Empty Lot Money Pit

OP

Investor · Tyrone, GA · Member since 2012 · 16 posts · 6 votes

Pat M,

I am trying to negotiate with the bank (BBVA) to cram down the principle as David suggested. The underwriters have my hardship letter situation under review. I am doubtful they will do anything unless I short sell.

I will post the results.

James

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

I know some people who have been successful in cram down and even made cash settlements to satisfy an under water mortgage. One paid 11 cents on dollar and another paid 25 cents on the dollar. The bank issued a satisfaction piece after the agreed payment was made and the property was then free and clear. There were multiple lenders, some national bank other regional banks and national mortgage companies that all have done this practice recently.

The alternative to the bank is that you walk away, they have to foreclose and THEN they lose a lot of money and have all the hassle of marketing the property and paying taxes and other expenses during the holding period. You are actually reliving the bank of the extra burden and costs of a foreclosure.

David Wurzel

Real Estate Agent · Jacksonville, FL · Member since 2015 · 252 posts · 132 votes

Deed in lieu would be my exit.

I have been to the Ranch many, many times serving foreclosures on both sides of the road. My thought on the issue out there is simply location. Way too many vacant lots that people can choose from and too far away from everything. Then, if you really want a cheap lot you can pick one up at the tax deed sale for a few thousand. Even still, who wants to do that when you have HOA fees out the wazoo to pay for the few houses that have been built out there.

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

@David W.

One of the examples above the owner did offer a Deed in Lieu, but was turned down. Many banks don't want the property, hassle and expenses. And in the example the bank chose a satisfaction piece over a DIL.

OP

Investor · Tyrone, GA · Member since 2012 · 16 posts · 6 votes

David W.,

I know, I know :(

My wife hates it out there because of the distance. There are some really nice homes there were built recently. Probably because they were in the same situation as me. I wouldnt mind building a custom home there if my bank works with me. Hell I may even look into some of the tax deed sales in the area. The HOA is 83 per month.

It looked like such a good deal in 2007.

OP

Investor · Tyrone, GA · Member since 2012 · 16 posts · 6 votes

EMPTY LOT MONEY PIT UPDATE

BBVA finally responded to my hardship request to lower the principle or take back the loan on the lot. The underwriters are now stating that I do not have enough income to make the payments so they cannot modify or do anything with loan.

The funny thing is that six months ago they would not modify the loan because I made to much. Now that I am self employed they will not do anything because I make to little. I have not missed any payments but it seems that is what they are encouraging borrowers to do before they will act.

The service department said I may appeal the decision with any new information that may have changed.

I now believe it is a waste of time to try and negotiate with the banks or at-least in this case it was.

PLAN B: Find a builder and throw a house on the lot and try to sell it that way.

PLAN C: Let it go into foreclosure and bite the bullet regarding my credit score.

OP

Investor · Tyrone, GA · Member since 2012 · 16 posts · 6 votes

EMPTY LOT MONEY PIT UPDATE

BBVA finally responded to my hardship request to lower the principle or take back the loan on the lot. The underwriters are now stating that I do not have enough income to make the payments so they cannot modify or do anything with loan.

The funny thing is that six months ago they would not modify the loan because I made to much. Now that I am self employed they will not do anything because I make to little. I have not missed any payments but it seems that is what they are encouraging borrowers to do before they will act.

The service department said I may appeal the decision with any new information that may have changed.

I now believe it is a waste of time to try and negotiate with the banks or at-least in this case it was.

PLAN B: Find a builder and throw a house on the lot and try to sell it

Plan C: Let the lot go into foreclosure and bite the bullet that my credit score will take

Russ Goodman

Real Estate Agent · Cape coral, FL · Member since 2015 · 24 posts · 2 votes

Has anyone considered a1031exch with someone needing to shelter their profits? I may all wet with this concept but it is done. It is more complex than I am suggesting, but it is something to check into. Just some thoughts.

Russ Goodman

Real Estate Agent · Cape coral, FL · Member since 2015 · 24 posts · 2 votes

Let me try to explain my cryptic post. I'm pulling references from an excellent book by the author William Tappan called "Acquisition and Exchange Techniques". the Examples he gives by this time are a little dated, but the concepts are still superb. Josh, not knowing your asset base, have you considered offering the bank a substitution of collateral? you could give them the choice of accepting a different collateral for a possible non-performing note on their books if they don't cooperate. If they accept it, they then must release your lot. to develop, sell, exchange, etc. You could purchase another asset, say an income producing one that would cashflow to cover the mortgage, and then substitute. I would give you more details, but I can't lay my hands on my copy. it's in the abyss of boxed up books. Also another concept from this book is to arrange exchange for the mortgage relief. I would suggest finding an exchange group and pose your situation. they are very creative problem solvers. Good luck and be creative!

