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moveright

C.A. - What does the EXACT play by play look like?

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I'm officially off hiatus. Haven't been around here much in a month. Anyhow, I've got my signs going out this evening and I expect calls.

 

I re-read the manual this morning and I realized that it is mainly focused on a traditional sandwich lease and brushes very gently over the topic of Cooperative Assignment. Well, just starting out, I will be focusing on CA's as per the recommendations in the manual (amongst other people). I know that a C.A. is overall a lot less work than a sandwich but I'm having difficulty figuring out exactly which parts in the manual are omitted if it is the case of the CA. for example, in a CA, you are never really "showing a house" right? you're just basically consummating a deal and a handshake between seller and t/b. no?

 

At the risk of being a complete pain in the a$$, can I get a specific play by play for a CA? something like:

 

1. speak to a seller - they agree to the idea of an CA

2. negotiate terms with the seller

3. etc

4. etc.

 

 

I'm just lost as to when paperwork comes into play, whether or not you are showing a house, just how to handle the entire transaction from start to finish. I hope that's not too much trouble but if I had a step by step 123 quick reference guide it would greatly help as I am a visual learner and am easily distracted(can you tell?).

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Michael, I don't know that it is possible to lay out a typical scenario from start to finish. As you can imagine, there are many variables in every deal we do. Success in this business often comes down to how well you can think on your feet and handle whatever is thrown at you. That comes with experience, of course. Overthinking the process can only bog you down, my friend.

If I had to summarize the process in 25 words or less, it goes something like this: market for homeowners and find one willing to do the deal. You are not "negotiating" the numbers, per se. You run the comps and advise the homeowner what the market will accept. They need to work with your terms, not vice versa. Once in agreement the paperwork between you and the homeowner puts you squarely in the middle of the deal as a principal.

Now, you need to find a t/b that is agreeable to the homeowner. Once you reach that point, your payday has arrived as you assign the deal over to said t/b.

In the interim, as I said earlier, there will be twists and turns. But probably nothing you can't handle or fix. Nothing will educate you as well as hands on experience, Michael. So don't let your need for perfection and analysis stop you from starting.

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Now, you need to find a t/b that is agreeable to the homeowner. Once you reach that point, your payday has arrived as you assign the deal over to said t/b.

When working a CA, what is your degree of involvement when finding a T/B? (Do you run a credit check/ background check?)

 

How do you know if your potential T/B is satisfactory?

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Your degree of involvement can be as much or as little as you want it to be. I think most consider that aspect of our business to be important and treat it as such. You cannot stick a deadbeat in a property for the sake of getting a deal completed. Common sense rules the day. A credit check is a must, in my opinion. I don't go as far as a complete background or criminal history. If an applicant makes me think I should do this, that's enough to let me know I don't want 'em. Ultimately, though, I insist the homeowner makes the final call as to who will be moving in. It's their property and so it's their call. The last thing I want is for a homeowner to come back to me 6 months later and accuse me of planting a meth dealer in their house for the sake of closing the deal.

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Michael,thanks for your reply.

I like the fact that you are having the homeowner make the final call.

What exactly are you looking for on the credit report?

Do you set up the T/B with a credit repair/improvement company and/or mortgage broker?

 

Thanks for your insight!

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I'm looking for obvious signs of failure. Numerous credit defaults, judgements, collections, etc. Just common sense things that alert you to the likelihood the t/b will be unable to qualify for a mortgage in a year.

I do not set up the t/b with a credit repair company. I'll certainly suggest they sit and talk with a mortgage professional so they can assess their ability to close within the year. But I don't require they do so. I believe in treating adults like adults. I know others will disagree and take a more hands-on approach, and that's fine, too.

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Mine go something like this:

 

Answer calls from sellers

Collect general property info

Research the property

Contact again to see it/make offer/get paperwork signed

Market property

Receive calls from buyers

Show property

Get paperwork signed/close

 

And yet, as Michael said, deals aren't cookie cutter at all. Sometimes you make offers sight unseen that are accepted, sometimes the deal doesn't come till you are at the property and pull out paperwork and talk it through. Sometimes they call you about a LP and it turns out to be a pure option because they offer you a wholesale price. Additionally, as you can imagine, working with buyers can be a highly variable process.

 

Get dirty. Go see a property and see why they are selling it, then make an offer.

 

Also, ive picked up a lame duck property before. Sometimes you cant get a qualified buyer bc your numbers are off. You have a moral obligation to not get involved in a deal like that, in my opinion. Some people are dumb enough to hand you a pile of cash for a terrible investment (in this case, a misspriced LP). Don't take the bait, your reputation is worth more than that. And its easy to cut a deal loose: use your cancellation clause, give the seller a call and tell em the deal is done, and that's business: no hard feelings.

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As for specifics with qualifying tbs, I suggest mortgage companies and credit repair agencies. Most people dont even know about these options or consider them, until you, Mr. Or Ms. Investor, are the first ones to suggest it to them. I dont go beyond that.

 

Credit reports are fascinating. Just read through it, then give them a call and ask:

What is this? Ok. What is this? Ok. What is this? Ok. What is this? Ok. And what is this? And youll get a clear picture of what's going on.

 

They are either ready to take on debts or they are not. That's what you want to know. Ask yourself: Would you be ready to buy this house if you were them?

 

If you have a winner, go to your seller, stress how unique it is that you have found a willing buyer, how fortunate this situation is, and talk them through what closing is going to require--do not let a qualified (and willing) TB slip through the cracks. Everyone gets closing jitters.

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I work with a mortgage broker in our area, it was actually him that found me! He pulls all my credit reports for free, credit counsels them and then he gets the benefit of the end loan.

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