WIAcademy EducateBlog

In today's real estate market, one of the most challenging aspects of investing is selling a property. In most parts of the country, it is a buyer's market. Homes are selling, but many homes are on the market for months before a buyer comes along who is willing to make an offer and who can actually qualify for a loan.

In order to sell properties, sellers are making concessions, such as lowering the asking price, providing home warranties, paying the buyer's closing costs, and offering seller financing. In this buyer's market, investors need to develop a clear exit strategy before they buy a property. To sell a property quickly, they need to sell it at a large discount, meaning that they must buy at an even bigger discount.

There are many different ways an investor can sell a home that he or she has rehabbed. Traditional selling methods include:

• Selling a property oneself through the use of yard signs and newspaper ads to advertise a property as FSBO (for sale by owner)
• Listing the property with a real estate agent, who will put the home in the Multiple Listing Service (MLS)
• Featuring the home in one of many for-sale-by-owner publications. Some of these services will also enter the home into the MLS
• Selling the property through the use of a buyer’s list (one of the best ways to sell a home)
• Selling the property by using another investor’s buyers list, or perhaps using the list of someone in your local real estate investors’ club holding a round-robin auction (a method of selling homes which has become very popular and if done right, can be very successful)
• Handing out fliers in the neighborhood asking the neighbors to invite their friends to look at the home
• Selling the home to another investor
There are other creative ways to sell a home, like selling raffle tickets and holding a drawing (if it's legal in your state). I've also seen sellers include an expensive sports car with the purchase of a high-end home. Sometimes it works.

Another way to sell your home is to auction it on eBay. You could call it the ultimate garage sale—you just include the home with the garage.

eBay Real Estate is huge, yet many people don't realize that you can actually auction a home on eBay. It is a good way to give your home international exposure with minimal expense, and it will typically yield a good selling price.
Before trying to auction your home on eBay, you need to understand the rules. First and most importantly is the fact that, due to the wide variety of laws governing the purchase and sale of real estate in the different states, eBay Real Estate auction-style advertisements of real property do not involve legally binding offers to buy and sell. Instead, eBay Real Estate auctions are simply a way for sellers to advertise their real estate and meet potential buyers. The winning bid does not constitute a binding contract, so if your winning bidder decides they don't want the home after all, you can merely report them to eBay and leave negative feedback for them.

Don't let that discourage you; eBay does its best to expose potential buyers to the rules and potential buyers are asked not to bid unless they intend to complete the purchase of the advertised property. Be aware that eBay's policies regarding real estate are different than its other policies. The full text of their policies and documents can be found by visiting http://pages.ebay.com/help/policies/real-estate.html.

Once the auction is over, it is the responsibility of the seller and the highest bidder to get together (usually through express mail and/or the Internet) and sign a formal real estate purchase contract. From that point on, the transaction is similar to any other real estate transaction. The purchase and sale agreement spells out the terms and conditions of the sale and specifies the closing date. The transaction is closed offline at a settlement agency, such as a title company.

Selling your home on eBay is quite different from traditional methods, but it has lots of advantages. First, you don't have to spend countless hours showing the home. No more rush cleanups when your real estate agent calls and wants to show the home in an hour! You prepare your home once, stage it properly, and place information and photos in your eBay ad, which will increase buyer confidence and generate more interest and more bidders, resulting in a higher winning bid.

What are the items you should include in your listing? Remember, your eBay listing is all that your prospective buyers are going to see, so it must be good. It has to be overflowing with information that is easy to read, and must look great. In designing your listing, put yourself in the shoes of a buyer. What would you want and need to know about a home before you would be willing to bid and buy, especially without being able to see it in person? At a minimum, include:

• Videos and photographs of the home (interior and exterior), the yard, the neighborhood, the views (if any), and anything nearby that might help sell the home (for example, schools and stores). You can do this yourself, or you can hire a professional.
• A home inspection report – this will cost you a few hundred dollars, but it gives your listing more credibility
• Floor plan of the home and a layout of the yard, showing the location of the home in relation to the lot boundaries
• Preliminary title commitment
• Rules, regulations, and bylaws if the home is part of a private subdivision or is a condo
• Mold disclosures, if required by your state
• Copy of the purchase and sale agreement you want the buyer to sign
• Details of any seller financing you might be offering
• List of the things you love about the home
Other items you could include that may help you sell your property:
• MapQuest map or Google Earth map showing the location
• Neighborhood statistics
• A current appraisal or recent CMA (comparative market analysis)
• Paid real estate tax notice
• Closing-cost worksheet
• Any concessions you are willing to make to help sell the home (for example, appliances you are leaving or yard-care equipment)

Be creative and have fun with your listing. If your extra effort attracts just one extra bidder, it could raise the final bid price by thousands of dollars.

