Property Manager · Florence, MS · Member since 2019 · 20 posts · 4 votes
Looking for some guidance and advice. (Long Post)
I have a homeowner that called me needing to get out of her home ASAP. She has a very ill husband and needs to finish her move to Florida because of his health. She has a 4/2 that is in one of the best zip codes of Jackson, MS and is/was lake front, but that still means it may never appreciate. The home allegedly appraised for $170k in January. Since then the person who owns the land on the back side of the lake opened the levee and drained it. Now the lake front property is dirt front property and is worth significantly less. It’s currently listed for $130k and hasn’t sold in 2 months. The listing agent, whom I do not know, suggested to the homeowner to call me.
Problem is, there’s a reverse mortgage with a $106k balance and the home is in excellent condition with a newly updated kitchen. I see no way to force much appreciation through rehab/upgrades. The home should rent for around $1,200/mo. Is there a way to subject to a reverse mortgage where this may work as a rental, or how else could I approach this?
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
What do you feel the home is worth AS-IS? Who did the 170k appraisal, was that the mortgage servicer? @Carl Bo Smith This is simply a standard sale if it's worth more than the amount owed 106K+ and if somehow the servicer thinks it less it could go short. Sounds like the home has equity if it appraised at 170K?
Flipper/Rehabber · El Dorado Hills, CA · Member since 2017 · 31 posts · 8 votes
6y
Hi there Carl,
This is a very unique situation. Have you or the homeowners checked the contract for a hammer clause? Just an idea of where to start since mortgages can range from state to state and lender to lender. I am interested in what other investors have to say.
Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes
6y
@Carl Bo Smith Unfortunately no you cant do a sub 2 on the reverse mortgage. Once the mortgagee is no longer occupying the property as their primary residence they have 12 months to pay off the debt (usually by selling the property) or the lender can foreclose. Your best bet would be to approach the agent about doing a short sale. Its a much more straight forward process with a reverse mortgage. The lender will order an appraisal be done and they will accept an offer at 94% of the appraised value. The problem you are going to have is if the property doesnt have anything to lower its current value the bank is going to want the full amount owed. It doesnt sound like there is much equity here if the bank wont accept less than the 106k thats owed. Also sounds like there is no value add opportunity so what would be the exit strategy?
Property Manager · Florence, MS · Member since 2019 · 20 posts · 4 votes
6y
Lydia T. Yeah, I've found out that the sub 2 route wouldn't work since my post. I am still new to this wholesaling and investing (less than a year) so this is the first RM I've run across. I'm also afraid the short sale option won't work because the payoff is 81% of the appraised value so there's a little equity there. If I could get the financing the property should work as a rental but I have a couple of things going right now that has my capital tied up until I can refi a BRRRR in a few months. I have an appointment with the seller tomorrow morning and was trying to see if anyone else had any other ideas.
Property Manager · Florence, MS · Member since 2019 · 20 posts · 4 votes
6y
@Stephanie C. I’m still somewhat new to this. Tell me exactly what the hammer clause would be with a reverse mortgage. I know a little about what it is when referring to insurance.
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
What do you feel the home is worth AS-IS? Who did the 170k appraisal, was that the mortgage servicer? @Carl Bo Smith This is simply a standard sale if it's worth more than the amount owed 106K+ and if somehow the servicer thinks it less it could go short. Sounds like the home has equity if it appraised at 170K?
Property Manager · Florence, MS · Member since 2019 · 20 posts · 4 votes
6y
@Brett Goldsmith Well it turns out that there hasn’t been an appraisal, only what the listing agent said that it’s worth. I just left the house and I feel like it would appraise for around $90k maybe as low as high 80’s. Jackson, MS as a whole is very low property value and until a lot changes in the city I can’t bank on any appreciation. However, this is in the safest and most sought after zip code on the south side of the city and I’m confident the property would bring $1,000 - $1,200 a month in rent with just new paint and carpet. I’ve faxed a release to the RM company to get the full payoff and rate of interest accrual.
Property Manager · Florence, MS · Member since 2019 · 20 posts · 4 votes
6y
@Brett Goldsmith Yeah, I’m gonna look a little deeper into it. I think if it appraises closer to where I’m thinking it will then it should hopefully work out.
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
@Carl Bo Smith Let me know if you have questions. They want 95% of appraised value for short sales with reverse mortgages. Typically you are not allowed to assign short sale contracts so wholesaling short sales. I wanted to mention this as your post mentioned wholesaling but it was unclear if you wanted to buy this for yourself.
@Carl Bo Smith Let me know if you have questions. They want 95% of appraised value for short sales with reverse mortgages. Typically you are not allowed to assign short sale contracts so wholesaling short sales. I wanted to mention this as your post mentioned wholesaling but it was unclear if you wanted to buy this for yourself.
Even if you close a reverse mortgage short sale deal, it is still not a good idea to immediately resell it.