I couldn't sell this house, so I wanna buy it cheaper from the bank.

5 Replies

I have a contract from a motivated seller that was 4 mos. behind. It was a purchase contract with it contingent to me finding a buyer. I was trying to find someone to rent to own this house, Here is the scenerio.
Purchase from seller:
5 BR, 3 BA on 3 acre.
House was recently renovated from insurance money.
Looks new and ready to move in.
Buying for mortgage amount of $187,000
Appraised for $250,000 in 2008.
PITI of $1,850 mos.
2 yrs left of Prepayment penalty.
$7,000 behind

Sell to buyer:
via rent to own asking $1,850 mos with $10,000 down earnest deposit.
Selling price of $229,900

I marketed for 1 month before the bank took it and winterized the house. Only 6 bandit signs were used and I received an average of 8-10 calls a day on this one house. Damn, those sign work well. No one bit the hook due to the high monthly payment or down payments and to most, Both. Well guess what? I have plenty of buyers for lower priced houses when I do a rent-to-own.

Anyway, I've been talking to the bank with the house to see if I can make an offer to them. I offered them $115,000 two weeks ago when they called, but said that offer was too low. They finally called back today and said if I want it, they'll take $160,000 and no less. I thought about it and asked them to pay closing cost at that offer. They want me to put it in writing and they'll most likely take it. That's $27,000 less than what is owed to them.

I know I can still sell it on a rent-to-own or seller financing for $229,900. That's a $69,900 profit.

My question is, is this a good deal?

How can I purchase this house from the foreclosing bank without putting my personal guarantee on this house?

Should I pursue this?

Is there a creative way to buy this house?

Let me know, Thanks

How are you paying the $160,000? Conventional financing using 25% down? Do you have that financing lined up?

So you're going to put $40,000 down and finance the remaining $120,000, $645/mo for P&I. From there, you're going to rent it?

$10,000 down payment reducing your cash outlay from $40,000 to $30,000... $1,850 a month (you can really get that for rent in Louisiana??) gives you a little less than $300 a month in cash flow. $3,600 / $30,000 = 12% cash on cash returns.

Not great returns... and if you can't really get the $1,850 things get dicey. Everything I've read about rent to own says you only have like a 10 - 20% conversion rate, 80 - 90% of the time it stays a rental and you just get to pocket a down payment.

I think you're better off trying to cash it out even if you have to sell it at $200 or $210,000. After $20k in closing costs, you'd still pocket $20 or 30,000. The numbers just don't work out for a long term rental hold IMO.

It does not seem highly likely that the property value has only fell a little over 10% since 2008. Secondly it does not seem highly likely the bank would take a 14% loss and leave $69k on the table.

That being said, to answer your question, if you conventionally finance it, they you will have personal recourse. Assuming you do not have access to a commercial line of credit with no recourse. You will have to put money down to finance it as an investment property.

You had the correct idea of finding a exit buyer via contract assignment or some sort of wrap but if the bank will not allow an assignment then you might have to take the house on personally and re-sell.

I have a couple of concerns. How is it that the bank took it back being only 4 months behind ?

Secondly, how are you in contact with them directly?

Is your exit strategy solely to rent/sell on owner financing terms or could you just be happy with a traditional flip to retail buyer for profit?

I wouldn't even consider an appraisal from 4yrs ago. I would base my decision on comps within the last 3 months within a 1/2 mile radius for my conservative taste(this is a personal preference).

If the property is truly worth close to or around 230k and you're picking it up for 160k. I would just acquire the house however you see fit. Personally, I might pick up a HML instead of conventional, since it doesn't need rehabbing, turn it right around and sell it retail.

I wouldn't worry about percentages, COC returns or rental rates. I would just knock it out of the park and move on to the next one.

Thanks for all the responses.

The banks took it back close to 6 months of non-pay. It is a small local bank that I've been keeping contact since I signed a purchase contract with sellers. The loan officer kept me in the loop when something happened to the house.

I had plans on buying via conventional financing, but don't really want to go that route. Don't know how to go about this transaction without tying up my personal resources, as I'm getting ready to build a home for myself and currently rehabbing houses with the little amount of money I have left.

It's just too much money to leave on the table.

I know I can get $230k via seller financing. No way under conventional financing. Therefore, I'm stuck on how to go about this transaction with the bank.

Anyway to acquire this house from bank using creative means?

Have you not been reading others responses? One way to get this is go with a hard money loan or get a private pipeline loan at a lower interest rate for a longer period of time.

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