record time.

How to Approach Selling a Luxury Property in a Difficult Market

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Placing a luxury property on the market is a lot different to listing a less expensive one. Just fixing the main cosmetic issues won’t necessarily address the concerns that prospective buyers may have in this higher price range. Here is how to approach selling a luxury property in a difficult market. 

Oak Alley Plantation, Southern Plantation, Mansion

Choose the Right Season to List Your Property

A waterfront property that’s listed when the weather is blustery with sand blowing up into the air isn’t going to be well received by potential buyers. Similarly, homes that look delightful with the fall colors may not be as attractive in springtime. 

Choosing the best season to list the property is half the battle. Failing to take this into consideration could lead to the home getting poor reception. Then, when the listing has been up too long, it becomes harder to sell as people start to question what’s wrong with it. By listing at the right time, you can avoid these potential pitfalls. 

Deal with Realtors That Already Handle Luxury Homes

While a newer realtor may be interested in picking up the listing and running with it, that’s not always the best move. It’s also an issue if your home sits in one price bracket, but they’ve only previously handled smaller transaction values.

Their contact list is likely to be limited to the lower end, which likely will restrict the interest they can generate and offers they can procure. 

Get the Staging Right

If the home has recently been renovated, but it’s not seen plush furnishings added or finishing touches made, that could be a problem. Plans may have caused you to make a late decision to put the house on the market even though it’s technically not ready to show. 

One way to get around this is virtual staging. This is the idea of replacing photographic visuals with a mixture of real shots of the interior coupled with imaginative staging elements. This is done by removing objects from the image and adding in furnishings digitally to complete the final presentation. 

Virtual staging is an affordable way to provide excellent new visuals without the need for physical staging. At a time when some sellers wish to limit the number of strangers visiting their homes, technology has come to the rescue. 

Accept Price Guidance from an Experienced Realtor

When selling a luxury piece of real estate, you may have a price in mind. Nevertheless, what your home can command currently on the market may vary markedly from your golden number. 

It’s important to listen to an experienced realtor on pricing. They have access to recent comps in the market. Even without those, they should have a good idea about valuations. When they advise what they feel the home is worth, asking them to list it significantly above this level risks the home going unsold.  

In a difficult market where homes aren’t selling as quickly, and prospective buyers are making lower offers, patience is required. Also, listen to the realtor because they usually know their job well, and given that they stand to gain from the sale too, they’re unlikely to steer you wrong.

contract for deed financing

Should You Consider Contract for Deed Financing in 2021?

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Interest rates are at record lows. Housing prices are at record highs. Multiple offers are the norm in some cities. You really want to buy a home, but the last time you tried to get a mortgage, you were denied. Worse, with COVID-19, a weakening stock market, an uncertain future, and post-election trauma, lenders are clinging to tight underwriting standards.

If you have a low credit score combined with some serious recent credit dings, conventional financing could be very difficult to obtain. Let’s look at some alternatives that can get you into your own home in 2021, including contract for deed.

Find Someone to Cosign

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If you can’t qualify for a mortgage, find someone that can. This might be a relative, a friend or even your employer. A person with excellent credit that will agree to be on the hook for your mortgage can be the answer to your credit difficulties. Rocket Mortgage puts it best as they say, “When someone cosigns on a mortgage loan, it means they agree to take responsibility for the loan if you default. Cosigning on a loan isn’t just a character reference.

It’s a legally binding contract that makes another person partially responsible for your debt.” Just make sure that your prospective cosigner understands their legal obligation.

Think About a Duplex

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Sure, you want a single-family home, but checking out a multifamily situation might be an eye opener. With a duplex you can rent the other side of your home and possibly collect up to half—or even more—of your monthly mortgage obligation. If you can show that you only need to come up with $1000 of your own money to make your $2000 monthly mortgage payment, you may be able to qualify without a cosigner.

The Simple Dollar expounds on this as they mention, “One reason buying a duplex is such an appealing idea is that there’s a lower barrier to entry than if you were buying a free-standing rental property. We already mentioned how you typically need at least 20% to put down on a single-family investment property, but the rules are a lot different if you’re buying a property to live in yourself.”

