Newie scenario

OK..I've begun my RE investing education by joining Biggerpockets and visited my first county courthouse. Luckily for me the two courthouses I visited were not computerized so I spent a couple hours familiarizing myself with the documents. Definitely not as simple/easy as I interpreted from others. When I got back to my computer I looked at a county that was "digital", and still found it to be labor intensive (relatively speaking).
So this is what I've gathered at day 3 of "the rest of my life". Please feel free to correct/enlighten me at any point:

1. Joe Doe buys his first house..a "Deed of Trust" is filed with county courthouse. In this deed I found original "Purchase Price".
-- question 1: Is original purchase price significant? I would assume if homeowner wants out it is irrelevant where as the bank wants what is owed at the bare minimum.
2. Joe Doe falls on some hard times and fails to make several payments. An "Assignment of Lien" is filed at county courthouse by the "Grantor".
3. Eventually an "Appointment of Substitute Trustee" is filed at county courthouse. This filing has the data the property will be auctioned off.
--question 1. Is there a specified period of time between an "Assignment of Lien" and "Appointment of Substitute Trustee"?
--question 2. Do I have to contact the "Appointed Substitute Trustee" or the homeowner to make an offer before auction date?

In regards to "Is it a deal" I'll use some numbers on one of the properties I found and ya'll tell me if my logic/thought process is correct...

- Initial loan amount was $119,918
- Original deed was Mar 06 so amount owed is approximately $114,000-116,000 (I just punched in couple different interest rates and looked at amortization from 5/06 to 3/09)
- Looking on Zillow I see houses selling around $105,000..Can I assume $105,000ish would be FMV? If that is the case, I can/should offer 70-80% of FMV. Based on that offer I could make between 21-31K if I had a buyer? If I wanted to rent it I would have to get 1400-1700 (based on 2% rule)...

That is what I've come up with based on what I've heard and been reading.. I look forward to any feedback/suggestions anyone is willing to provide.

Aaron

Edited: 06/26/2010 at 10:10AM

Eddie Ziv

Real Estate Investor · Studio City, California

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Oct 21 '09, 01:59 AM

Aaron, you have some very good questions in your post. I will let others to answer most of them but I will allow myself to respond to the last part.
First, Zillow is not a good source of info for FMV when it comes to comps. In most part of the country, they are about 1-3 years behind. You need something more accurate like 3-6 months comps which you should get from a realtor of your choice.
Second, I'm not sure if 70%-80% offer of the FMV would be sufficient. In this market and considering any rehab cost, that may be too high of an offer I'd say 60%-70% is more like it. If you want to rent it and you want to base your rent on 2% rule, your out of pocket expense (Including purchase) shouldn't be more then $85,000. That, if you can rent it at the higher number of your range i.e. $1,700. However, that rule is sort of "cash flow slam dunk" If the area has a good potential for appreciation and it is a long term investment, you don't have to use the 2% rule.

Edited: 06/26/2010 at 10:10AM

Aaron Aaron

Real Estate Investor

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Oct 21 '09, 07:35 AM

Thanks Eddie for the info. Is it usual to just ask any realtor for a comp report, or do they expect some sort of return? I would assume that if they do comp reports for you that you try to use them when a realtor is needed.
Also, if I have an established relationship with a local realtor, can they do comp reports for other areas outside of their local area?

Thanks again,
Aaron

Edited: 06/26/2010 at 10:10AM

Scott R.

Real Estate Investor · Amarillo, Texas

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Oct 21 '09, 08:40 AM

Aaron,
Comp reports (CMA's) are fairly simple to produce for a realtor, they plug in a few numbers, bedroooms bath sqft address and generally select how far they want to search from that address (1 square mile or such) and the MLS produces the report. Most realtors would not charge for such a report, but they are looking to do future business, as thats how they get paid. By "local area" I assume you mean specific neighborhood. Any realtor should be able to get CMA's for any house in there MLS provided area, which would generally be the town or city, maybe small ones close by.
-Scott

Edited: 06/26/2010 at 10:10AM

Scott R.

Real Estate Investor · Amarillo, Texas

434 posts
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Oct 21 '09, 08:41 AM

Also what city and state are you located in!?

Edited: 06/26/2010 at 10:10AM

Aaron Aaron

Real Estate Investor

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Oct 21 '09, 09:01 AM

Yeah, I kinda figured that was how realtors worked. I am currently located in Greenville, TX.

Edited: 06/26/2010 at 10:10AM