Creative Purchase/Financing Help!!

[Brad Fitzpatrick]

I'm trying to buy a bank owned property that is probably 50% finished and needs a lot of work done. Any creative ideas on how to finance this? I was thinking about how I could get the bank to agree on a purchase price then deed me the property (without paying them or getting a loan) so I could get all the work done on the property so it was finished...Then I could get conventional financing and pay the bank the agreed upon purchase price. Anyone have experience or ideas on this type of deffered arrangement?? Thanks.

[Jon Holdman]

The bank isn't going to give you a deed without paying for the property.

When you purchase a property, the lender will use either an appraised value or the purchase price, whichever is lower, as the "value" for their loan calculation. So, if you're thinking you could get the property, fix it up, get an appraisal and get a loan based on that appraisal, it won't work. Your new lender is going to look at the purchase price and lend based on that.

If this is a small(er) bank, you might be able to get them to give you a construction loan to buy and finish the property. Then, when its fixed up, refinance into a conventional loan.

Hard money is another option. Some HMLs will lend based on the ARV (after repair value). That might give you enough money to buy it and fix it up. Then you refinance into a conventional loan and pay off the HML.

In any case, you're going to need some of your own cash.

Do you have numbers on this property? Price, expected ARV, work required? What's your strategy for the property long term?