First Pre Foreclosure Please Help!
Here are the details.
Fair Market Value 150,000
Going to the auction block in one week
Bank needs 82,000
Title Company is doing title search for additional leans
Reinstatement will cost 8,000
Rehab will cost 10,000
I have bought three properties this year and I am familiar with the market. This is my first pre foreclosure deal. I have met with the owners and I am building a report with them. My questions are:
If I sent the reinstatement money to the bank and get a quit claim deed would this be a good way to execute this deal as long as there are no other significant leans on the property?
The have the house listed with a broker how should I go about that? The broker says they can not be involved in a deal where the owner does a quit claim deed. I plan to give the owner 15,000 cash once they vacate the house if they accept my offer. They are running out of options however.
I have seen many posts about subject 2 deals. Would this be appropriate in this case? If so how would a sub 2 work in this case? If the seller will do a quit claim deed my plan is to send the bank the reinstatement amount of 8K give the buyer 15K (once they move out and escrow closes) and make the payments on the loan while I do the fix up and then flip the property.
I sincerely appreciate any comments on if this is a good plan. I will get title insurance and put the house through a normal escrow to help insure that this is done right with the exception of not getting a new loan. I do realize that this could triger a due on sale clause however as long as I make the payments on time I find it unlikely that a bank would want to move a performing asset to the non-performing side of the balance sheet. Thanks again
[ Edited by 58pilot on Date 12/15/2004 ]
Question: If I sent the reinstatement money to the bank and get a quit claim deed would this be a good way to execute this deal as long as there are no other significant leans on the property?
Answer: You can do this form of investing, but you will still be subject to the lenders due on sale clause.
Question: The have the house listed with a broker how should I go about that? The broker says they can not be involved in a deal where the owner does a quit claim deed. I plan to give the owner 15,000 cash once they vacate the house if they accept my offer. They are running out of options however.
Part Answer: Based upon 6-month hold
Fair Market Value 150,000
Bank needs 82,000
Rehab will cost 10,000
Buyer cash $15,000
Listing sale $9,000
Real Estate Taxes ?????????
Back taxes ?????????????
Insurance ???????????
Utilities $900
Closing cost $2,250
$119,150 into the game
If sold at retail possible profit of $30,850 - What is the wholesale value?
You will have to take title to list with most agents/brokers.
This may make a good sub 2, but more details should be worked out on this!
This does have some profit potential but depending on other factors such as market time, taxes and other liens you could face marginal profit or loss.
[addsig]
I think this is a good one to do subject to, and you seem generally on the right track. I would just also add holding costs to previous estimates, the mortgage payments would need to be made during the holding period.
Thank you both for the posts. I have checked with the tax collector and the taxes are paid. I do need to consider holding costs. I bought a book today on Foreclosure investing by Peter Conti and David Finkel and so far I have found some good information. Hopefully I can get the seller to accept what I think is a fair win-win offer. I sure want this deal to go through so I can get some more foreclose experience. It is my prediction that the number opportunities for investors will rise because of the vast number of those who have variable interest rate mortgages. Interest rates are bound to increase as the fed is likely to continue the trend of pushing interest rates up. When rates go up payments will rise and some of the overextended may be unable to stay afloat. I think for those who are able to assist in solving the problems of those in foreclosures; investors could make nice profits from foreclosure investing. I did buy a house from HUD this year but it seems as if many times these HUD houses are in need of extensive rehab and investors tend to bid them up beyond fair market value when considering rehab costs. This seems to be the trend in my market anyway. It appears to me that the real opportunity could be in focusing in on pre foreclosures. I think it could be very rewarding actually being able to help people.