Need Advice...Please
I found an owner facing foreclosure. He is 7 months payments behind. I got the owner to sign the authorization to release and talked to the bank. Bank already assigned the case to an attorney.
He owed 10,400
original mtg: 192,000.
FMV around: 230K to 250K.
Estimated repair cost: 20K-30K
Is this a short sale candidate? What about doing subject to? How much should I offer the bank? Seller agrees to sell it for 100K. Bank asks for pictures from the house and how much the seller is willing to sell it for...
Please advice.
Thank you all.
where are all the experts?
I might not be understanding what you wrote. If he owes 10K, and the house is worth 230 then why would the 1st mortgage take a discount on it?
I would search the public records to see if he has any other mortgages out there that you may not be aware of.
I would then confirm the amount owing and find out how much time that you have before the sale. If he truly owes 10k on the house, and you can buy a 230k house for 100k, then I would write up the deal.
Sounds almost to good to be true...
Derek
nhle, if this is not a typo on the $10,000 forget the short sale and the loan balance is not enough to work on a subject to. Make sure to get a signed purchase contract for the $100,000 and quickly get a hard equity loan, making sure you close at a title co. so you have title insurance. You had better act fast on this one! By the way, if you need a partner, let me know!!!
Bob
nhle,
I assume this is what you mean from the original post:
FMV = $230-250K
Mortgage balance = $192K
Payments and fees accrued: $10,400
Repairs = $20 - 30K
This is a possible short sale candidate since it needs so much repairs. Are you sure you estimated correctly? You may need to have estimates done by general contractors to submit with your short sale proposal. You should get started before the auction creeps up on you. There was a post recently by pbodys called Step By Step Short Sale Completed In 2 1/2 Weeks!
There are also short sale articles on here. Click on the "Articles" link at the top of the page, then go to "Article Topics" and you will find a topic called "Short Selling." You should read up on the articles and get a better understanding of short sales. Good luck.
Tanya
Thanks for the reply everyone. Tanya is right - the default amount is $10,400. The current mortgage amount is $192K. The owner refinanced the house back in October 2002 and never made any payments. Therefore, they really owe the bank at least $202,400.
I faxed the shortsale package to the bank today, offered $100K. I included an estimated repair cost list that totaled $36K. The mitigation specialist called me immediately and rejected the offer. He said that the bank appraised the house back in October, it came in at $240K, they did another appraisal recently and it came in even higher. Therefore, unless I'm willing to offer in that range minus the repair costs, they will not consider the offer.
What should I do now???? I think I will go as high as 150K, but don't know how many times I should go back and forth with the bank before I offer my final price. Please help.
Your responses are greatly appreciated!!!
do you know if the appraisor included any repairs that are needed to get an accurate value. Sometimes they just do a driveby of the property without knowing that the property needs repairs. don't give up. if you convinced yourself of what you are willing to pay, then you should be able to convince the bank.
I actually got a copy of the appraisal that the bank did in October from the owner. They noted some repairs, including scraping and repainting the outside of the house, but nothing major. They subtracted $5K for lack of garage, $2K for bathroom, and $5K for overall condition. BUT, they wrote in the report that the house "appears to have been well maintained and in overal good condition", and this condition is typical of this neighborhood of older homes. My problem is, I quoted $36K in repairs, the mitigation specialist is not arguing with that, he's saying that with the repair costs, we should still be offering at least $200K since the house is appraised at more than $240K. Now I'm wondering if I quoted the repairs too low. What other reasons can I give the bank why I'm not willing to pay that much? I wouldn't even need to deal with the bank if I'm willing to pay $202,400, it would be enough for the owner to pay off the bank, I can just buy the house directly from the owner. I don't think I would do that though, there wouldn't be much of a profit.
Anyone has any other suggestions? Do you think that it's typical that the bank will reject the initial offer immediately? Do you think they really won't accept any less than what's owed to them and would rather proceed with the foreclosure? The foreclosure should be sometime in August, no date has been set.
