Huge equity deal!!
I have a homeowner currently going through the foreclosure process. The home is built in the 1939 and is appraised at $43,000. The land is 10 acres and is appraised at $102,500. Total value is $145,500. The homeowner owes 3,846.10 in back payments and the principal left is $32,478.06. Which comes to $40,170.26. This is 73.29% equity. We have $20k in cash to work with. The sale date is set for April 25th. My question to all of you is, How much shoud I offer the homeowner? Should I discount the mortgage? What should I do?
Any help is appreciated.
Please help,
Jorgan Cattin[ Edited by jcattin on Date 04/07/2003 ]
I would check and see if you can divide up the land and make sure it is zoned residential. If it is zoned agricultural, then you may not be able to have more then 2 properties in the 10 acres. If you could divide up the land in 1 acre parcels and sell them, it would be a great investment. Land is always harder to factor in because it could be worthless after you buy it. So make sure you research it fully.
I'm not too sure about discounting the mortgage because if the lender counts the land value into the FMV, then they may see all the equity and will not short sale. If the property value is as you say, then you might be able to short sale the mortgage.
You can start by speaking with the homeowner and ask them, "what would you like to see happen?" Also, what are they planning on doing if it doesn't sell. Gather as much information as possible, then decide whether it would be a good deal for you. As for making an offer, it depends on you. Some investors set a limit of the maximum they will pay for a property. So if the most you will pay is $35K, then start at $20K and work your way up. Once you get to $35K, then tell them that's your last offer.
Tanya
I understand that we will need to finance a portion of this deal (the more the better!). My question is, could we get bank financing on a deal of this nature?
Thanks for all your help,
Jorgan Cattin
Figure out what you're going to do with it. If you're going to buy and hold, make sure you know all of the expenses and that it has a CF after all is said and done.
Sounds like a deal that could be great, but go in with a plan having done all of your homework. Good luck.
We have a couple of plans. Plan A: We get the property and subdivide it into 1 acre parcels and sell them off(I am still waiting to here back from my county zoning office). Plan B: Get additional financing to rehab the house and then resell.
We have absolutley no intent or desire of holding on to this property.
Jorgan Cattin
Does anyone have experience in developing subdivisions? If so, is it easy to get your county to break up a parcel into smaller parcels? Will the utility companies cooperate with us in installing utilities? Who pays for the roads and street lights? What other costs are incurred through this process? Are there any books that anyone could recomend on this subject?
Thanks for all of your help,
Jorgan Cattin
Jcattin
...you should start a new post for this question. In a nutshell, you pay for everything. You pave the roads, run the lines, put in sidewalkes, etc. Never done it, don't know much about it, but it is an expensive process and you don't always get your money right out unless there's a strong demand for building lots.
Ask the owner about the mortgage; if FHA-insured, and it was acquired before 1989 (?--will get back to you on the date), then the loan would be assummable (must qualify for loan just as the buyer). Give the buyer a fair amount (e.g.10-15K). Refi the loan and pull out some cash and HAVE A NICE LIFE!! a