One of the keys to getting a lot of people to look at your listing is to have a very low starting-bid price. There are entire books written on eBay-auction strategies but, to summarize, what you are trying to do is attract people's attention. You want to pique people's curiosity and get them to say, "No way! They can't seriously be selling a home that cheap." If a low-starting bid gets someone to look at your listing, you potentially have one more bidder who could turn into a buyer.

So how low is low? Try $9.97. It's crazy, but you have to trust the system. You have to believe that hundreds, even thousands of people will see your listing and, among them, will be people who will bid the price up and you will sell it for its fair market value.

For the faint hearted, you can always set a reserve price with eBay. No matter where you start the bidding, if a bid doesn't meet your reserve price, the bidder will be told that their bid doesn't meet the reserve amount and, if they want eBay to post a bid, they will have to bid higher. Details on eBay's reserve price policies can be found at http://pages.ebay.com/help/sell/reserve.html.

Another advantage of selling your home on eBay is that you can eliminate most, if not all, of the contingencies that you get with a traditional offer on your home. In a traditional offer, the buyer makes an offer and then starts their due diligence. The offer is often subject to a home inspection, to the buyer getting approved for a new mortgage loan, and to an attorney's review of the documents. This puts the buyer in control.

When selling on eBay, if you have done a good job of putting a wealth of information in your listing, you can reasonably ask and expect all bidders to have looked at the home inspection report, reviewed all of the documents, had their attorney review the documents, and looked at the photos to see the condition of the home. Thus, it is not unreasonable to expect the highest bidder to sign a purchase and sale agreement with no contingencies. Then, if the deal does fall through on the buyer's end, you usually will be able to keep the earnest money for damages. (Always have your attorney review all documents to ensure you are in compliance with all legal requirements in your state.)

Knowing how to sell (or buy) a home on eBay will increase your options in selling your property. So what are you waiting for? Log onto eBay Real Estate today, learn the rules, and have your own ultimate garage sale!

Posted 11:04 AM | Permalink | Comments (0)

We have all seen the late-night infomercials touting houses for sale for pennies on the dollar. The infomercial tells us that if we simply pay the back taxes on a property, we too can be proud owners of new homes. It sounds easy, almost too easy. The question is, can you really get possession of a home by just paying the past due taxes of a few hundred to a few thousand dollars? The answer is yes, you can. However, as you probably suspected, getting title to a property just by paying the back taxes is not quite as easy or risk free as the infomercials make it sound. Just like any other area of real estate investing, you must be educated and know what you are doing in order to be successful. You must understand the rules and the risks of the game before you can play and expect to win.

First of all, let’s discuss tax liens and tax deeds. As we all know, governments (local, county and state) use taxation as a way to raise capital to fund their operations. One of the major taxing methods is the real estate property tax. Basically, the government charges property owners a yearly fee that is determined by the local tax rates and the assessed value of the property. If the property owner doesn’t pay the property taxes by the due date each year, then the government places a lien against the property for the amount of the defaulted payment. The tax lien clouds the title of the property so that it cannot be sold without the government getting paid the taxes due on the property.

It’s important to note that tax liens take precedence over all other liens, and the government can and will seize and sell property for unpaid taxes. Generally, liens on a property are given priority based on the date the lien is recorded. The first lien recorded is in the first position, the second lien recorded is in second position, and so on, but not so with tax liens. Tax liens, no matter when recorded, can jump to the front of the line and claim first position, ahead of mortgages and other liens. This is one reason banks like to collect property taxes with the monthly mortgage payments and place them into an escrow account. The bank then pays the property taxes when due each year, eliminating the possibility of a tax foreclosure by the government.

In each of the states, after a tax lien is placed on a property, the owner is given additional time to pay the back taxes (from six months up to four years, depending on the state). If the back taxes are not brought current by the deadline, the taxing authority (usually the county) will hold a tax sale and auction off either a tax lien certificate or a tax deed. Twenty-eight states use tax lien certificates and the rest use tax deeds. However, a few states use a combination of tax lien certificates and tax deeds.

