All Forum Posts by: Tom Mole

@Josh B., take a few minutes and go back to the basics. Just because a property is in foreclosure does not make it a good deal. As @Isral Konopasuggested, make your offer based on the numbers and good business acumen, not on what the seller will accept. 

#1 BIG question: 

Why do you feel this is a good deal at $115k? What is your analysis?

• Is this a HUD foreclosure?
• What have comparable properties sold for recently in the area?
• What do you plan to do with the property, if your offer is accepted?
• What condition is the property in?
• Does anyone live there?
• Is the property "under water"?
• Are there back taxes pending?
• Who's selling this, the homeowner or the bank? 
• Is there a realtor listing the property?

That's plenty of questions for now. Without knowing these issues, at least, no one is going to be able to tell you if this a good deal. Do me a favor and post back answers to as many of these questions as you can and ask for help with the ones you don't know how to answer. Put "@Tom Mole" in your reply so that I get a notification and I'll help you evaluate the deal through the forum thread. That way others can learn whilst you do. DO NOT post the site address, names or phone numbers. 

Let's have fun with this!

@Braden Hobbs I believe I was remiss in failing to make one further admonition. Be careful about offering to "help" the owner in foreclosure. 

You and I know that despite your profit motive, you have altruism in your heart, but you don't want to find yourself trying explain your altruistic actions to a judge. HUD has been looking closely at complaints from the foreclosed where someone offered to "help" them.

To be fair there have been a lot of scammers helping folks out of their homes. Be not one of them neither by omission nor commission. Be instead clear about your reason for contacting the distressed owner. You are a real estate investor who makes a living "working" with homeowners facing foreclosure to find the best possible resolution to their problem. If you underplay your profit motive or overplay your altruism and someone loses his home, even if he originally agreed to it and signed all the necessary documents, you could end up answering a complaint. That would be somewhat unpleasant.

This ought not frighten you away, but rather better prepare you to be successful. Every successful business person eventually gets sued. The best prepared are usually victorious.

Remember, you "work" with homeowners, you do not "help" them.

All the best.

First, allow me a moment to say welcome the BP and foreclosure investing.

I find that owners in foreclosure mostly come in one of two mental states. They usually start out in denial, figuring that their situation is temporary or in some way not real. As the auction looms and time has passed, every investor in the world will have hammered on them until they become jaded. You can reach them as they transition from denial to jaded. For this reason be prepared to make a lot of calls and face a high level of rejection. That's not to say don't bother, rather get your "GRRR" on and do it.

You're gonna hear I lot of "no's", so as @Ned Carey says, don't invest too much love investigating a property until you have some progress with the owner. Do try to connect with the owner early and often. It's usually better to talk to him before he signs a contract with a realtor, if that's possible. When you speak to him find out if he's underwater. It's significantly more complicated if the owner needs to short sell. Again, don't let that discourage you, instead get even more "GRRR" on and go for it.

There's a number of ways to invest in the foreclosure market. Buying preforeclosures is pretty straight forward way to get started. I hope this helps. Scream if you still have questions. Go find those default notices and market like a madman. Send letters, make phone calls and even better knock on some doors. Persistence and personal contact works best in this market.

Luck is for rabbits, so instead I wish you success.

@Jack B.  congratulations on your success to this point. You seem to be doing well and you're looking to add to your portfolio. My hat's off to you.

Whether or not you should invest in these two candidate properties however leaves me with more questions than answers. 

• Are you planning to purchase both properties, if all goes well or you trying to decide between these choices? 
• Have you figured your expenses other than cost of money, such as taxes, insurance, vacancy and reserves for the unexpected? 
• What is the market vacancy rate, particularly in the less savory neighborhood?
• What are your repair cost estimates?
• How long do you intend to hold these properties?
• Are you counting on passive appreciation to make the deal?
• What are you doing for to protect your assets? 
• Do you have property management?

First of all, the only appreciation I would depend on is forced appreciation. I love passive appreciation, but since that is not under my control, I don't factor that into my investment calculations. That being said, if you had to pick between these choices, I might use the possibly of appreciation as a tie-breaker.

Along the same line of reasoning I wouldn't focus as much about the market value of a property that I planned to hold for a long time, but I'd keep it mind. I would want at least some equity at the time of acquisition. 

If I would be uncomfortable walking through the neighborhood at night, that would weigh heavily against my decision to purchase a rental property. @Brandon Turner invests in the Seattle area and he doesn't invest in rental property that would make him uncomfortable having his wife walk through the hood at night.

Have you set up entities, have liability insurance or enough debt to protect your assets. It seems like you may attract an unscrupulous tenant somewhere along the way that may sue you just for the money. If they can get to any of your assets with a suit against one of them, you're gonna have a problem. If you have enough insurance, you'll be OK, but how much is enough to protect you against the worst possible lawsuit. Leveraging your properties could provide you with the most cash while lowering your asset exposure. Combined with entities and insurance could provide you best safety along with greatest cash. Have you considered this?

The bottom line is how you feel about these deals. Do you like them, one or both? Have you considered everything? I suspect you've looked at most of this and you're probably pretty sure what you want to do. It's very wise to run the idea by the community, but this will be your decision. I'd be fascinated to hear what you decide to do.

All the best.

How do you buy and hold strictly for appreciation? I presume that you mean you might invest in something that covers the NOI plus cost of financing and nothing more, depending on the price to go up in order to profit.

Unless you're selling you must be renting, so why wouldn't you make sure you're going to cashflow? After all depending on passive appreciation is speculation, not investing. Unless you have a crystal ball, you won't know whether the value will go up or down in the future. "Appreciation or cashflow" is not the question. 

