Investing In Non-Performing Assets
Hello everyone and thank you in advance for any advice you can offer. I'm located in Florida (mortgage state) and have become close friends with a wealthy Real Estate investor who is principally retired but he just can't seem to stop chasing the "deal"!!! He has made an informal proposal to help me in the real estate investing area. I've bought and sold several properties but with limited success. He is encouraging me to get into buying local non-performing assets (1st mortgages) in foreclosure which are close to the Sheriff's Sale Date at the courthouse. I'm assuming these can be bought at a discount but am unfamiliar what the discount amount would be. We would continue with the foreclosure process after an assignment of mortgage has been recorded. I'm assuming we could use the existing attorney representing the bank to complete the foreclosure process on our behalf, but before that we would offer the borrower an opportunity to exercise a deed in lieu of foreclosure if the property has not been overly encumbered with liens or judgements. The whole point is to ultimately end up with the property in order to retail to the general public at a good profit. This approach seems to very attractive because while I'll be birddogging these deals and managing them to the end he is willing to provide the funding with a 50-50 split of any profit at the end.
Sooo here are my questions to other experienced investors:
1) I live in a county of $1.2 million and there is a steady stream of foreclosures. Is this a legitmate way of investing and can I make a living at it?
2) Can the foreclosure process be continued using the same attorney for the bank once we have an assignment of mortgage?
3) What amount of discount can we initially propose to the bank for their non-performing asset they are about to foreclose on?
4) Once the original borrower has vacated the property and fix-up has been completed, would the best approach for marketing the home be thru my wife who is a Realtor?
Any help and suggestions will be greatly appreciated.
its a good strategy for making money.
a mortgage company is willing to discount if the property is not worth it..
if there is equity they will finish the foreclosure themselves....second a mortgage company will not deal with individuals buying one note...they usually bundle mortgages..in some cases they bundle nonperforming with performing and sell them as a package..if you are going to buy up private mortgages then you may have better luck in dealing one note at a time .if you and and your investor are worth millions then i suggest obtaining a mortgage bankers license...it would put your foot in the door in dealing with banks.[ Edited by lp1 on Date 11/28/2003 ]
In my experience it will be an unusual situation to find a lending source that will discount. When they made the loan they had an appraisal and the loan committe
made a judgement. They assume a profit on completing the foreclosure.
This is only true in present time. If the market in housing dumped, then you can go forward and buy such paper. My suggestion is if that occured, I would probably as in the past, just let them complete the foreclosure and then buy.
However, you are in an area of great profit just by changing a bit.
Check the titles of the properties in foreclosure. Check prior sales etc. what you are looking for is the second mortgage which is going to be eliminated in that foreclosure. Now that is your target. Why? Because that lender is about to lose everything and he will sell really discounted like ten cents on the dollar.
So, you check the prior sale that gives you a maybe value. You check the mortgage in foreclosure. If there is equity you then check for a second, or a third or a land contract whatever Thats your target. And it is a goodie....
Example:
HOuse sold for $200,000, lst mortgage on it of $150,000 now in foreclosure. (as you can see the lender will not sell this little darb at a discount)
Second Mortgage (PMTD) taken back at time of sale? $40,000. The lender or prior owner has done nothing except sit and wait for the ax to fall. I can hear the Hail Mary's all the way to Calif.
You approach the Second Mortgage Holder. "Hi thar folks," (I always like folks) makes people think you raise mules for a living. " My name is Bob, whats yours?" Now he really hates you people hate to have the privacy associated with a first name destroyed on casual meet. "You are going to loose a lot of money and I am here to help you. You got one of them thar second notes which says $40,000 on it? Well here is $4,000 for it right now, just sign this assignment of Mortgage and assignment of Note."
Now if that works I shall be greatly suprised, but who knows. Money does talk.
I use a much more sutler approach. No I did not misspell Sutler I used it in its original usage. Da folks dat used to come along behind armies and sell them things and services.
In any case you see what I mean. Thats your target. You cure the foreclosure and start your own, you hold costs down by substituting in your own Trustee or Atty if you are in a mortgage state.
Now was not that fun? Get rich, call me afterwards I love to talk to rich people.
Sutler in training. Lucius
Oooops sorry, I forgot to answer a really important question.
Your Question was. Should I market the property by utilizing my Wife who is a Realtor?.
My Answer is: Yes, unless you wish to terminate your marriage with some really bad vibs emenating from da female member of your union.
If she is approached in the right manner, flowers, candy an introduction to a movie star whatever. She may give you the ultimate award that a Realtor can give.
A Discount.
Pithely Lucius