BiggerPockets

I have a property I am working. The property is valued at $6 and the foreclosure payoff is $4.2 M. I am in the beginning stages of the transaction with Chase, but I need to see if there is a lender available to help finance the property. If transactional funding is available that would be great, if hard money is available, that would be even better.

Thanks,

Jeff

Jeff-

A couple things.

1. This does not seem to be a short sale if the property is valued higher than loan payoff, unless there is a large 2nd mortgage out there.

2. Transactional funding is for 100% and hard money is usually for 70% with you coming to the table with the other 30%. On this deal, that is 1.26M plus monthly payments. You sure this is what you want?

Sorry left my wallet in my other pants!

Seriously. I am not sure why you think trans funding is the "way to go". You don't indicate that you are flipping the property or that you have prospective end buyers lined up. Unless you have a flip set up, you won't get Trans Funding.

Maybe I didn't understand. You have been pretty vague with the details.
Who "values it at $6M"?

Thank you for your responses:

The value was received by 2 recent appraisals (within last 6 months) and I am looking at a SS flip on the property. The house in an area close to 17 Mile Drive close to where the US Open just took place. The homes in this area are all in the $2M+ range.

Thanks,

Jeff

Dana-

I was looking at doing A-B transactional funding and find a C -buyer with all cash or assist the C-buyer obtaining financing by possibly holding a 15% second.

Eric

I'm not trying to hit this out of the park with a million dollar profit, I'll be happy with $150k to get the deal done. That's reasonable enough for any work that I put into it.

Thanks,

J

I am missing something here. You say that the reason for default was that "the mortgage jumped because of the economy from $8000 to $18000 per month. A loan of $4.2 million amoritizes at $18000 per month at 5% interest. Was the borrower expecting to pay significantly less than 5% interest?

In todays market an appraisal (or two) can be meaningless. On a one of house of this kind the appraisal can be off by 30%. Transaction costs add another 8%. Holding costs can add another 10 -20%. So the $6million house can actually be a break even purchase at $2.5 to $3million! The difference between the $4.2 million purchase price and the $3million bottom line price is risk capital of $1.2 million. I don't think you will find too many people wanting to risk losing $1.2 million unless the upside is alot greater than this deal.

If you negotiate a short sale approval it would be difficult for an end buyer to circumvent you as you are under contract with the present owner. If you can find an end buyer for a back-to-back deal I can likely provide transactional funding. Your idea of carrying a second actually could help with the end buyer, assuming you are able to negotiate enough spread. You want to be very aware that your end buyer will need a mortgage lender, if they are getting a mortgage, that understands this is a flip and does not have standard 90 day title seasoning requirements. I may be able to point you in a couple directions for that end lender.

In a normal situation this would be true. But in a home in this price range an end buyer will be much harder to come across in the time frame you have the SS approval for.
I have seen this happen before on million dollar properties and commercial properties too.
An end buyer on a very high end home realizes an investor with little money or leverage is in the middle of a deal trying to make a spread.
The end buyer waits for the SS approval to expire and goes to the listing agent/seller and says I want to buy this property. If you want to sell it to me, you have to get rid of this middle man. If end buyers are scarce enough, that B investor will see his contract with the seller disappear very fast. The typical real estate purchase contract is one of the easiest contracts to break.
Or it just takes one phone call to a lender to say you would like to give them more on the short sale than this flipper is offering and all the sudden that flipper's negotiations with the lender come to a standstill. Lenders are VERY sensitive to this now.