Don’t Leave Deals on the Table

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Research all of the financing avenues that may be available to you. If you are a veteran, for example, you can get a no-money-down mortgage even in you have a very low credit score. VA loans are great if you are a first-time home buyer.

In addition, bet you didn’t know this, courtesy of the USDA:

“The USDA Loan is a mortgage option available to some rural and suburban homebuyers. USDA Home Loans are issued by qualified lenders and guaranteed by the United States Department of Agriculture (USDA). USDA Home Loans are particularly favorable to those living in rural or low-income areas. USDA Loans offer $0 money down, lenient eligibility requirements and competitive interest rates – due to the loan being guaranteed by the USDA.”

Rent-to-Own

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In states that allow it, you might want to look at a rent-to-own deal. In these situations, someone that owns a home free and clear will rent it to you and apply part of your monthly rent to a future down payment. At some time, you will be able to purchase the home from the owner, and many times the owner will act as the bank and finance the property. While this arrangement does work for some, there is room for difficulty with this arrangement. Sometimes unscrupulous owners will enter into a deal they know will be difficult for the tenant to keep, i.e., an inflated monthly payment, and if a late payment occurs, that can be quickly followed by an eviction. In these cases, all down payment money is usually lost, and the owner then looks for another victim.

Contract for Deed

person writing on paper

If your credit is just not up to par, if you can’t find a co-signer, if duplexes aren’t your thing, and if rent-to-own sounds too risky, consider contract for deed. In some states like Minnesota, contract for deed deals have been utilized for years. The Morris Law Group explains the process well:

“Instead of purchasing a home with a mortgage, the buyer agrees to directly pay the seller in monthly installments. The buyer is able to occupy the home after the closing of the sale, but the seller still retains legal title to the property until all payments have been made under the contract; actual ownership passes to the buyer only after the final payment is made. Contracts for deed have long been a financing option for property transactions between family members or friends. Some nonprofit housing organizations also use them to help low-income families find a path to homeownership.”

The C4D Crew takes this process a step further as they will work with you when you find a home you want to buy. C4D will buy the home you are interested in, and then they will sell it to you on a contract for deed basis. You don’t have to find a free and clear home, nor do you have to convince a reticent homeowner to enter into a contract for deed deal. These guys do it all.

Of course, your credit will need to be checked, but C4D understands that bad things happen to good people and they can look past issues like tax problems, divorce, job loss, and even a recent bankruptcy.

Yes, if you can find traditional financing that’s great!  But if you can’t, and you want a legitimate way to own your own home, you really need to consider contract for deed financing.

real estate investing

6 Encouraging Reasons to Invest in Real Estate During COVID-19

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While many people think that the stock market has been the only investment game in town during COVID-19, savvy investors are looking for real estate opportunities. While the current set of economic conditions is certainly unique, there are six great reasons to invest in real estate during the pandemic.

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Interest Rates

Mortgage interest rates are at record lows, and buyers with good credit can get a rate below three percent. Rates of six percent or more were not unheard of before the Great Recession that began in 2008, and the difference between a $250,000 loan at six percent and one at three percent is a healthy $400 monthly.

person using MacBook pro

While it’s true that rates for investors may be a bit higher than those for would-be homeowners, the purchase of a duplex is a great way to capitalize on these low rates since a duplex would be owner-occupied and therefore more easily qualify for better loan terms.

The Rental Market is Stable

Top apartment rental site ABODO reported in September, “Last month we said, until there is a therapeutic treatment or a proven COVID-19 vaccine, we’re predicting a stable rental market at best, and that is what we saw in September. There are some hopeful signs that the pandemic is easing in some parts of the country, and the much-anticipated vaccine seems to be moving to fruition. That said, even if the virus disappeared tomorrow, we still see a stable apartment rental market because we just do not foresee things returning to normal for a while.”

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A stable market means that investors can get the rents they need to cash flow their units. And if you’re prudent and careful as you screen tenants, you can help avoid the perils of the eviction process.

