A Seller with No Equity.
BP,
Real quick question regarding a D4D lead that I got a hold of. The owner died in February. Before that they refinanced the mortgage. The lady I spoke to (the grand daughter) said her grandma just wants to sell for what they owe, which is around $171K according to her. Zestimate on the house is $175K. She said it's a 2 level house even though it looks like a ranch from the outside.
My question: Do I have any strategies available to me to wholesale this house? I'm pretty sure I don't but I have no idea what I'm doing so I figured I'd ask.
First off...NEVER go off the Zestimate. They are notoriously inaccurate. ALWAYS go off of actual sold comps from the last 6 months if available (can also be obtained from Zillow). She may be counting a finished basement as a 2nd level. If you check comps and they're still pretty close to having no equity you can look into a Sub-2 deal structure.
Originally posted by @Jim Viens:
First off...NEVER go off the Zestimate. They are notoriously inaccurate. ALWAYS go off of actual sold comps from the last 6 months if available (can also be obtained from Zillow). She may be counting a finished basement as a 2nd level. If you check comps and they're still pretty close to having no equity you can look into a Sub-2 deal structure.
I'm just using Zillow as a quick reference. What is a "sub-2 deal structure"?
I also use Zillow for reference but when it comes to determining ARV I filter for properties sold in the last 6 months and look at how much they sold for. If it's not immediately listed by the yellow dot then you can go to the property and get a good idea of what it sold for by looking at the "Price/Tax History" section of the listing and seeing what price it was at when taken off the market.
A "Sub-2" deal is where you get the property under contract "Subject To" the underlying mortgage. Essentially you're getting a deed putting the property in your name and taking over the payments on the existing mortgage while leaving the mortgage in the seller's name. It can work out well if the seller has a fairly low mortgage payment and the rent rates are fairly high. In this particular case you probably don't have a deal because just the principal and interest payment on $171k at 4% is going to be over $800 so you may have to have $2000-$2500/mo rent to satisfy the numbers for any investor you would wholesale to.
I have to say @Jim Viens pretty much said what I was going to say.
Don't go off zestimates. Those are not accurate. It's a computer algorithm that doesn't take many factors into consideration.
The subject to would be the way to go in this case. At least that's what it looks like.
I do want to add that just because it's a lead, it doesn't mean that it's a good deal. I do find it hard to believe they owe $171k on a house worth $175k. If it's being sold by a grandma as you say, then surely she has had time to build equity in the home. That would be my thought at least.
Remember; not every lead is a deal, and no deal is better than a bad deal!
Yea, she said that the payments are $2000/mo so that's probably a no go.
if she recently refinanced then an appraisal was done and the bank would have only given her 80% so you at least know that an appraisal came back saying it was worth 215 so is there room? Sure but I would say only if it is pretty turn key
Originally posted by @Matt Turbitt:
if she recently refinanced then an appraisal was done and the bank would have only given her 80% so you at least know that an appraisal came back saying it was worth 215 so is there room? Sure but I would say only if it is pretty turn key
Naw man, place looks trashed.