Tips for trust deed buyers - Establishing Property Values

Establishing Property Values.

• Always physically inspect real estate a borrower is purchasing, with your money for the trust deed.
  
  It doesn't matter if the broker, appraiser, and title company have already seen it. This is a must! See it for yourself!
  
  
• Have you estimated the value, of the real estate collateral, by using different valuations?
  
  Most agree, it's better to have more than one indication of the market value, of a property. These are some indications of value to check yourself.
  
  
  • read the appraisal
  • ask your realtor for any information on closed sales, of similar properties
  • check the tax assessors opinion, of value on the pre-lim, or at the counter, at any title company
  • if it is a four plex, or income property, find out the most common ratio between yearly gross rents other similar properties command.
  • what is the property worth if you were to buy it today.
    
    Don't over look what sometimes is the best of all indications of value.
• Use the actual purchase price, as the value of the property, whenever a property has changed hands, sold, or been purchased (all or even any part) within the last 18 months.
  
  Use this figure as the final value for basing loan approvals. What is better, or more accurate, than its sale price. Remember, 18 months (to the day), plus the value of verifiable, capital improvements made to the property, since purchase.
  
  
• Learn to distinguish between real and personal property.
  
  Never mistake "personal" property, for real property, located on the premises when establishing your opinion of value. Sometimes, this is very tricky, or confusing, with some items. These include trade fixtures, a mobile home, hot tub, etc.
  
  Real property is defined as "property which is affixed to the earth". Sometimes, property screwed down still isn't real estate, like items belonging to a tenant.
  
  
• Ask the borrower how they plan to repay the short-term loan?
  
  Primarily, private money loans depend on real estate equity. However, it doesn't hurt to find out if they have already been pre-approved. For a speculative home, you want to know it is pre-sold. Or, you want to know the reverse might happen. For instance, the loan was going to be paid back prematurely, because of a pending sale.
  
  
• Is the loan amount over $30,000.00 and less than $500,000.00?
  
  Loans under $30K have lots of restrictions & limitations in California. At the other end, these homes are beyond single-family construction, and equity lending. Of course, these numbers change over time and depend on the market where you invest.

Previous tips for trust deed buyers.