No buyers at auction, what now?
I was working with several homeowners during the pre-foreclosure process last month. Many of the properties were NOT purchased at the auction last week. Here are my questions:
1) At this point, do they already have the foreclosure on their credit record or does that happen only if/when the property is purchased at the auction?
2) Since no one purchased, is it worth while to keep pestering the lender for a short sale or would I be approaching it as REO now?
One other quick question. I have a senior lender that has agreed to my short sale offer. I am now negotiating w/ the junior lien holder. The senior had an appraisal done last week and now the junior wants an appraisal. They said that it was fine w/ them if I could get a copy of the senior's appraisal rather than wait for another one to be finished.
I've heard that typically the senior isn't going to like seeing the junior getting any money.
I'll be giving the senior 65k out of 75k owed and figured I would offer the junior like 5k out of the 19k owed since they would lose at auction anyway. This is the break down:
Owes 75k 1st/19k 2nd
Give 65k 1st/5k 2nd
12-15k in rehab needed (20k to be safe)
ARV approx 150k
I would like 10-15k to assign.
End user investor gets approx 50k profit
How should I handle the appraisal question w/ the senior? The junior isn't getting all that much, really. Waiting on another appraisal may kill me and the deal! I could complete this in a matter of days by using the first appraisal. How about if I offered to pay for 50% of the appraisal cost at closing?
Thanks!
[ Edited by woodchuk on Date 03/12/2003 ][ Edited by woodchuk on Date 03/12/2003 ]
Here are my questions:
1) At this point, do they already have the foreclosure on their credit record or does that happen only if/when the property is purchased at the auction?
Yes. Once is has gone through the foreclosure auction, even if not purchased, it is recorded on the owners' credit report.
2) Since no one purchased, is it worth while to keep pestering the lender for a short sale or would I be approaching it as REO now?
You cannot short sale it after the foreclosure auction unless you had permission from the bank before the foreclosure auction took place. It is now considered an REO.
This is the break down:
Owes 75k 1st/19k 2nd
Give 65k 1st/5k 2nd
12-15k in rehab needed (20k to be safe)
ARV approx 150k
I would like 10-15k to assign.
End user investor gets approx 50k profit
How should I handle the appraisal question w/ the senior? The junior isn't getting all that much, really. Waiting on another appraisal may kill me and the deal! I could complete this in a matter of days by using the first appraisal. How about if I offered to pay for 50% of the appraisal cost at closing?
Simply ask! If you don't ask, then you'll never know the answer. If the senior says no, then you have two options: 1) get another appraisal and take the sacrifices necessary or 2) purchase the property by short saling the 1st lein holder and payoff the 2nd leinholder at full price.
You said it will "kill you and the deal" if you had to wait for the appraisal. So pay the 2nd leinholder the full $19K and take the discount from the 1st of $65K. You will pay a full purchase price of $84K when the ARV is $150K, then there is still money to be made. It may not be as much as you wanted, but some is better than none.
Tanya
This is a question along the lines of the previous question. What is the method(s) of determining if a property was sold at a auction if not attended?
You can call the bank or bank's attorney and find out if it was sold or if it is now a bank REO.
At the auction, the bank's attorney is either present or calls in the say the opening bid. Sometimes the bank's attorney will be present at the auction bidding higher than the highest price to try and get as much for the bank as possible.
Tanya
First off, I realized that the first part of my question wasn't exactly phrased correctly. I knew that at the end of the foreclosure process, the property would then be REO. What I really meant was, is there an kind of short time period there where I can still work w/ the bank AND the homeowner before the foreclosure is recorded and possibly avoid the foreclosure on their credit.
I guess the answer to that question is no anyway (thanks for the response). It really makes no difference to me but from a referral/relationship building standpoint, I would have liked to have been able to tell the homeowners that we still have a chance if it doesn't sell. Oh well.
Regarding the appraisal, I certainly don't mind asking to use the apprasial for the junior lienholder, especially if the senior is motivated. My concern was that the senior may cancel the deal if they find out that the junior is being partially paid as well. Ive heard from several investors on this site that that's a big no-no in the eyes of many lenders. I just wondered if it would be better to suck it up and wait on another appraisal to avoid conflict w/ the senior. I'd be taking a chance on things be completed in time but if alerting the senior to the possiblity of the junior's settlement is sudden death....?
Any advice from those of you who have been in this situation before?
[addsig]
Only recently rediscovered this site.Not too savy of how to negotiate it. What state are most of you from? From what I read, it doesnt sound like laws in state of Texas...where I am located.
Anyway, with regard to this thread, my approach would be to take over the first lien(what you call senior) and foreclose the property. That would wipe out any 2nd ,3rd,etc. liens(junior). So, you get property based on what you paid to 1st lien holder. Cant that work in your state?