Again, thanks for listening and responding!
What did you include in your short sale package to the bank? Did you take the worlds worse pictures of the house for them? Did they get the sappy letter from the homeowner complete with tear stains on the paper? Did you get a moment of time to get to know the person in loss mitigation some more?
If you didn't get a chance to cultivate the situation enough, I'd go back and do that. Also, but I'm not sure, <someone help me on this one> I think it may be a good idea to make it clear to the bank what the kind of income you expect from an investment like this and show them on paper what price you would need to get for this house in order to meet your goals. You're in business to make money, just like them. You've guaranteed them that nobody else is going to buy this house <you guaranteed them this right?> so they should just bite the bullet and give you your price and they should also know that you aren't going a penny over that price.
Remember also, June 30th was the end of a quarter and banks have all those loss requirements that they have to make. Maybe they went over??? Try again a week from the end of this month
Thanks for the reply!
I faxed another letter today to explain all the reasons why I offered $100K. I'm willing to pay $150K but didn't think I should come back with this new number right away. Shouldn't I go back and forth with the loss mit. specialist a few times before offering my final number? I don't want him to think I'm too eager to buy and that this house may be worth more than I'm letting on. But at the same time, I don't want to irritate him. Anyway, he didn't call me back after my fax. I was going to follow up with a phone call but haven't yet. I'll do it tomorrow. This guy seems very busy, his voicemail always picks up, and I always have to call many times before getting him in person. He usually keeps his responses very brief and to the point, so it's hard to make any kind of small talks with him.
Does anyone have any stories on how they dealt with their bank and how you and the bank came to an agreement on the final number? What's the average discount that they are willing to give?
Have you looked at the roof? I mean, from up close and personal? If it needs to be redone (hint, hint), that could add another easy 7k-10k to the repair cost. (You do want the new roof guaranteed for 30 years by the manufacturer, right?)
Every dollar counts.
I did mention the roof, I mentioned everything I could think of at the time. I sent over 25 photos that included exterior wear and tear on siding and shutters, interior cosmetic issues like scratched floors, unplastered walls, unfinished floors without carpeting, hanging wires from light fixtures, etc. The major things were the 2 holes in the ceiling due to a leaky roof and the rotted structural pole in the basement.
In my fax today, I mentioned that the 36K in repair costs didn't include labor because I was going to do the work myself...I had to say this because I think I estimated too low on the repairs. I also got a copy of the original bank appraisal and pointed out reasons why it was too high and that the houses in the comparable prices were much younger and in better condition than this house. I mentioned the owners were going through a nasty divorce so the house has been badly neglected since they refinanced back in October. So not only was the house over-valued, but it also has depreciated in value greatly in the past 6 months due to neglect. So far I don't have a hardship letter from the owner yet, but I basically explained his divorce story in my letter, so they have an idea what happened...I should be able to get the letter from the owner this week, but the guy seems kind of lazy about writing it, he's at a point where he doesn't seem to really care what happens next. I really do hope this works out because I genuinely would like to help him with his credit and put some money in his pocket to start fresh.
Anyway, does anyone has any other advice? I really appreciate everyone taking the time to reply. Your advice has been very helpful.
Thanks.
Quote:
On 2003-07-01 21:58, nhle wrote:
The major things were the 2 holes in the ceiling due to a leaky roof
And you included the $7,000-$10,000 it would take to replace the roof?
Quote:
and the rotted structural pole in the basement.
Oops. I'd sure want an engineer to check that out and write up an estimate of all the thousands it's going to cost just to find out how extensive the structural damage is.
Quote:
So far I don't have a hardship letter from the owner yet, but I basically explained his divorce story in my letter, so they have an idea what happened...I should be able to get the letter from the owner this week, but the guy seems kind of lazy about writing it
So are you. Write the letter, print it out, go over to the house and ask him to read it and sign it. Then mail it.
Quote:
he's at a point where he doesn't seem to really care what happens next.
