My First Practice Deal.... What Would You Do?
Property going to foreclosure in 2 wks
spoke w/ seller but she is messed up and just letting it go
Called mortgage co today to see if I could by note They said "no" and "no" they don't do short sales[I thought I could talk w/ seller again if they said yes]
about the property:-Bad shape, roof leak vacant ,door open animals in and out dark and damp, probably mold, possible additions not permitted etc
With c/c and rehab and holding etc would be about $60 K
Mortgage w/ court costs $73K
Resale $150 K
Is this worth bidding on at the auction Will the bank bid to their loan amount or will they let it go because they don't want it?.
They can't know how bad it is!
Also I would flip to a rehabber
I figure I will follow the process to see what happens
Thanks all!
Sounds like alot in repairs. possibly 15-20k+??
repairs at least $40K-$50k
Thats why I wonder how much one should get into when bidding if you don't do rehab yourself
Go to the bank and talk to the person in charge. Show them you have the cash to purchase it from them. Be persistant. They dont want the property. It is a liability to them. Be a pain in their you know what.
If the property will profit you go for it and best of luck.
The bank's opening bid can be their amount owed, without a single penny more. They don't have to bid that much, but they CAN bid that much without being out of pocket another dime.
Will they? Who knows. But whoever owns the property is responsible for taxes, securing it against vandals and squatters, etc. So it's a continuing drain on the bank's resources, in addition to being an 8-to-1 drag on their ability to lend other funds (if house is carried on their OREO roll, they're restricted from lending out eight times its value ... that's a lot of vig they could be earning elsewhere instead of having a deadweight drag they've got to keep paying to own).
In other words, they have motivation to let it go for something less than the $73k they've got in it. Maybe they will, maybe they won't but it's worth it for you to try if the rehab situation can be brought under control.
I'd say if you can find a rehabber you can work with on this deal, you're going to be able to try to make it happen. If you're comfortable with the rehabbing arrangements you can make, then create an LLC and go for it. [ Edited by flacorps on Date 10/16/2003 ]
Thanks Your input has clarified some of my thoughts
So I see that the bank may bid less than they owe If one tops their bid will the bank usually come back with another bid or will they let the bidding go on with out any further input ?
LynLiz,
I think that you are missing a huge opportunity here in terms of practicing your short sale package technique. On the up side, you could get the building for pennies on the dollar for real.
Have you ever heard the phrase "a picture is worth a thousand words". Well you need to give the bank your dissertation by way of pictures. Your mistake was thinking that there was an intelligent life form at the bank when you called to talk to them about the situation. YOU MUST PROCEED LIKE THERE IS NO INTELLIGENT LIFE FORM AT THAT BANK.
Now, having said that, you need to hurry up and do the following:
-take lots of pictures of that nasty, ugly house - make sure that you photograph the worse areas of disrepair
-get a contractor to walk thru with you and give you a good written cost estimate for repairing all of that damage - the estimate needs to be on their letterhead (do not use a jack leg contractor for this task)
-you need to get the seller to sign an authorization so that the bank will talk to you about the situation
-you need to have the seller write a hardship letter - how they got into this situation and how they can not see the light of day right now and they need to work with you to resolve the matter
-you need to ask the seller to demonstrate that they are behind in bills other than the mortgage - a copy of a few late bills will do
-you need to set forth your proposal for purchasing the house at a deep discount - this should be your cover page and it should indicate that you are helping the seller out with the situation and how much you want to pay for the property as well as the items that are included in your proposal (pics, etc)
Once you gather all of this, place it in a 99 cent folder that has the 3 fastners in it. Preferably, select one that is a bright color has a clear little window on the cover. Place a label in that area that says something like "Short Sale Proposal for (Address of Property)". Now the reason you do it like this is because you want your well organized proposal to stick out like a sore thumb. You want the Loss Mitigator to always be able to put her hand on your folder so that it can get processed.
You need to get the name of the Loss Mitigator that is handling the sellers file from the seller. It appears on all those letters that the seller has been receiving and ignoring. The address and fax number will also be there. Send the proposal return receipt requested.
Fax a copy of the Letter of authorization to the Loss Mitigator AND include it in your proposal. There may be a few more documents that the bank may require of you. But they will let you know.
My point here is given the timeline, you need to get their attention NOW. They will want to deal with you after they get this professional looking package with those pictures. Make sure you prepare the package the way I suggested. They will be impressed and want to deal with you because most people do not do anything like this. They are so relieved to receive a file full of the majority of what they need to make a decision.
Also keep in mind as you go thru this process that this is the last quarter of the year, banks need to clean up their books by 12/31. As they look at the number of foreclosures on their hands, they start to come around a bit because they ARE NOT SUPPOSE TO BE HOLDING PROPERTY - IT IS FROWNED UPON AND THOUGHT OF AS A POOR LOAN. And as said previously, for every dollar that is outstanding, it prevents them from loaning a couple of thousand dollars to someone else - so you got them by the short hairs!
They all do short sales for that very reason - bad loans prevents them from writing significant loan business. So go get that piece of property and low ball the offer. They will come back with something reasonable.
BTW if anyone else has recommendations for what else should go included in the short sale package. Let her know quickly. Good luck let us know when the closing is scheduled!
ligem , thanks the reply was inspiring! I will print it and keep it with me.
I will do as you say
There is a chance I cannot find the owner , she has moved again but if I do what would be an incentive for her to work with me? I don't think she cares about the credit issue , She has just lost her car, too
The seller may be depressed, but I would go gung ho on how badly she will ruin her credit for future home purchases. She feels bad today, but she'll feel worse next year when she still needs a house but can't get one. I would also sweeten the pot by offering her a little "moving money."
Ligem that was an excellent post..
Benny
[addsig]
I love that post especially after repeatedly listening to Secrets to Short Sales and would just like to add if you can hammer out a profitable deal here, which you can, Why not as incentive offer this desperate owner 1 or 2 thousand for complete cooperation with the needed paper work. Considering the possible payoff that is something to consider that would make the seller respond.
Update on this deal
I did more follow up, went back to court house etc
What I did find there was that the person that I spoke to about purchasing the note and who said "we do not do short sales ", [from loss mitigation] IS the person who was corresponding to the owner in regards to the foreclosure.
I ended up attending the sale at the court house steps. The bank rep was there and only about 20 people of which only 2 parties were bidding.
The bank rep started at $100 , next bid by someone else was $50K. The bank rep bid $60K and it went from there. The bank rep stopped at the amount owed to them, plus expenses. The bidding went on up to $80K SOLD
So really the owner made over $6k since she receives anything over what she owes. So she made out better by not working out a deal
I got a lot out of this experience
First , you all Creative Investors , who gave me advise really pushed me into thinking that I could do this and by following through I have found that it is just a process and you might as well take a chance and put yourself out there. I am READY! for the next deal
Bring it on!
Thank you ! Thank you!
Lynlinz