Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
I have flipped in the past via purchase on contract and flip via lease option or contract. I happened to drive by a home the other day that recently had a fire. I inquired about the house with a fireman that worked that call, that I also work with as an insurance agent and found out the owner was rehabbing it to then sell when the fire took place.
This started me thinking about wholesaling a fire or water damaged property? The insurance company will pay the damages, and then I can get the property under contract and flip it to a rehabber or even a fire / water restoration company at a great discount?
I havent put all the pieces of the puzzle together yet and thought I would throw this out there for advice from those that have done something similar to this?
I've sold two fire damaged houses to rehabbers. One was a two story with significant damage to the top story and roof. They were just like any other deal. The sellers couldn't make an insurance claim because they didn't have insurance. This is common where I am with inherited properties and low income areas. Fire damage in my area isn't something that most experienced rehabbers I know shy away from. It's all about price.
Exactly, if it is a good enough deal you can wholesale it. One thing to keep in mind that could make fire damaged houses a great lead. Many will have insurance. If the owner got a payoff from the insurance company, they can sell cheaply as they already got most of their money.
In the situations that K. Marie mentioned, they may not have any other options other than to sell cheaply.
My thoughts on the fire damage part of it is to find out what the insurance company settled for on just the fire damage, not any contents or loss of use.
I am an agent with Country Financial, so I have a call into our claims unit to get specific details about how they cut the check, specifically in the area of loss of use on a primary residence, or loss of rental income on a rental? Some companies pay a specified time frame like 12 months, however ours pays a specific dollar amount. Typically 20% of what the dwelling is covered for on primary residences and 10% of what the dwelling is covered for on the loss of rental income.
I will base the repair costs on just the fire damage portion of the claim that was paid. You will have to get this info from the seller, but they should work with you on this because they want to sell. The reason that I want to know the total amount they were paid on the claim is to to buy leverage in my negotiations.
Keep in mind that the total cost to rehab will most likely be more than the fire damage, as the rest of the home will most likely need updating as well.
My thought is that it should be very easy to get deep discounts and also be able to buy it on contract because the seller has already or will be paid by the lender.
My only area of concern is that this is the lenders collateral, so they will be concerned about making sure their collateral is returned to the state or better that it was in when the seller took out the loan. I also dont know if the insurance check is cut to both the home owner and the lender? If it is a 2 signer check, the lender may want the funds to be used to pay the contractors directly which may be a problem? If anybody has any insight on that issue, please let us know?
I rehab about 5 or 6 fire damaged homes a year, and I buy them all from wholesalers. What would be the best way to locate these potential fire damaged sellers? Should I try to contact the owners of the fire damaged house individually? Or do I need to talk to the insurance agency or bank?