What is the difference between a tax lien certificate and a tax deed?

Tax Deeds - In states that provide tax deeds to the bidders at a tax auction, the deeds to the property are actually issued at (or right after) the tax sale. The deeds either wholly or conditionally transfer title to the subject property from the tax-delinquent owner to the successful bidder. The type of deed that is issued is different for each state, but in most states it is a non-warranty deed. This means that there is no warranty as to the condition of the property, no warranty of the condition of the property title, and no guarantee that the property even exists.

So, just because you get the deed to the property doesn’t mean you can count on moving in or selling the property the day after you purchase it at the auction. Most of the time you will have to go through a quiet title action to clear the title before you can sell. And several states give the original owner a redemption period in which they can still reclaim the property, even after you have been given the deed. The rules which govern how the redemption takes place and how much the original owner would have to pay to reclaim the property vary from state to state and even county to county. That is one reason it is critical that you understand all the rules and regulations governing tax liens and deeds and the state’s statute on redemption in a specific state and county before you bid at the auction!

Tax Lien Certificates - In the states that use tax lien certificates, the title to the property is not given to the successful bidder. Instead, they are given a tax lien certificate that creates a first-priority lien on the property with the right of foreclosure – again, subject to the state’s statutory right of redemption. The buyer of the certificate pays all the back taxes that are due and other expenses. They must then wait through the redemption period (six months to four years). In order for the delinquent owner to redeem the property during the redemption period, they must pay the certificate holder the full amount that was paid for the tax certificate, along with interest, any penalty fees, and sometimes expenses. The interest rate on the tax lien certificates is set by each individual taxing authority and ranges from six percent to 24 percent. With penalty fees in some states, the overall interest on tax lien certificates can reach upwards of 50 percent. That is not a bad return on a relatively safe investment, considering what rates banks are paying on savings these days.

Most people who purchase tax lien certificates do so for the higher rate of return they can make on their investment and not to gain title to the property. Statistically, more than 95 percent of tax lien certificates get redeemed. Very few people will let their home ownership slip away for just the back taxes. However, it does happen. So a very important rule is to never buy a tax lien certificate for a property that you would not want to own. You only want to bid on properties that are saleable and/or rentable because, if the certificate does not get redeemed, your only remedy to reclaim your investment is to foreclose on the property. The property is the security for your investment. But you need to go through the foreclosure process in most states to get the deed to the property. Again, it is critical to know the state’s rules and regulations that govern how the foreclosure is handled.

If your goal is to get a good interest rate and great return, you should probably bid on nice homes in nice neighborhoods, preferably owner-occupied homes. Owners of these properties will most likely redeem the tax lien certificates. But if you want to gain title to the property, then you should concentrate on distressed homes in distressed neighborhoods. There is a better chance of actually obtaining title to these properties in the long run, especially if they are really rundown, vacant, abandoned, neglected and/or owned by an out-of-state owner.

Which states offer tax lien certificates?

The states which offer tax lien certificates and the interest rates required for certificate redemption are shown in the following list. However, interest rates could be different if there have been any recent changes in the state statutes.

State Interest Rate

Alabama 6%
Arizona 16%
Colorado 10%
Florida 18%
Illinois 18%
Indiana 10% to 15%
Iowa 24%
Kentucky 12%
Louisiana 17%
Maryland 12% to 24%
Massachusetts 14% to 16%
Mississippi 17%
Missouri 10%
Montana 10%
Nebraska 14%
New Hampshire 18%
New Jersey 20% to 24%
New York 10%
North Dakota 9% to 12%
Oklahoma 8%
Rhode Island 6% to 18%
South Carolina 8%
South Dakota 12%
West Virginia 12%
District of Columbia 18%

Which states offer tax deeds?

The following states sell tax deeds: Alaska, Arkansas, California, Idaho, Kansas, Maine, Minnesota, Nevada, New Mexico, North Carolina, Ohio, Oregon Pennsylvania, Texas, Utah, Washington, and Wisconsin.

Some states have laws that allow for both tax deed and tax lien sales and it may vary from county to county within the state. Connecticut, Florida, Massachusetts, Michigan, Nebraska, New Hampshire, New York, North Dakota, and Vermont are the states that can sell both tax lien certificates and tax deeds. You will need to check with each specific county in each of these states in order to determine what is being sold at their tax sales.