There Are Good Deals Out There

If you live in Austin, TX where Tesla just announced that it is building a new plant, you can forget about finding bargains. We found the following in a recent Boston Globe article, however, and this is beginning to ring true in some areas.

“As sales slump, home prices will fall later this year and early next in the ‘low single digits’’ nationwide, according to Mark Zandi, chief economist at Moody’s Analytics. The declines may be more pronounced in West Coast markets, which were already overvalued relative to incomes, he said.”

Buyers need to be patient, but anyone that is selling their home during the pandemic probably has to sell it, so discounted properties can be found.

Values are Values – No Matter What

An investor who wants to cash flow $400 per month on a four-family and is able to find the property that makes that happen should pull the trigger regardless of the state of the housing market. If a low-interest rate can be locked in, and if property tax rates look stable, there’s no reason to wait.

The Worst May Be Over

At this writing, it doesn’t look like there will be mass lockdowns again in the U.S. The idea behind the first wave of lockdowns was to flatten the virus’ curve thereby not overwhelming the hospitals. While the site of refrigerated trucks commandeered to hold dead bodies was chilling both literally and figuratively, the health care system has been able to back off from that Armageddon-like scenario, and hospitals seem to be handling their COVID-19 patient load. Even if the pandemic trudges along, the economy may have seen its lows and things may just stay stagnant until a vaccine, therapeutic treatment and/or true herd immunity crowds out the pathogen.

Real Estate is Adapting

Some industries like restaurants, bars and caterers have been severely injured by the pandemic. In fact, the bedrock of many catering operations–the buffet–has been altered, transformed and may no longer be viable as a method to serve food.

The real estate industry, however, has stepped up to their own plate with an array of technological innovations like virtual tours. Landlords, for example, can rent apartments without having to physically show them, and that adds a sense of security to prospective tenants. The real estate industry has found a way to thrive even during this crippling pandemic.

Investing in real estate shouldn’t only be reserved for good times. And as shown above, there are many solid reasons to become a real estate investor even during COVID-19.

Red Flags to Look for When Buying a House

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Shopping for a new home is one of the most exciting and stressful life events. While it’s certainly fun to check out the different houses and imagine yourself living in them, at the same time, finding that “perfect” house can be daunting, time-consuming, at times disappointing, and downright stressful. Of course, the best way to ensure the process goes smoothly is to be specific in what you’re looking for, the budget you are working with, and what you will and will not accept. 

Brown and White House Beside Trees

With that said, here’s a look at red flags you will want to be aware of before making an offer on a home.

A Lot of Homes for Sale in the Neighborhood

While it may seem like a jackpot that there are so many homes to choose from in a particular neighborhood, this can also be a red flag. Why the mass exodus, what is prompting everyone to sell at the same time? Sure it could be totally harmless and nothing to the story at all, but at the same time, it’s worth a little investigating and asking questions. This is when it can be helpful to work with a realtor, as they can offer some insight.

The Home Is in Need of Major Repairs

While there are certainly those that don’t shy away from a DIY challenge, other buyers want to be able to move in and have things relatively ready to go. If there are massive repairs needed, then you’re going to need a budget to get it done. Some of the most costly projects can include new windows, a new roof, foundation issues, and a new furnace.

Is There Lead Paint in the House?

If you’ve been looking at older homes and they tend to fit your personal style a little better, then you’ll need to be hyper-aware of the potential of lead paint in the home. Basically, any of the houses built before 1978 here in the United States would have contained at least traces of lead in the paint that was used. Lead-based paints were the norm back then, but now people know much better.

Today, people realize just how hazardous this substance is to have in the house and as zotapro.com points out, that it needs to be removed properly, safely, and professionally. While it can certainly be remedied and the house will be made safe to live in, it’s something you at least need to be aware of since it will be a priority to get done.

Signs There Is an Infestation of Pests

Another red flag is a sign the house has an infestation problem. That could be an issue with bugs, rodents, or any other type of pest. It will then become your problem and your expense and trouble to get rid of them and repair any damage that may have been caused. 

Go Into the Deal Well-Informed

Keep in mind what is a red flag for some may not be for you. It’s all about being aware of the situation you are entering so that there are no surprises after the fact.