Pre-Forclosure SHORT SALE
Bidding on home to move in to (not flipping) - comps are 200K. Home loan owed 150K. Total penalties including loan are 188K. She's claiming BK 13 he's not - they are divorcing - all marrital property to be sold. Layer for bank says there is an IRS lien, but I don't know how much.
Offered Bank 110K with estimate to fix house 70K. Bank called me and said they will order BPO and contact me. I need sales contract between me and owner. Hardship letter, payment stubs from owner.
The bank didn't say no to my bid. Home is "as is". I've had a home inspector and two contractors view the property. Title search going on right now. Getting a construction loan to cover fixups.
What's me next step? anything learking that I should watch out for should I get a lawyer and what is a typical cost for this type of help?
:-o
I should say the area comps for 200K. The home is estimated at 150K to 160K - Needs a lot of work so it's up side down - no equity.
Personally I would have offered lower since $70K worth of repairs should scare a bank into the low 90's, but if you plan on moving in and not flipping for a quick profit the deal looks ok. That was a long sentence
Also, I've been reading about the seller's right to redeem the property for up to a year - I don't know what the AZ statute is? Can I just have the owner sign that right away in the contract??
a title comany would be able to do a Owners and encumbrances search (what is bascially called the 'title work"
; this will provide any and all liens against the owners and the property - this is essential information that is publically available fro any property (although it normally costs $75 to $125 to obtain).
sorry, just re-read your post and you said the title search is going on now - this O & E is part or the title work, so give them a day or 2 to get their work done then use that information to make your offer in writing.
I already made the offer for 110K pending the outcome of a clean title search - which there won't be if the IRS has a lien.
run run run :-o
[addsig]
70k to fix a house is too much. Either your estimate is way off or the house is about to be condemned.
Either way, if it will cost you anything above 30k you are asking for a world of frustration, unless you are in the remodeling/rehab business.
The numbers you give on this does notm make sense. 110k to buy, 70k to fix, to get a house worth 200k is not a good deal. How would you pay for the 70k repair, out of your pocket? Moving into a house that is in already repaired, no cost over runs, no contractors that run with your money, no delays, no building permits and inspections, that cost 200k is a much better deal.
Brenda
70k is to tear down the room addition and rebuild in block. Redo kitchen - rebuild the entire house almost. This is the challenge. Plus I will be living in it for many years and if I get it for a total of 190 - I'll have 15k in equity.
Challenge - I'm just worried about the judicial aspect.
For the time you will spend redoing this house, you could probably make more than 15k at minimum wage with no risk.
Brenda
Where's that American Spirit and the need to take risks and challenges. What a great learning experience and a labor of love.
If we are to assume that the land has some value (25% or maybe more of the ARV), then 70K for repairs is high.
If you were to build the whole house from the ground up you would not be spending that much more. Hence you are pretty much implying that there is little value in the present structure.
You noted that you want to remove an existing extension and rebuild it from the ground up. Does it really need to be or is this something you 'prefer' as this will be owner occupied? The bank might not see it the same way.
15K equity for all the time and trouble even if this was not a short sale is really nothing. When you add the effort to execute the short sale you are really undervaluing your time. You must really want this specific house.
John
If you have never done a rehab, you do not realize what you are in for in a 70k rehab. Kind of like sailing around the world on your first sailing trip.
If you can afford the money and time, and want to do it as a hobby then go for it. You are making an emotional decision. But there is nothing wrong with that. Just do realize that almost nobody spends more than they estimate at the start of the project. Most experienced rehabbers assume 10-20% over budget on all projects. I would assume that most first timers over spend by more.
I am just coming from a business angle. While I do enjoy my real estate, I try to make business decisions. Just trying to show you that there are easier and less risky ways to get equity. But again, if you want to spend your money on a hobby and you are not putting yourself or your family in a financial or time bind, then go for it. I have certainly spent a lot of money and time on my passions and have no regrets.
Good Luck and let us know how it goes.
Brenda
OK I got everything hte bank wanted and gave them the $110,000 offer. They came back and said they wouldn't consider the offer. So I asked what would they take, which they replied that the BPO was 159K. I was shocked - the guy who did the BPO said I was in the ballpark and couldn't see why the bank would want the house. SURPRISE. I then asked what the current costs against the home are and he said 195K.
Looks like they have to foreclose bid that amount. I'll probably have to pick it up from the REI.
The BPO is way off - I talked to one of the contractors I had in the home and he says that two room extension has to go. Anyone who buys it will have to spend 50K to get it in shape.
Any Ideas
UPDATE:
Funny/Wierd/Strange
So I went to the auction this morning. The pre-foreclosure fell through cause the husband didn't respond with a signature to arrive at a price of sale with the bank. So I have a money guy bid on the home - it starts at 139K - I'll go to 147K - Keep in mind the home needs 50K in rehab and there is a tax lien 10K.
All the investors know eachother - and I think I see the current owner on the property there with his money guy to buy the home during the foreclosure. He left when the home got to 156K.
Ends up - bidding war between two guys - home goes for 170K and the buyer was prepared to go even higher. I talk to the guy afterwords and tell him my speciall circumstances for needing the home - He says his homes sell within 24 hours of foreclosure purchase and he can give me a hard money loan for the Home - No renter can pay the monthly on this home and this investment group couldn't fix it for 20K and have anything nice.
The other investors in the room were shocked he would go so high. The bank loves him.
Evryone who has seen the home and knows the final price is shocked.
Trying to figure out what my Nitch is in this business????
deuce,
Don't get too dismayed at auction bidders that behave like this, because they quickly put themselves out of the pack and back into the main stream. It is a fact that these auctions get more crowded every day, we get many new faces at each auction.
He can only do so many purchases that lose tens of thousands of dollars. He tied up his capital AND will take a loss.
Look at it from the point of view that you will have less competition at future auctions and he wont be nidding on the properties you want.