Preforeclosure with equity
Hello all,
As are many, I am new to REI. I have decided to start investing in Preforeclosures and have a question.
What can you do with a preforeclosure that has equity?
I have been to my local courthouse and taken the names and addresses of the most recent NOD's. I have also looked each property up on a local tax assessor's property value page and found out that five out of the six properties has a value greater than what they originally paid for the home.
Granted, I haven't talked with the homeowner yet, and I don't know if there are any seconds, but let's say there are no seconds and the property is worth more than they owe? Would a lender even consider a short sale just to avoid taking ownership of the property?
I had considered Hard Money to out right buy the property but I am just not sure of what course of action to take. Any help would be greatly appreciated.
Thanks in advance!
Webscott22 <IMG SRC="images/forum/smilies/icon_confused.gif">
[ Edited by webscott22 on Date 03/08/2003 ][ Edited by webscott22 on Date 03/08/2003 ]
The more techniques, strategies, or tools you know, the better able you will be to capitalize on opportunities that present themselves to you.
As you wouldn't use a screwdriver to drive a nail into a 2x4, maybe a short sale isn't the right 'tool' to use in this (or most) situations.
Before selecting which 'tool' to use, you should learn as much as you can about the opportunity you face, and based upon the indicators, select which 'tool' or 'tools' would be best suited for the task at hand.
Eventually, this will become instinctual.
Rarely does anyone pick up a paintbrush and pallet for the first time, select a 'style' and create a masterpiece.
The purpose of a short sale is to discount a mortgage on a home with little equity, no equity, or upside down (negative) equity. A bank will not take a discount unless there is a chance that they are not going to get close to what the homeowners owe at the foreclosure auction.
Example #1:
FMV (Fair Market Value): $100K
1st lein: $75K
Equity: $25K
The lender will not take a discount because there is a high probability that an investor at the foreclosure auction will pay $75K for the property.
Example #2:
FMV: $100K
1st lein: $75K
2nd lein: $30K
Equity: $-5K
The 2nd lein holder will mostly likely take a discount on the loan because he is in the junior position. The 1st lein holder will probably not take a discount because he is in the senior position and will most likely $75K at auction. This is a possible short sale because if you can discount the 2nd leinholder to say $10K, then you can still make a small profit from the deal.
You may want to read up more in the Foreclosure/Pre-foreclosure/Short Sale forum. Not all pre-foreclosures can be short saled! Remember, this is a creative real estate investing website. So be creative!
Tanya
Hey folks,
Thanks so much for your input. I know I have long way to go, but I'll get there.
I will continue to read the TCI forums and try to gain as much knowledge as I possibly can.
Thanks again to those who responded.
webscott22