Example Property: Cartmel Lane, Windermere Florida
Defect: Mold and Unsecured Pool
Negotiated and Purchased at $366K
Remediated – Remodeled and Sold at $705K
The first step is identifying the lead. There are literally hundreds of ways to identify property owners in distress. We use some conventional and some more innovative ways to find these specific clients. The 7D Theory process is proprietary and the innovative ways are only shared with associates of the Eureka Realty team. The lead generation process is irrelevant to know because at this time we are giving the researched and verified lead to cooperating realtors in Florida and in participating cities across the nation. Every lead is scrubbed from each category to make sure the properties have characteristics and amenities that are desirable to end user owner occupants. These homes are located in more popular areas that include good schools, employment centers, parks, shopping, retail, restaurants, entertainment, service facilities and access to major roads and thoroughfares. We also identify affordable housing opportunities by using the affordable housing index. This means the ARV (After Repair Value) will be at or less than the median home price in that county. My investors receive Broker Price Opinion appraisals that are extensive and accurate to help you determine after repair value. We have distressed clients who have a higher than normal probability of selling within the year. We conduct interior and exterior inspections on every property to confirm our initial research. Contact information for the distressed home owner is verified. As well as psycho-graphic information which is a profile on the distressed home owner to identify the likelihood they will participate in our program and with our buyer network. All our distressed clients are represented by an attorney so they are assured all debt and liens are settled with the bank.
The purpose of the exterior inspection is to verify the contact information for the seller we would like to contact. If we can’t find the owner then this process is moot. It is also to determine the Psycho-graphics of the distressed seller. Psycho-graphics is defined as the reasons why a consumer is motivated to do something. Only 3% of sellers are ready to follow through with a transaction ant time of contact. The other 97% are poised to begin or not ready.
This is the appraisal process. The purpose is to determine the value of the property after a condition adjustment is made for defects. The investor will also have an easier time calculating the after repair value after familiarizing themselves with this report. This report is typically 7-9 pages and includes a photo description, two page property narrative and three page Broker Opinion of Value with adjusted comparables. See the Cartmel Lane Case Study to see an example of the report we provide.
There are many ways to locate owners including private investigation services. The information compiled in research and exterior inspection allows us to find the subject. Owners that remain in the property can qualify for relocation assistance between $3K – $10K. However, many distressed sellers are in the “not ready” phase and decide to vacate the property. The owner of Cartmel Lane left the property and our private investigator found her in an apartment in Texas.
Contracts are written and sent to potential sellers or their attorneys to show our interest and seriousness. The price on the contract is the assessed value. The real number cannot be completed until the interior inspection and our evaluation is complete. Our appraisal is typically done after this contract is presented to the owner. All contracts are written with an interior inspection clause that reads ” The interior of the property has not been inspected. The seller shall provide access for the purposes of appraisal evaluation. The offer price may be adjusted after interior inspection.” The price is almost always changed because the assessed value is not an proper evaluation of the property. Another contract is rewritten and executed with all the corrected information.
Typically our defective distress short sales close 20% – 30% below market value. This price will be determined after interior inspection. IMPORTANT NOTE: There is no one price for any house in that is evaluated. There is what is called a Range of Values. The Cartmel Lane home could have been worth in a range between $360K to $417K. An argument can be made that both values are correct. However, after condition adjustments due to the damage in the property the more accurate price within this range is at the lower end of the indicated range of values. The Cartmel Lane home closed at $366K.
Another advantage of our process is that our buyers will always receive a free and clear title. All short sale negotiations are conducted by an Orlando based Real Estate firm. They have been successful negotiating liens such as Code Enforcement, Internal Revenue Service, Home Owner Association and first and second Mortgage liens. In some, cases paying a negotiated pay down of a lien is necessary and that becomes the responsibility of the buyer.
See the results of Cartmel Lane in the Profitable Results Section in the bottom right side bar @ www.7DTheory.com