Which states have redeemable tax deeds?

Some states sell redeemable tax deeds. The successful bidders in these states are issued a deed to the property, but there is a period of time (the redemption period) during which the delinquent taxpayer can reclaim (buy back) the property by paying the amount that was bid plus a prescribed penalty. After the redemption period is over, if the owner hasn’t reclaimed the property, the winning bidder can obtain clear title to the property, usually through a quiet title action (a court action to establish ownership of the property). States that sell redeemable tax deeds are Connecticut, Delaware, Georgia, Hawaii, Rhode Island, Tennessee, Texas, and Vermont.

What are the various bidding methods used by different states?

Make sure you understand the bidding process and how it works in your particular county. There are several different techniques that are used to determine the winning bidder for states auctioning tax lien certificates:

• Bidding the interest rate down. In some states, like Florida and Arizona, the bidding starts at the maximum interest rate set by the statute and each bidder bids a lower interest rate. For example, in Arizona (as of this writing) the maximum allowable interest rate for tax-lien certificates is 16 percent. Potential certificate buyer’s bid 15 ½, 15, 14 ½ percent, etc. until the lowest interest rate someone is willing to accept is reached. That person purchases the certificate at the ending bid rate. If the certificate gets redeemed, the delinquent taxpayer still must pay the full statuary rate, and the county keeps the spread.
• In some states, the auctioneer is auctioning a percentage of interest in the property in the event the certificate is not redeemed and the certificate owner has to foreclose on the property. In other words, the bidders start bidding 99 percent, 98 percent, 97 percent, etc. until the lowest percentage of interest someone is willing to accept is reached. In the event of a foreclosure, the certificate owner could own anywhere from 99 percent down to one percent of the property, compared to the property owner’s one percent to 99 percent. Under this system, the bidders are looking to get the statutory rate from a redeemed certificate and not planning on a foreclosure. There is some risk involved, however, as there is with any investment, if the certificate is not redeemed. You just need to know the rules and the level of risk you want to take before getting involved in tax lien investing.
• Other states, like Colorado, use a premium bid system. In states using this system, the law allows the face amount of the tax lien certificate to be bid up. In other words, there is a statutory rate of interest that is paid on the face amount of the certificate, but the bidder may pay more than the face amount for that certificate in order to win the bid. In some states, the successful bidder gets this premium back if the certificate is redeemed and in other states, the successful buyer does not get the premium back and the county keeps the premium amount. Know the rules before you bid.

For most states that are selling tax deeds, the auction is like a typical auction where the deed will go to the highest bidder (highest bid over the taxes due). Some states, however, also use sealed-bid type auctions, where there is a deadline to submit the bid and all bids are then opened and the highest bid gets the deed.

In the next article on tax liens and tax deeds, we will discuss several additional items:

• Where is the best place for you to invest in tax liens?
• Should you invest in tax lien certificates or tax deeds?
• Advantages of buying “after” the tax auction.
• The importance of doing due diligence on tax lien properties.
• Buying tax-liens online.
• How to take a tax lien vacation.
• Where to find information on the thousands of tax sales being held in counties all across the country.

As you can see, to be successful in investing in tax lien certificates or tax deeds, you need to know what you are doing. Knowing the rules of the game is one of the most important factors to successful investing in tax liens and/or tax deeds. It is a great game, with lots of money to be made, but you must do your homework before you play or you could get hurt.

Posted 10:13 AM | Permalink | Comments (0)

The price you pay for buying (or receive for selling) an option is often referred to as the “premium.” The premium of an option can be divided into two parts: intrinsic and extrinsic value.

Intrinsic Value:

Intrinsic value or IV can be defined as the amount an option is in-the-money. The deeper in-the-money the option, the more IV it possesses. For a call option, the formula to calculate IV is: stock price minus strike price. For a put option, the formula is: strike price minus stock price. Let’s practice calculating IV on stock XYZ, currently trading at $50. Suppose the 45 calls are trading at $7.50. To calculate how much IV is in this call option, we would plug the stock price (50) and strike price (45) into the aforementioned formula: 50-45= 5. Thus the 45 strike call has $5 of intrinsic value. This should be quite intuitive as the option is indeed $5 in-the-money. Now let’s look at a put option by calculating the amount of IV in the 60-strike put, currently trading at $11.75. Once again just plug the stock price (50) and the strike price (60) into the put IV formula: 60-50 =10. There is $10 of intrinsic value in the 60 put because it is $10 in-the-money.

