Property in Preforeclosure with lots of EQUITY!

Real Estate Deal Analysis & Advice
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Property in Preforeclosure with lots of EQUITY!

Account Closed
Real Estate Broker · Seattle, WA · Member since 2008 · 121 posts · 12 votes

We been in contact with OptionOne Mortgage on a property that is in PreForeclosure , they are mortgaging for 283k with arrears.

The property is in a good neighborhood but the property is run down and lots of junk in, on, and around the property.

The Comps for the neighborhood is 455k-510k
These Comps are in saleable condition though. Our property is a 1929 Junker.

The Seller is very motivated and would agree to sale with minimal profit to himself

I was considering trying to assign the property to a builder for 25k or Trying to Short Sale it also...if possible?

Any & all input will be great Thanks Everyone!

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Eric Foster
Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
18y

So lets say you pay $350k... after closing costs you are in at about 360k plus lets use $100k to repair... you are now at $460k...

To get to the point quickly... If you list it for 500k and sold it for that amount... pay a Realtor commission and closing costs again... and pay say 3-6 months of holding costs, mortgage, taxes and insurance... you would lose 10k-15k.

Something has to change... Also need to get exact with the numers...

Guesstimates = No Money...
No money = Bad

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  • John Michailidis.
    Real Estate Coach · Sarasota, FL · Member since 2008 · 36 posts · 1 vote
    18y
    Originally posted by "seattlegogetter":
    We been in contact with OptionOne Mortgage on a property that is in PreForeclosure , they are mortgaging for 283k with arrears.

    I'm not sure what you're saying -- what is the loan payoff?

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  • Eric Foster
    Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
    18y

    Mortgage Balance… Totals past due plus attorney fees?

    Cost to repair? 2k, 20k, 200k?

    Seller minimal profit? 2k, 20k 50k?

    More specifics please...

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  • Eric Foster
    Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
    18y

    So lets say you pay $350k... after closing costs you are in at about 360k plus lets use $100k to repair... you are now at $460k...

    To get to the point quickly... If you list it for 500k and sold it for that amount... pay a Realtor commission and closing costs again... and pay say 3-6 months of holding costs, mortgage, taxes and insurance... you would lose 10k-15k.

    Something has to change... Also need to get exact with the numers...

    Guesstimates = No Money...
    No money = Bad

    1Reply
  • Eric Foster
    Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
    18y

    An investor buying it wholesale will do the same “quick math” and come back with a quick "No" as their answer...

    Rework the numbers… i.e. Offer less, reduce costs to rehab, sell to end user, etc

    1Reply
  • John Michailidis.
    Real Estate Coach · Sarasota, FL · Member since 2008 · 36 posts · 1 vote
    18y
    Originally posted by "EricFoster":
    Guesstimates = No Money... No money = Bad

    :lol: Ha! Truer words of genius have never been spoken . . . I bow down before you!

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  • N.A N.A
    Banker · MD · Member since 2008 · 30 posts · 1 vote
    18y
    Originally posted by "seattlegogetter":
    Loan Payoff is Est. $282,201.33 Total all fee's

    Seller wants 350k for the property (still not executed)

    Repairs & Rehab is 90-110k guesstimates

    The Home is 800sqft on a 5000 Sq ft lot.

    If I can provide anything else let me know, Thanks for all your advice everyone

    First - get REAL estimates.

    Second - it's too tight if those estimates are correct or close. You'll lose money unless you can purchase for closer to 300k.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    18y

    Its worth $450K and needs $100K of work, right? And you're going to wholesale it, so you want a cut and still leave enough profit for your end buyer. I think you need to be closer to $225K on the purchase price.

    I have other posts where I break this out in more detail. But, if a rehabber buys a house and has rehab costs that come up to 70% of the final sales price, do it in six months, use hard money and some of their own for the deal, they will stand to make about 12% of the selling price after the closing costs on both ends and the holding costs. That's about $55K in this case. If you buy for $300K and flip it for, say, $310, the rehabber is going to lose money.

    At $350K like the seller wants, there's no deal. $350K + $100K rehab = $450. You lose all the costs, which in this case is going to be something like $60-70K.

    Jon

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  • John M.
    Real Estate Investor · Rancho Cucamonga, CA · Member since 2008 · 78 posts · 2 votes
    18y

    hey seattle,

    so how much would you get out of this deal (if you haven't already provided the numbers)? Is it a simple subtraction of the your buyer's offer and the purchase price?

    0Reply
  • Eric Foster
    Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
    18y

    Glad to hear it worked out!

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