So I have been working hard on #bp90days through yellow letter marketing and driving for dollars. I've been on three appointments, the first two did not sign a contract when I met with them, however, I am working them through the follow-up. The third appointment is the one I needed some advice on. So after a short meeting with them at their house I get them to sign a contract, below are the details:
3 beds/2 Bath/Basement
Garage converted to office space
-House would need a complete gutting.
-Pool would need to be ripped out of the back.
-Pretty much everything needs to be replaced.
-Rough estimate of 80-100k in rehab
Anyway, they signed the contract under the assumption they owed 98k on the mortgage that they haven't paid on in two years. After some research, turns out they have been keeping some details from me. Mortgage company gave me the following info:
Interest-bearing principal balance: $415,007.25
Non-interest bearing principal balance: $98,000.00
They are facing sheriffs auction soon and have managed to delay it once, with a possibility of delaying it two more times.
Any advice here would be great as I wasn't exactly planning for a soup sandwich like this for my first contract. Oh well, no time like the present to learn.
@Christopher Gable great work on getting those appointments! Don't discount that. Keep up the great work.
In regard to your question, if the Sherrif's auction is already scheduled, it is usually too late to perform a short sale. It takes a long time to foreclose anywhere in the US and it looks like these homeowners are in the twilight of their ownership on this property. The only way you are going to buy this home is if you buy the for the total judgement balance or if you buy it at the auction. 90% of the time, the banks representative will start the auction at the price of the total judgement balance. If nobody else bids, then the bank "buys" the property back, cleansing the property of all junior liens, evicts the former homeowners and lists the property with a Realtor who specializes in REO (Real Estate Owned) on the MLS or Hubzu or Auction.com, etc. This process allows the bank to also make a valid claim on their mortgage insurance.
My recommendation for going forward... Short Sales can be a great way to buy property at a steep discount with no competition but you have to catch them way before an auction date is scheduled. If you get contacted by a homeowner who is under water, make an appointment with them, and make sure a Realtor who specializes in short sales attends. In order for you to perform a successful short sale, you will need a realtor to list the property. Who pays the realtor? The bank. Who pays the seller's attorney? The bank. Also the bank will often times pay a relocation bonus to the seller to move out of the house and assist with relo expenses (sometimes to the tune of several thousands of dollars). The other benefit to the seller is a Short Sale is much less deleterious on their credit than a foreclosure.
Hope this helps!
Sounds like a short sale. There may still be time depending on the investor guidelines. Sale dates are often postponed depending on an active work out option status and investor/servicer guidelines. Depending on borrower actions such as BK or in responding to the judicial foreclosure, more time can potentially be obtained too.
Are you looking to purchase this property or whole sale it?
Your short sale offer once accepted by sellers can stall Sheriff Sale. It needs to be submitted by a real estate broker who is knowledgable on short sales. It sounds one can not get a mortgage with the condition so cash and quick closing is my approach. If they have not paid mortgage for two years, I suspect they have not paid property tax, insurance or income tax either. Expect more surprises.
Whatever you two agree is not what the bank thinks. All lenders need to make sure the short sale is known on the market, advertised and hopefully on the mls.
Lenders have their agenda and will counter back later selling you the market price when they are ready often way over what you want to pay. Good luck.
If the arc is $300k the lender will Never approve a $112k price. Even if it Really needs $100k in work, unlikely the lender would even go down to $200k.
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