Because intrinsic value is the amount an option is in-the-money, at-the-money and out-of-the-money options do not have any intrinsic value. The one and only variable that will influence how much intrinsic value your option has is the underlying stock price. Suppose you currently own an in-the-money call option. As the stock price rises and your call moves deeper in-the-money it will accrue more IV. Conversely, as the stock price decreases your option will become less in-the-money (and eventually out-of-the-money) causing it to lose IV. At expiration the premium of an in-the-money option is equal to its intrinsic value.

Extrinsic Value:

Extrinsic value or EV is the amount of money an option is worth over and above the IV. EV can be thought of as the amount of money option buyers pay for time and implied volatility. EV is often referred to as time value. Generally, the more time an option has to expiration, the more EV it possesses. The formula to calculate EV is: premium minus intrinsic value. Let's compare a one-month 45 strike call option to a six- month 45 strike call option on a $50 stock. Because both options are $5 in-the-money they possess the exact same amount of intrinsic value. However, that doesn't mean they will be worth the same amount. Since the six-month option has more time to expiration it will invariably posses more extrinsic value. Let's check:

Stock XYZ @ $50
1 month 45 call premium = $6.50
Intrinsic Value = 50 - 45 = $5.00
Extrinsic Value = 6.5 - 5 = $1.50

6 month 45 call premium = $11.00
Intrinsic Value = 50 - 45 = $5.00
Extrinsic Value = 11 - 5 = $6.00

As you can see the six-month option has four times as much extrinsic value ($6 vs. $1.50). Implied volatility is another variable that influences the amount of extrinsic value that an option contains. If we were to compare two-similar options (same strike price, same time to expiration, but different underlying stock), one trading at 100 percent implied volatility and the other trading at 25 percent implied volatility. Which do you think would contain more extrinsic value? If you said the option with 100 percent implied volatility you are correct! As implied volatility increases, options accrue extrinsic value, as implied volatility decreases, options lose extrinsic value.

Hopefully you know by now that options are decaying assets and lose money as time passes. It is crucial to understand the differences between intrinsic and extrinsic value because it aids in measuring exactly how much value your option will lose due to time decay. Options don't lose all of their value at expiration; rather they lose all of their extrinsic value. Let's look at a covered call example to illustrate:

Suppose you buy a stock at $50 and sell an in-the-money 45 strike call for $6. Some traders may think that they can make $6 of profit in this trade since that is the amount of premium they received for selling the call option. That would be an incorrect assumption! The 45 strike call option possesses $5 of intrinsic and only $1 of extrinsic value. As a result, your max profit is only $1, not $6! Assuming the stock stays at $50 or above, only the $1 of extrinsic value will erode out of the option premium as time passes, not the $5 of intrinsic value.

Although we used a basic covered call in our example, differentiating between intrinsic and extrinsic value is important in any type of options trade. Making it a priority to grasp the nuances of intrinsic and extrinsic value will assuredly help in understanding more advanced option strategies.

Posted 10:01 AM | Permalink | Comments (0)

It doesn’t matter if you are making your debut in the world of entrepreneurship or already own a successful brick-and-mortar or home-based business, there are numerous advantages to running an eBay business.

The overhead of running an eBay business is extremely low. Since eBay is a wildly popular site, you will not need to do too much to market yourself, at least not in the way of traditional advertising. Customers are already drawn to the site; therefore, you can just focus on catching their eye once they stumble across your listings. Additionally, with all the tools available to eBay sellers, you will likely be able to effectively run a profitable business without needing to hire employees, at least in the early stages.

Getting Started

The first step is deciding what you will sell. First of all, you must know what items are prohibited on eBay. Listing items that are off-limits for the site will result in your auction being cancelled and possible disciplinary action being taken against you. Refer to the Rules & Policies page of eBay’s Membership & Account section for a complete listing of banned items, as well as items to which special rules apply.

It is also important to choose a product which you are knowledgeable about, particularly when you are first starting out. You will have a better idea how to price the item, how to describe it and answer the many questions buyers may have about the product. If you encounter a deal on merchandise that will make you a profit that is too good to pass up but you are inexperienced in such items, do some in-depth research to bring yourself up to speed.

