I am a new real estate investor from Rhode Island and am hesitant to make a short sale for my first deal. I have extensively tried to see how the property I am looking at would not work financially short term and long term but have not been able to. The property is assessed at around 140k (3Bed/2Bath with 2000Sq ft of living space) and the offer put in is 92k (they were asking 95k) with 2500 in closing costs. We have been approved for a conventional loan with 3% down with mortgage insurance dropping off in 3-5 years so will bring my our total monthly payments (including everything) down to $750-800 a month. renting it out in a few years we should have even more equity and be able to cash flow about $400-500 a month or sell to make a great profit. Looking at exit strategies it seems we would be in a pretty good position to sell, lease to own, or rent in 1-3 years when we purchase another property. The neighborhood is good with much higher priced houses selling frequently as well. Any advice/tips on this deal? There is no rehab required and is completely move in ready. We are sick of renting and getting nowhere so this property seems perfect for the time being and will allow us multiple options to cash out on the deal later on and fuel future deals. Are we missing anything? Any advice on additional things to look for? I have checked property records ( house was built in 1960) and everything else I legally could and nothing out of the ordinary has come up. At this point we are waiting for the bank to accept the offer.
good luck. I have been waiting for over 2 months now. The agent never seems interested with this property when I try to get any info from her
Who is doing the actual negotiation with the bank?
How many loans, judgments, liens, etc.
Do you know if it's a Fannie/Freddie/FHA/VA loan?
Do you know exactly what the "$2500 in closing costs" includes/excludes, as your closing costs will be more than that, or did you ask for $2500 in closing costs from the shorted bank?
Many realtors simply don't have the patients dealing with Short sales, simply because of the amount of time it may take to close it.. They typically will have a third party negotiating with the bank while they do what they know, showing the home (Selling Homes). Short Sales can be very lucrative when you are the one handling the negotiations with the bank or you are choosing Someone too negotiate it on your behalf for a few reasons, especially if your strategy is to flip the home because at the same time you are negotiating with the bank and submitting your offer you are willing to pay for the home, your realtor is continually showing the house to potential end buyers for you to flip it too. Other advantages is the bank will schedule the BPO through you, so you can do the walk through with the agent doing the BPO and this can be very helpful because you can influence the pricing opinion of this agent by pointing out anything helpful that might effect pricing of a home as in repairs, crime stats, school districting, whatever it maybe that would effect that opinion downward. Typically speaking and depending on which bank or banks are involved your looking at anywhere from 7% to 18% discounting off what the BPO comes in at. Another advantage is timing. Negotiating Short Sales you have some control as too the timing of closing the deal as they are many stalling tactics you can employ. So whether you are buying to hold or wanting to flip it with minimal carrying cost, it's to your advantage as an investor to control the submission of documents and negotiating the deal yourself opposed to some firm hired by the real-estate agent. Many agents will be open to you handling the negotiation if you let them know you intend to increase their commissions by allowing them to earn on both the purchase and the resell.. Good Luck with this one Tim, I hope all goes well.
1) The assessed value may be completely irrelevant to actual market value.
2) You can never know for sure where the market will be several years from now.
3) As far as I know, once you have PMI, you can no longer get rid of it.
4) I would expect 25%+ down payment unless you plan to live in the property.
5) How do you plan to have 'even more equity' in a few years? Payments go almost all to interest for the first half of the loan term.
The state of Maryland no longer allows Realtors/Agents to negotiate short sales. They now require a licensed short sale negotiator to do that. Due to that fact I no longer deal with short sales in Maryland either as an investor or as a Realtor. Putting in 6 months of effort to have it not go through was bad enough when I was able to be a part of the negotiation process, but now that I am cut out it really just isnt worth my time to deal with them.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing