How Low Would You Offer?
I located a property that has a note for 140K. The note holder, an out of state financial company is eager to sell. The house was condemned by the city. The judge has given until March 28 to begin repairs or the house will be bulldozed. The homeowner is out of state and has not done any repairs or improvements.
Is there a "normal" discount for a loan of this type? What would you suggest I offer? I understand that after purchasing the note I would have to foreclose on the property. Thanks for your help.
I have spoken to the rep from the city and he said to keep him informed of my progress. He said it will not be a problem to get an extension from the judge as long as we can show we are moving in the right direction. I spoke to another investor this morning that went through the same process a few months ago. His property was past the demo date and he was able to extend it with no trouble from the local city officials.
The property will need major rehabing. Estimates from my contractor are 50-70K, depending on the grade of finish we decide to go with. The home should be worth 200K ARV, based on comps in the area. I am very familiar with the properties in the area.
I submitted an offer to purchase the note this afternoon. They said I would hear back within three days. We will see.
Do you mean that the home is worth 200k in its present condition?
No, it would be worth that after it is repaired and ready for sale. Thanks for all the comments.
Yeah, city officials lie their face off to you.
First things first.
Forget about mojo and the purple bogedyman etc. Focus on taxes in arrears first. Get with county tax records with Block and lot number of property to see if back taxes are owed. Find out when pending tax sale is scheduled and amount (if any) is due. (usually alll the town is looking for) If it is over XXX K then you walk away.
Take it from there.
Thanks for all the comments. We did check on the taxes and are set to pay them. The note purchase is complete, the demolition order from the city is suspended for 210 days, per the municipal court judge. We have that much time to complete the foreclosure and show progress is being made on the rehab. That will not be a problem. We are set to foreclose on the first Tuesday in May. Then, we begin the rehab which will take about 3 months. So far, everything is working out. Will post a detailed report of all the numbers later.