Product Sourcing

Once you have decided what to sell, you must find a product source. Ideally, you would find a reliable source from which you can expect a steady stream of discounted merchandise that you could then sell at a profit. However, this is often easier said than done. Start by doing an online search for discount merchandise, special bulk pricing, closeout sales, and liquidations. You could also contact manufacturers or wholesalers and inquire what their bulk discounts are. You may even be able to find a company who is willing to work out a drop-shipping arrangement with you, meaning that you would not actually have to store or ship inventory. You would merely serve as the middle man, so to speak. A buyer would place an order with you and you would pass along the order to your supplier, who would ship the order directly to your buyer. You would make your profit on the difference in the manufacturer’s price and your selling price. This part is mainly trial and error. It may take a while before you are able to find someone with whom you can forge a long-term relationship. Do not become discouraged. Keep putting in the footwork, and keep your eyes open in day-to-day life, as you never know what kind of amazing deal you could run into at the most unexpected of times.

Make sure you are in compliance with federal and state income tax laws

Remember that if you make a profit of $1 or more on eBay, you are required to report the earnings on your tax forms. You will probably also need to pay self-employment taxes. You should meet with a professional accountant to be sure you do not inadvertently violate and tax laws.

Create your accounts

Create an eBay account and a PayPal account if you do not already have them. Be sure you have upgraded to either a premiere or business level account on PayPal, as you cannot accept credit card payments with the personal level PayPal account. There are many other advantages to having the upgraded accounts, such as the special features and tools available.

Design a logo

This will help you build repeat business by making yourself easily recognizable to customers. It is extremely difficult to instill a sense of loyalty into customers without a good logo, which will help customers identify you and your products at a glance.

Introduce yourself

Fill out the “About Me” section. When you do business in the physical world, people can have face-to-face interactions with you and determine whether or not you seem reliable, and knowledgeable. In the impersonal world of the Internet, you need to give them enough information about yourself that they feel comfortable trusting you with their hard-earned cash.

Buy a quality digital camera

A high-quality image of the actual product you are selling, not a stock photo from the manufacturer, is crucial to selling online. To take a good photo, you must have a good camera. Some cameras, like a model made by Casio, actually have an “eBay best shot” setting that takes some of the guess work out of the process.

Observe

Look before you leap. Get an idea of how things work, such as what similar items such are selling for and what other sellers are having success with. Explore the tools available to sellers. They can increase your profit by increasing productivity and decreasing the amount of time and energy you spend selling.

Start small

Try listing one or two items, then gradually work your way up. It’s probably not a good idea to open a store before you have a little eBay experience under your belt.

If you don’t know, ask

Visit the community message boards, and look into the educational resources eBay offers.

The Basics
Listing an item

Choose a descriptive, enthusiastic headline to draw in customers. Ask yourself what you would say to sell your product in 10 seconds to a customer, and write it as the headline.

Since a buyer is unable to handle and inspect a product personally, his or her only way of appraising items on an eBay listing is to view the images you provide and read the product description. You must provide quality photos and a detailed description if you hope to make the sale. Use a high-quality digital camera to take a picture of your item against a plain background in a well-lit area, making sure to get several clear, up-close photos of any important features that a buyer would be interested in. Before uploading your images, make sure they are appropriately sized.

When it comes to the full description, provide all the details that a potential buyer of such an item would like to know. Otherwise, potential customers will either click past your listing or flood your inbox with questions. Be descriptive, enthusiastic, and, above all, honest. Do not leave out or gloss over unfavorable facts. Along those same lines, be sure to detail all your policies as well, including accepted forms of payment, return policy, and customer satisfaction guarantees.

When setting a reserve price, have faith in the system. A high reserve price will often scare off potential buyers, while a low, $.99 reserve price will draw a crowd, leading to a bidding frenzy that will likely drive the price up to, or sometimes even past, suggested retail price. Do your homework and see what similar items are selling for on eBay before making this decision. Also use your head when setting a Buy-It-Now option. If you set a buy-it-now price too low, there is little incentive for people to bid on an item, meaning you limit your potential for profit substantially.

Shipping items

Rather than listing three flat rate shipping options, most buyers prefer that you include a shipping calculator which allows them to input their zip code and select the preferred shipping option and receive an exact total that can be built into their final price. This is an option you can choose to offer on your form when you are listing your item.
You may also consider investing in a scale to avoid waiting in long lines at the post office on a regular basis. Also, PayPal offers an easy and convenient way for you to create, purchase, and print shipping labels online. You can then schedule a pick up at your home or office, thereby eliminating the need to go to the post office or shipping center at all.

