Big Short Sale Profits Hard To Come By......
OK...here's what isn't clear to me: In order for a home to qualify for a short sale candidate, it needs to have a small amount of equity in it. And if this is the case, chances are it was recently purchased and/or it doesn't need a lot of repairs. Therefore, why should one expect a bank to discount a mortgage enough for an investor to make a decent profit? Especially if the home doesn't require that many repairs to begin w/.
I've read these deals where people claim to be making in the range of 60k-100k...how is this possible!!.............
[addsig]
A good short sale candidate will have no equity and be in need of many repairs. The need for repairs is what causes the no equity situation. The bank can't win and stands to lose more by waiting and having the property further deteriorate, so they are open to a deal.
I was in the middle of one and a dead tree fell in a storm and ended up resting against the house. No damage was done but I was fed up anyway after 2 months of working on a deal. I sent a picture and said forget it you can keep it. They suddenly were more than ready to make the deal, at 1k less than my previous offer and insisted we close within a week.
Usually the property is encumbered by two mortgages and two notes.
The holder of a second is not in the business of real estate and is very afraid that they will not be paid anything.
FOR EXAMPLE --- Let's say a property is worth $200k and need about $10k in repairs to bring it there. (It would cost a non-local lender close to 18jk to bring the property to par.)
Let's assume that there is a 1st mortgage for $135k, and a second with an institutional investor for 55k. in second postion. The lender in second position is in jeopardy. The 2nd lender would have to spend $153k, plus a brokerage commision in order to try to recover the 55k. *It would not happen.* In adition the lender is tying up 200k which it is not willing to do. Therefore if an investor comes along and wants to purchase the note for say 25k it will open their eyes.
In addition you may be lucky and the 1st lender will take a little less as well. You can argue to both lenders that the property is only worth say 185.
So if you sell if for $200k or creatively for 210 and paid 125+25 and another 10 for repair, you would walk out with 50-60k
Very difficult thing to do, but not impossible.
My experience in the south is since there is so much building going on, one can short a not so new house with or without equity.
House that was built in the 60's w/a 1st & 2nd mortgage and approx 20k equity was in an area with new construction all around. The owners had been in & out of 4closure for 2 years which was the key factor. A hardship letter from the owner explaining BK was their only option was all the mortgage co's needed to hear. We were able to short the mortgages & sell the house to an investor (created $80k equity). So it really depends on the prop, area & circumstances. In the northeast, it's not that easy because prices are thru the roof. Email me if you'd like. I'm moving to Uptown Charlotte soon.
shamund,
I'm in NC (N. Charlotte) off 77. Email me w/your info & I will give you a buzz
leartherules,
Yesterday this guy called with the following ;
Is in and out of Ch 13 for the last 2 yrs.
Got dismissed from ch 13 day before yesterday.
House is appraised for 165k, tax value of 150k, owes 179k with all the arrears. Now that Ch 13 is dismissed I think the bank will foreclose in December. The bank is chase. I am thinking this is a good SS. Repairs are minimal. What do you think. Is this a deal.
the tax value is immaterial.
do you agree with the appraisal?
what, in your informed opinion, is the house worth in it's as-is condition?
can you defend your opinion with market data?
Knowing whether this is a 'deal' for you depends entirely upon your exit strategy.