Possible forclosure deal...not really sure
Well I found this site a few days ago and its given me a wealth of information, but that's not my problem right now. I am working with a partner on this one, we both are pretty new to investing and he happened to come across this from a friend
The house -
2 Bedroom, 2 Bath, 1149 sq. feet, 1 story, 2 car garage, Central air
The money -
They bought it for $71k they have a $61,488 mortgage that was taken on the house in 1999 (I guess they had to put 15% down if my thinking is correct), they are currently $7k in arrears on the mortgage. There are $5k in back taxes owed on the property. I guess calculating the good payments they probably brought their balance down to about $58-59k. The foreclosure is supposed to be like June 8th or something. The person in the house wants $7k to get out of it, the house might need repairs ( Paint on outside of windows looks crusty, not sure on inside)
With all that said I was wondering if this was a viable deal? I've read a couple things on short sale and I am not really sure if that would be the way to go on this one. Or if I should find an investor to put the money down for it. Is the money that the person in the house is asking for too much?
I just looked at the foreclosure list and the appraised value they have on the house is $60k
The deal - what is the ARV of the property? based on their original purchase price FMV would only be about $80-85K. Total cost to purchase would be approx $72K + $3k closing costs = $75K + $7K to seller = $82K. Not a good deal. This seller is still in denial if he thinks that he is in the position to dicate terms to you. I'm not a preforeclosure investor. Maybe they can give you some ideas, but personally I'd walk and pick it up at the sale or on REO.
Make sure of your exit strategy, too. In my area. 2 bed homes are difficult to resell because they are mainly used as rentals or retirement homes.
Roger
I guess the ARV would be 77 - 80k. Yea, I thought the guys demand for $7k was kinda steep, but this deal came to me and my partner through an associate of his. Now I don't know much about short sale, do you think I could short sale this house? Say I go to the lender and offer them like $40k for the house (or lower) and get it before it goes to foreclosure next month. ~$59k is the balance still owed to the lender. This is the first deal I've actually come across since I decided to start REI, I dont have an investor at the moment either but I was trying to see if this would be a good investment to try and work on.
a short answer is I wouldn't bother. Short selling is really a game for the more experienced investor. Is there an RE agent involved? If so, I'd simply make your offer, and let the agent deal with the details. If not and you still want to pursue the deal, it may be feasible to find an agent (experienced, full-time) to work with you. An agent will help you with the process and will also help CYA for you.
You really need to have a game plan as to what you are planning on doing with the property if you get it. Rent/lease-option, wholesale, fix & retail? Different exit strategies require different discounts in order to be profitable.
I can understand your frustration with not finding deals. After I decided to actually start REI, it took me over 6 months before I found a deal I was comfortable with. You need to decide what a deal is for you. A minimum % of FMV or dollar amount that would make the deal worth your time (with a cushion built in for mistakes).
Example: on a property FMV of $100K, paint, patch & carpet repairs (PPC), some investors wouldn't touch it if they couldn't get it for $70K or less. Others might take it at $85K. Again, your exit strategy plays a part in deciding how much you can pay for a property and still profit.
Roger
Yea, I will have to start making a game plan up for some other properties that might come my way in the future. This one just kind of caught me off guard, I did find a lot of info on it though. I'll probably look into birddoggin to start off my REI career.