Russ Goodman

Real Estate Agent · Cape coral, FL · Member since 2015 · 24 posts · 2 votes

Oops sorry I meant James.

Mark Gallagher

Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes

Unfortunately it's time to start missing payments. If you had a tenant who paid on time every month, would you even think to lower their rent?! Your credit score will take a hit, but in my opinion you're pissing money away anyways. Might as well keep your money and lose your credit. Plus, since you're moving to self-employed you won't be able to get conventional financing now until you have 2015 and 2016 tax returns filed for self employment. No better time than now to stop paying really. Hopefully they'll realize it's in their best interest to work with you rather than get some vacant lot that no one wants.

Sounds like some people have been building recently. If you see eventual upside, sounds like you should be scoping up other development lots at tax sale.

Greg Christensen

Phoenix, AZ · Member since 2015 · 22 posts · 7 votes

Let's just say I'm an unfortunate member of your club so I know your pain. Mine is a bit more complicated as I secured it with a HELOC so there is no lien on the property from the bank as I paid cash from the line of credit. Regardless, a few other things I'm trying (and still hoping for success):

1. Listing it on Craig's List every week.

2. Have contacted adjoining neighbors to solicit any reasonable offer.

3. Contacted the HOA for relief on the HOA fees.

4. Contacted the county for relief on the taxes.

5. Am currently in the process of identifying other properties I want and offering my lot as a barter.

I'm also looking into tax benefits if I were to pay off the loan and give the lot away as a charitable donation.

Best of luck to you. I'd be interested to hear how your story ends.

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

@Greg Christensen

list it every DAY on craigslist!

Richard C.

Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes

People suggesting building on this should take a look at the aerial shots on maps.bing or google maps. It is impressively empty. And there is a 2 acre lot for sale on the MLS for $10,000.

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

I would not say build. To me that's good money after bad. And I speak from experience, I currently have left maybe 60 lots and land, or lots of land.

Account Closed

Professional · Jacksonville, FL · Member since 2015 · 397 posts · 34 votes

Originally posted by @James Floyd:

I only posting this for general thoughts and hope there is something I haven't thought of. I am not asking for legal advice just opinions if you were me. Any feedback would be appreciated.

Ok here's my little situation. In 2007 purchased an 7.7 acre "estate lot" in the new Jacksonville Ranch Club equestrian community. Like most people I didn't realize the real estate bubble would pop and thought it would be a great investment. I financed the lot with a conventional loan thinking I would be easy to resell.

Paid 175,000.00 Its on a 10 year loan at 6.5 interest. I still owe 110,000 today with a 1,700 monthly payment.

A lot of investors purchased land there and are in the same situation. A few families have build homes but its mostly a nicely planned out ghost community.

I had it for sale since I purchased it. It is only worth maybe 40k. I could keep paying and hope for the best. I could reach out to builders and try and negotiate a deal for a spec home (risky). I have offered owner financing but that difficult on a lot.

How would a savvy investor turn this sinking ship around?

It really depends on what is in the area and what some of the uses of the property can be based on the zoning. Any address for the property? A constant $1700 monthly cash outflow might sting after a while.

John Hickey

Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes

10y

Been a while and I was wondering if you were able to figure something out?

Jared Henry

Member since 2021 · 1 post · 0 votes

5y

@James Floyd what was the outcome of this? I own a lot here and can likely find a buyer. I know quite a few locals in the area looking to buy my lot but I feel confident in my investment. I bought my lot at the lowest point.

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

5y

I've sold hundreds of lots over the years. Five years ago, as noted above I had 60+ lots left. To update, I sold 3 more lots this year already and have 15 lots left. 4 are listed for sale and 5 more will soon be listed. 3 more have some work to do in March, then they will be for sale. The 3 left have some more work to do to ready for listing. Just like rehabbing a house, lots often need some rehabbing. Sometimes lots need, rezoning, variances, perk test for septic, utility service, road access, right of ways, historic clearances, or some other action to enhance the marketability of lots and land. Sometimes a lot needs nothing to remarket, but the key to profitability just like houses is to do something that increases the value of the property, whether it is a house or land.