How To Refinance After Buying Property Cash
Dear all,
I need your urgent advice. I have been offered a property that's awaiting ratification of the foreclosure through the courts. This should take another 2 weeks or so. The person that's offering it to me is an investor/rehabber but is not interested in acquiring another property at the time. If no one else steps in to purchase it, though, he and his partner will. He says that once the ratification process has been completed, we can settle within 10 days. He wants me to 'step-in' and take their place in the 'winning position' so that they don't have to pay the lawyers and the title companies twice; once for them to buy it, then again for me (the buyer) to buy it from them. I would give him a 5k check that his lawyer would keep in escrow in order to hold the property. Then I would pay in the courts $46k (this has to be cash); and afterwards setttle with him for the difference (whatever "commission" or "fee" we have agreed he should get for finding the property). My problem is that I don't have $46k so I was thinking of going to a hard money lender. How do I present this property to them? I would take this hard money loan, and after making some minor cosmetic repairs, refinance the property so that I can get better terms and put it up for sale right away. Does anybody have any comments about my proposed strategy? Does anybody know of hard money lenders AND mortgage brokers specializing in Baltimore, Maryland? Please help!!!
Thanks!
I'm having a similar problem myself. I want to pick up a piece of property for about a 3rd of what it's worth and need to pay in cash. I'm also wondering how to handle this one as far as approaching a lender. I don't have experience in the other area you're needing a solution to.
Hope we can both find a solution soon! :-?
If the value is solid then a HML will be interested if the LTV is low (sounds like this is the case in both posts so far).
Check on the site in the lender section.
Speak with folks at the local investor meeting for the area.
John
[addsig]
So far I haven't been able to find a HML who will do it because a relationship with them hadn't been established yet. Without having the property as collateral to base the loan off of until after the sale, they won't consider it. I have to pay for the property in cash first - it's a tax sale. Most hard money lenders want their money back in three to four months. Sometimes a year, but at very high interest rates. And if you can't make the year mark, I don't know what happens.
It's not entirely clear; has the place gone to (Sheriff's) sale yet? If not, is there a loan you can acquire Subject to, or have your conversations with the lender killed that possibility?
Are you talking only to the investor (bank?) who holds the mortgage or to the individual upon whom the foreclosure is being done? If the former, they may not be interested in anyone taking over the mortgage, and it sounds like they'd like to cash out. Why? Could there be problems with the place? What if they are planning to declare bankruptcy? That could make it messy and costly.
If the deal is that you'll have to buy it at the Sheriff's sale, you may have competition with other investors who also want it. You may have issues with 'seasoning' the title. If there is a redemption period for the owner (who's losing it) you'll need to get him/her to quit claim their interest or wait the full redemption period before you can truly control the property. I work with one private mortgage broker who'll lend on a Sheriff's Sale property if I can get clear title and "own" it free and clear for 7 days, call around, maybe you can find one. But you'd still need to find the cash up front, if only for the week or so.
One option might be to find a lender to help you buy it from the owner (and cash out the investors) before the foreclosure/Sheriff's Sale happens. You could still kick back some $$ to the investors, though it may not be necessary, as a sale is a sale. Are the numbers there to support a more conventional buy?
I'd be careful that these 'investors' aren't trying to maybe pass on a marginal property to you. Examine why they don't seem to want it. Make sure there aren't title, structural, environmental, property line, etc. issues. If it seems like they're giving you a break, look that gift horse in the mouth and ask "Why?" Could be a great deal, but it also could be a headache and possible money pit. Just because it quacks like a duck...
That said, I picked up a decent house awhile back at a USDA foreclosure sale for less than half of its retail value, and was able to get the original owners to Quit Claim me their interest for $100 so I could resell it at a profit. Bargains are out there. Good luck.
What is the real estate market like in your area right now? If you plan to simply buy the property & sell the property, I wouldn't waste the money to refinance it. If you have done your comps for the real sales value AS IS correctly, there should be no problem for you to sell it within the time frame. Remember you are holding the property hopefully for 90 days or less - 15% for 3 mos isn't very much in the big scheme of things. In regards to using a hard money lender, I highly recommend it as long as you fully understand all of the contigencies of the deal (i.e. prepayment penalties, etc.). For my first deal I used a commercial mortgage broker. He had his own hard money contacts & charged me a fee for the service. But after the deal was finished, the lenders were so pleased with the outcome that they personally told me that they would be interested in doing another deal with me.
loon-----why would you have to get the owners to quit claim you their interest if you already bought it at the sale. Don't they lose their interest once it goes up for sale? I thought that after the sale, the owners have absolutely no interest at all in the property. What am I missing here?