Buying Process
ACQUIRE FROM CLE REAL ESTATE LLC
Step One: Review the prospective property’s spec sheet and accept the offer. Most of the properties offered will be violation free with respect to Point of Sale (POS) rules. If there are any outstanding POS violations, we will disclose those and their related costs with the spec sheet.
Step Two: If the offer is accepted we will write up a purchase agreement and get the property under contract. The contract will be secured with an earnest money deposit (10% the purchase price). The title agency (Mark Madden- Federation Escrow and Title) will send you wiring instructions for the earnest money deposit.
Step Three: Once the property is under contract and secured with earnest money, we will bring the property to rental housing standards by correcting any housing violations, obtain all necessary paperwork with local authorities for rental and establish a title transfer date (also called closing date).
Step Four: Closing date is set usually within 2-4 weeks if there are no housing violations. These dates can be delayed if there are extensive repairs and formal inspection process. The title company will email you a HUD statement (refer to: https://en.wikipedia.org/wiki/HUD-1_Settlement) which will specify the exact amount due before the closing date. Please allow ample time for the bank transfer wiring process (typically 3-4 business days from a Turkish bank to the Title Agency’s bank account). We will help you addressing any questions you may have on the HUD form. All closing costs are BUYER’s responsibility (around $1000/property).
Step Five: House title will be transferred to your name within 1-3 business days of closing. We will verify this title transfer process and send you an online confirmation referencing County website.
Step Six: If the house is not yet rented; we will advertise, schedule showings, accept and screen applicants and select the best applicant candidate as tenants of this house. A lease contract will be prepared and signed with the tenant establishing move in date. We will retain one month’s rent amount as our leasing fee; this is typically the security deposit. If the house is rented already, you will start collecting rent at the beginning of the month following title transfer.
ACQUIRE FROM HOUSING MARKET
Step One: Identify deal (this can be done by us or you can do your own research). Once you identify a deal, we can provide you consultation* on the location/potential income/local requirements (Point of Sale process) and create a spec sheet for your review.
Step Two: After you’ve found a deal that meets your requirements; we can schedule a viewing of the property of which we can identify and create a report on the condition of the house, any potential violations and a rough cost estimate for repairs. At this stage, we can also inquiry about POS violation list if any. This will be a consulting cost*.
Step Three: If you would like to go forward, you can make an offer and negotiations on deal begin with the seller. Offers can be made “contingent upon property being POS violation free” which we highly recommend. Otherwise, as a buyer you would need to go thru the point of sale process as described below. Most bank owned, auctioned or foreclosed sales (hereon bargain sales) are subject to buyer accepting and assuming POS violations. POS process starts with application to the City’s housing department and submitting a fee. Most if not all bargain sales; the seller has no funds to initiate the POS process, therefore at the time of negotiations; you are not aware of POS violation list (since it will be ordered after your offer is accepted). There are a few exceptions where a “contingency” can be placed with the offer stating “contingent upon buyer reviewing the POS violations”. Most banks don’t accept offers with contingencies. Cash offers are always more attractive (versus obtain a loan for the purchase).
If your offer is accepted realtor will write up the purchase agreement and get the property under contract. The contract will be secured with an earnest money deposit.
Step Four: Once the property is under contract we will have a POS inspection (Click here to view POS Inspections) done to see what violations need to be brought up to code. Violation list is typically issued by the City with the POS process (Click here to view POS Process). This can also be done by the seller but assuming they didn’t have it done we need an inspection on the property to see how much we need to put into escrow. The escrow amount is usually between 50-150% of the total cost to repair the POS violations.
Here is a Link to a sample Point of Sale Checklist:
http://www.cityofeuclid.com/uploads/forms/pos%20and%20rental%20checklist.pdf
Step Five: The last step in the acquisition process is closing and title transfer. After we’ve gotten the property under contract there will be a closing date set usually between 2-4 weeks. That gives the investor time to secure funding and asses POS costs. Once we’ve closed on the property it will take another 3-5 business days for the title to transfer over to you the investor. Once that happens there is a chance that you will receive a refund on excess funds used to close.
POS Process: (City of Euclid is provided as a sample, every City has their own procedure)
CITY OF EUCLID POINT OF SALE (POS) ASSUMPTION PROCESS
The buyer is to come in to the Euclid housing office to complete an application packet to assume violations. The three documents listed below are to be submitted with this assumption application packet.
Step One: Buyer obtains a copy of the point of sale inspection report from the seller or city of Euclid. If any of the violations have been corrected by the seller this must be verified by an inspection. The most up to date violation report is to be used.
Step Two: Buyer must provide estimates for the cost of repairs. Costs should be listed for each violation and totaled. Contractor pricing should be used for all estimates.
Step Three: Buyer must provide proof of financial ability, in the form of a current statement of savings account, checking account, or a letter of credit from a bank and/or
mortgage lender.
Buyer or seller must arrange for escrow of 50% of the validated cost of repairs to be held in escrow by an independent title company.
Housing staff will review the application to assume violations. The housing clerk will call to advise of the outcome of the application. If approved, buyer will be advised of escrow amount. If denied, buyer will be advised of next steps to cure deficiencies. Once approved, the housing clerk will make an appointment with the buyer to sign the assumption agreement. At the time of your appointment bring: 1. Current driver’s license or photo ID 2. Original signed letter from the title company verifying the amount of funds held in escrow 3. A $275.00 non-refundable fee to process your application. Check/money order made payable to “city of Euclid. Credit cards are also accepted. Buyer or seller must notify the housing department in writing if the sale is not completed. This notification will release the unsuccessful buyer and allow a new assumption to be initiated.
POS Inspections:
The inspector will be looking for building code violations and will cite everything that is found. The requirements for these inspections vary from town to town as you can see below. In general, the seller of a property is responsible for any repairs required by the city. After the repairs are completed by the seller, the city will conduct a re-inspection. If everything passes then a certificate of occupancy is issued and title can transfer. The buyer can also assume these repairs and take care of them after title transfers if they so choose, but the buyer would need to sign an affidavit. This is typically the case for a bank owned property as they are sold “as is” without any repairs by the seller. The kicker is most of the time the bank won’t order the inspection until they have an accepted off on the house, so buyer’s go in blind, although there is standard language in purchase agreement to have an offer contingent upon the point of sale.
The city will give time frames for completion on each repair item. They will also require the buyer to put monies into an escrow account for the repairs before the house can close. The money can be used as the repairs are being completed, but this is the city’s way of ensuring that the repairs will get done. This escrow account must be established prior to closing, and therefore can substantially increase the upfront cash needed to close on a house. Many loan programs will not allow you to work the escrow account money into your financing. While point of sale inspections may seem like another added layer to complicate a real estate transaction, the real purpose is to protect the community and the property values of other homeowners in the area.