Potential Deal or Short Sale advice ???

Question

I'm still new in real estate investing so I'm looking for advice on a potential deal. Luckily my marketing is paying off and I have friends bringing me potential deals. Here is the situation. A seller who wants to get out of her home called me. She has a home equity loan of $56,000 and no other leans on the property. She is only 2 months behind in payments but wants out of the area asap. My first question being that it's only a home equity loan will the bank even consider a short sale? Also this home currently is a 2 story duplex but each unit only has 1 BR. To make it more appealing to potential buyers after the rehab the property should probably be converted to a single family 3 BR, 2 Bath home. The ARV value with comps and the neighborhood should put this home at around $100,000.

With that said any advice on how one should proceed on this potential opportunity ???

Tarl Yarber · Answer

First off congrats on your marketing and getting that phone to ring!

To answer your first question: yes, banks will consider shortselling a HELOC. Funny story, had my shortsale negotiator talking with a bank who was the equity line on a property, only mortgage for the house so they were in first lien position. Throughout negotiating we find out the reason they were fighting us is becausw they thought they were a second lien and didnt want to get erased, we had to inform them they were the first and after that things went a lot smoother.

It sounds like you may be correct on converting to a single family, but i would need more details to be completely on board.

At 55k on this duplex heloc, do you know the as is value? Shortsales look at repairs for what it would take for minimum standards not investor flip standards. If properties in the same condition sell for more than she owes currently, with selling fees included, then a shortsale may not happen. You will want to have a good shortsale negotiator who will meet the bpo agent at the property and will also encourage you to get a contractor bid to help submit to the bank for justifying the purchase price.

Hope this makes sense and hope it helps.

Mark Denning · Answer

Thanks that's a start !!!