The question ought to be "cashflow or capital gains?" LA/OC (and most of the neighboring counties) generally don't cashflow as well as other parts of the country. Here in town rehabbing is often a better idea because it creates forced appreciation, but capitalizing on that depends on selling quickly. Buy and hold for cashflow. Rehab and flip for capital gains.

This is just my humble point of view. I just hope this addresses the question of what do you do. It's still your call.

All the best.

Ask your title agent to do a preliminary title search. They'll often do this for free (with the hope, perhaps expectation, that you'll use them for your title work.) 

However, if the property is bank owned and the bank was the first lien, then almost without exception the only lien that still may remain is the property taxes. You can usually check with the county tax assessor or tax collector to find the back taxes due. Is the property in Allegheny County? If so, start here with the Treasurer.

Remember that just having a clear title does not make a deal a great deal. Do your homework and make sure that this deal is priced right and you'll be able to do with it what you plan with it. BTW, what do you plan to do with it? (Buy and hold, rehab and flip, wholesale, etc.) Run your numbers based on you exit strategy and never offer more than your calculated maximum allowable offer. If any of this is not perfectly clear, ASK about it before you move forward.

I hope this helps. Keep us up to date on your progress. I love to hear how things for you. Great job getting started.

All the best

@Wayne Brooks, I didn't find out anything about the original TD, but I'm sure a local title agent could get that data or quick trip to the county recorder's office. I'm too far away to drop in, but I'd love to see this one through. 

I'd specifically look up the chain of title on lot 16, which probably only shows ownership as part and parcel with the other lots. The really nasty part is the surveyor indicates that the west boundary of lot 15 runs through the structure by about 10'. Without ownership to lot 16 there could be entitlement problems going forward and Marcus would probably never get title insurance. 

Now the reality check is that this was clearly never the original intent. I'm certain that this can be cleared up, though it may take a judge to reach complete agreement. It can be done, it should be done. Most people would give up on a messy deal like this, but if Marcus has done his homework and patiently works through the details, he deserves a great payday. I hope he gets it along with the incredible experience this deal offers.

I'd be inclined to make an offer with a long escrow and contingency for clearing up this title issue. Since this is a REO the bank probably balk at all that, but they're gonna have the same problem with whomever they try to sell this place to. They may as well work with Marcus and he ought to tell them that in polite, but firm terms.

@Marcus Kennedy, I've busy poring over the details you sent. There doesn't appear to be a way to get much information on lot 16, though I found a weirdness that's hard to resolve. Apparently, according to the Jefferson County Assessor, lot 16 isn't attached to lot 15. The GIS map indicates a 20' separation. It seems as though lot 16 was intended to provide space for a road that hasn't been developed and likely won't be.

I'm inclined to suggest you get a scrivener affidavit as @Wayne Brooks mentioned. There was clearly some kind uncertainty in how to write the legal description. The assessor's property card lists the metes and bound as lots 13 thru 16. The GIS map, while not to be considered accurate for conveyance, indicates the boundary for the property address to be along the edge of the house, not including the driveway and deck and looks to include lots 12 thru 15.

This is kinda messy. You probably will need to talk to an attorney that specialized in metes and bounds law, even if you can get the foreclosed owners to agree about the error. I'd probably start by talking to my friendly title agent. Jackie seems to be familiar with the situation.

I hope this helps at least a little. This is a great thread. I want the thank you for bringing this one to the forum.

@Marcus Kennedy, I just gotta ask who actually owns the title on lot 16? Perhaps the guy in foreclosure doesn't own it at all. It's kind of tough to say without digging in, but I'd like to know how they can be in foreclosure on most of the property, yet own lot 16 free and clear. I still think you may want to look into a quiet title action. Fixing errors like this is what the action is for. This does sound a little sticky.

Let's look at it from another point of view. What would an investor do if they bought this property at auction? What would the bank do if no one bid at the auction? How would they sell it? Perhaps you could consult with someone at the bank from their REO department. Do you know any local investors that buy at the auctions? Perhaps one of them has seen something like this before.

Incidentally, who is selling the property, the resident owner or the bank? If this hasn't gone to auction yet, then you ought to be dealing with the resident. Let the owner know the offer is for all four lots and all appurtenant property (meaning the house, driveway, garage, et al.) If this has already been to auction and you're buying from the bank, you might want to check the title on lot 16. Does the resident owner actually hold title free and clear? Perhaps it never transferred from the previous owner. 

If you're willing to send a private message with the specifics, I'll take a look. If you think that might help. In the meantime, make an offer.

All the best.

Keep in mind that there are other things to consider. 

• Are there any junior liens? 
• Are there outstanding taxes due? 
• How much would it take to pay the arrears? 
• Are there clouds on the title?

There may be a lot more to worry about than just the unpaid balance (UPB). Now, that being said, don't let that discourage you. Just make bloody certain that you do your homework. Provided the property in Morris County, start here Morris County. In fact it's usually a good idea to make sure the seller is the owner of record. The county is where the deeds are recorded, so start there.

To the issue of the offer, you could waste a lot of time trying to figure out the UPB. Perhaps you could get creative and make your offer based on the remaining balance on the mortgage plus the realtor and other closing expenses, since the seller won't be able to pay those expenses under the circumstances. Alternatively, you could make an offer to the bank to buy their non-performing note, then offer the seller deed-in-lieu. Everybody's happy in this case, except the realtor who's liable to get ticked off, so you might offer something for his time and trouble.

You got your hands on the tail of the golden tiger. Make sure there are no surprises, then get creative. If there are some nasty surprises in this deal, let go off the tiger's tail.

All the best.