While many sellers include in their listing that the buyer is responsible for purchasing package insurance if they so desire, the responsibility of insuring that the package reaches its destination is that of the seller. Play it safe and purchase package insurance with delivery confirmation, preferably requiring a signature.

Feedback

Exercise stellar customer service in all transactions, since your feedback score directly affects your chances of success on eBay. Be honest in your descriptions, respond to inquiries quickly, ship as soon as possible after the auction closes, and handle any customer complaints promptly and with grace. You may find that it is better to fix problems that you’re not even responsible for at times, since the money lost due to bad feedback is likely to be more than the cost of resolving a customer complaint.

Be sure to also do your part by leaving honest feedback for the buyer as well. Guard against the tendency to give retaliatory feedback if a buyer rates you lower than you would like. Doing so can cost you business, and can even result in you getting suspended from eBay.

Once you have gotten the hang of the process and experienced some success, you will likely want to grow your eBay business by opening a store. The basic store option costs around $15 dollars a month, and offers numerous tools for automating and streamlining your business. As your business continues to grow, you may upgrade to the more expensive store options, which give you better placement and more seller tools. Remember to continue listing live auctions in order to increase visibility, since you can reference or link to items for sale in your store that would be of interest to someone who is already bidding on the item you have up for auction.

Posted 10:55 AM | Permalink | Comments (0)

Creative financing – what do those words really mean? The words sound exciting and almost mysterious, and someone who actually uses creative financing to purchase or sell a property is thought of as someone worthy of praise and admiration. Many investors, especially new investors, have a misconception about what creative financing really means. Many believe it implies the use of strategies that are complex and difficult to understand.

In reality; however, creative financing simply means finding an alternate way to solve a financing problem. When faced with a challenge in financing a property, choose the easiest path to the finish line. The goal is to get the deal completed and make some money, not to impress yourself and your fellow investors by using complex techniques.

There are situations where one has to be creative just to get the deal done. This series of articles on the art of creative financing will discuss different methods and techniques to get a property financed. The more methods you understand, the easier it will be for you to find solutions to a seller’s problems. As you analyze each deal, be sure to use the simplest financing technique that will get the job done.

Whether you are a brand new investor, just getting your feet wet, or a seasoned professional, one of the most important things in real estate is maximizing the return on your investments, while minimizing risk. One way to help maximize your profits is to negotiate a discounted purchase price; another way is to get the least expensive financing possible for each deal.

Whether you are dealing with banks, mortgage brokers, hard-money lenders, private lenders, or good old Uncle Charlie, a well-written, easy-to-understand loan package will help you get money faster and, quite often, cheaper.

Most often we use loan packages when we are dealing with traditional financing, like banks, credit unions, and other mortgage lenders. There are basically two different types of traditional loans - residential loans and commercial loans – each with their own qualifying criteria. Residential loans are for single-family homes and buildings with up to four units, such as duplexes, triplexes, and fourplexes. Commercial loans take over when an apartment complex has five or more units and cover most other types of real estate from office buildings to industrial complexes.

Residential loans are split into two different categories, owner occupied and non-owner occupied. Investors, for the most part, will be getting non-owner occupied loans for properties they are fixing to sell or fixing to rent. However, there are occasions when an investor will actually move into the property and live there while they are rehabbing, in which case they may qualify for an owner-occupied loan.

There are also three different types of residential mortgage loans – conventional, FHA, and VA. Briefly, VA loans help veterans get into homes for little or no down payment, and FHA loans are loans insured by the government, allowing more people to qualify to get into homes by requiring smaller down payments.

There are many different specialty loans and loan programs which will be discussed in future articles; however, they all require a loan package to be submitted in order to qualify for the loan.

Just what is a loan-request package? For the serious investor, it is more than just a loan application with a few attachments; it is a sales tool! Yes, you are trying to sell the lender on the fact that it will be in their best interest to loan you the money for your project. A well-written, easy–to-follow loan package will show the lender that you are prepared and have thought through the project.

Especially in today’s financial environment, when you apply for a mortgage loan, lenders tend to ask for enough documents to destroy a small forest. Just as you want to minimize your risk in your real estate investment, lenders want to minimize their investment risk that you will default on the loan. Thus, they require lots of documentation to verify facts about you both personally and financially, and facts about the property you will be pledging as security for the loan. Each lender will have a list of the minimum documents they require. Be sure to give them everything they ask for.

Typical List of Documents in a Loan-Request Package

1. Personal Information

• Lender application form – will include name(s) of applicant(s), current address, phone, type and amount of loan required, as well as other personal and financial data
• Driver’s license and social security card photocopies
• Divorce settlement papers, if applicable, no matter how far back in time
• If not a U.S. Citizen – permanent resident alien – copy of green card (alien registration card) or non-permanent resident alien – copy of Visa
• Your personal resume

2. Income Documentation

• W2 forms for the last two years
• Last two pay stubs, covering at least one month
• Signed tax returns for the last two years – be sure to include form 1040 (long or short form) along with all schedules
• Business tax returns for the last two years if you own 25 percent or more of a business
• Current business income statement
• If self-employed, many lenders want verification that you have been in the same line of work for at least two years
• Rental/lease income (proof required will vary by lender)
• Proof of social security income, pension, disability income, 1099 income, or any other income you want to use to qualify for the loan

3. Employment Verification

• The lender will request verification from your employer that you are indeed an employee
• The lender may also request a statement from your employer indicating that you will most likely continue to be an employee for the foreseeable future

4. Asset Information

• Bank statements for the past two months
• Last quarter investment or trust accounts (if applicable)
• Copies of stocks, bonds, or U.S. savings bonds
• Current statement for 401(k) and/or IRA accounts
• List of all real estate you currently own, including address, current value, loan balances, monthly payments, and rental income (if any)
• Value of autos, boats, and any other personal property
• Listing agreement and sales contract if you are selling your current home
• List of any life insurance cash value

5. Liability Information

• Complete list of current debts and minimum monthly payments (may be taken from credit report)
• List of any loans on which you are a cosigner
• If debts are owed to individuals, lender may require a statement from payee as to the current balance, payments, and if payments are being made on time
• If the loan requested is for a refinance, a copy of the current mortgage and payoff amount

6. Proof of Housing Payments

• Last 12 months of cancelled checks paid for rent (if applicable) or payments on a land contract
• If you rent your home and it is managed by a professional management firm, they can verify that you are current on your rent and that rent has been paid on time

7. Property Information (for investment property purchase or refinance)

• Property address, legal description, and location on map
• Purchase agreement (if applicable)
• Copy of earnest money check (if applicable)
• General description of the property with pictures of property and neighborhood
• The year the home was built
• Type of construction
• Renovation proposed (if any)
• Details of renovation plan and schedule, including the budget, the contractors to be used, and the added value to the property when the project is complete
• Copies of any appraisals available

8. Miscellaneous Information (may be required)

• Gift letter (if applicable) signed by the donor and proof of receipt and ability to gift the funds
• Landlord’s contact information (if applicable)
• Realtor’s contact information (if applicable)
• Insurance agent’s contact information
• Contact name and phone number for the lender’s appraiser to access the property
• College diploma if you graduated within the last two years
• Cosigner’s complete information (if applicable)
• All pages and schedules for any bankruptcy filing within the last seven years and the discharge sheet for any type of bankruptcy (Chapters 7, 11, or 13)

9. Loan Request

• The purpose of the loan (purchase, refinance, consolidation, or expansion)
• Summary of calculations showing the requested loan amount (and financial justification for the deal for an investment property)
• Preferred type of loan with preferences for rate and term
• Statement of your ability to pay the loan back from proceeds of a sale or rental income

Once you have this documentation gathered, make several copies so you will have ready- made, loan-request packages for future loans (probably only requiring a few updates to bring the package current).

Applying for a loan can be time consuming and very frustrating at times, especially when the lender keeps requesting more and more documentation. However, if you spend the time now to put together a great loan-request package and then make sure you have all of the information the lender requests before you submit the package, you will increase your chances of getting a loan approval sooner rather than later. Be proactive and develop a good sales package that creates a positive image for you and your business.

In the next article on creative financing, down payment requirements for investors in this current financial market will be discussed. We will also discuss front-end and back-end debt-to-income ratio requirements and credit scores.

David Boyd is a real estate investor and owner of Wasatch Front Homes, LLC in Farmington, Utah, working in short sales and loan modifications. He is also a licensed securities agent with Regent Capital Group, specializing in 1031 Exchanges and tenant-in-common investments.

Posted 09:43 AM | Permalink | Comments (0)