Put yourself in his place. I'll bet either she's leaving him, or he has good reason to leave her. In either case, he's in mourning for his marriage. Just have him sign the letter. You'll be doing him a favor.[ Edited by AKlein on Date 07/01/2003 ]
their is know way you could offer them $202,000 and spend $30,000 fixing it up. you would have no equity if the property appraises for $230,000 or so. That defeats the whole purpose of a short sale. If the bank forecloses and repairs the property themselves, they would be lucky to make $10,000.
To AKlein:
A friend of mine, who does rehabs for a living, looked at the house and gave me an estimate of how much everything will cost to repair. He says the pole looks worse than it really is. His estimate is way below what I gave to the bank, but I'm sure the amount could be substantially more if I went to a big contractor.
To Foreman:
Right now the bank thinks I'm only willing to offer $100,000. I would be willing to offer as much as $150,000, but not more than that. So I guess I will go back and forth with the loss mitigation specialist and see what happens.
I used to work for a bank, so let me give you the inside on what the loss mitigation people's world is like and their perspectives.
First of all, at our bank the loss mit people always had their phone on voicemail. This is because they are not customer service oriented and they like to get whatever project done that's in front of them and then call anyone that was trying to get a hold of them during that time. They are not the busiest people in the world, but they ARE busy. The reality, however, is that these are the kind of people that like to be busy, especially in impersonal paperwork type stuff. These people didn't get up one morning and decide to work at the loss mit department of a bank. They started working for a bank just for a job and became attracted to the non-human atmosphere at loss mit and the piles of complicated paperwork.
So, with that said, here's what happens when someone like you enters their world. First, they don't like having to call PEOPLE, especially strangers. They become very rigid and combined with their need to make their managers love them, they will call you back with one thing in mind: get this over with, my manager said that we couldn't take any losses over <blank> amount, and I can't wait to brag to my boss at what a good job I did in completing that goal.
This makes you wonder, should I be talking to the decision maker instead of just a regular loss mit person? I think that talking straight to the manager would be a good idea. If the regular loss mit person is friendly with their manager and has some power over their managers then it's better to stay with them, but in most banks the workers are very competitive and always trying to take over their bosses job, so I'd say that 85% of the time the regular loss mit person does not have any decision bending strength. Most of the time you'd want to go straight to the manager.
Now about buttering this person up, I know it's hard because they don't want to talk to you a lot. The best way to start a casual conversation with them is to start in with something like this: " You know, your job is very interesting to me. How do you like working for the bank? How long have you been doing this for? Wow, that's a long time. It must have been really difficult to have become so high and mighty..." you get what I mean?
Also, people that work for banks crumble under the strength and professionalism and rigidity of other people. Your short sale package should be neat, complete, on letter head, typed to perfection, full of pre-made looking forms, overinundated with detail. When you show them your business plan on how much money you HAVE TO make from each deal, it should be on a pre-made looking form where the necessary income percentage is part of the pre-made looking part. Act like it's not your decision how much money HAS TO be made of this deal.
At this point, I'd let things cool down a bit and start all over again on this package and submit it about 10 days before the end of the month and tell them you can close on the 30th. Perhaps you do need to rethink the income amount a little, but make it your last offer and let them know that.
Wow, Kelea...thanks for the great info, very insightful.
I actually didn't get a chance to follow up on my fax when I got a voicemail from the loss mit person today. He said he will reconsider my offer, but want to send an appraisor out to the house to do a complete appraisal, inside and out. He said he can't get a hold of the owner because the owner never returns his calls, so he's giving the appraisor my phone # so I can coordinate the appraisal. He said that depending on what appraisal price is this time, we can negotiate from there. I called him back immediately (and got his voicemail of course), I left him a voicemail to thank him for reconsidering and said that the appraiser can call me anytime.
I hope this won't backfire on me and that the appraisal won't come back even higher than before. I hope he really is willing to negotiate and is just not out to prove me wrong...I'm sure he doesn't have time for that kind of game.
Well, thanks for the advice. I will keep you updated.
nhle,
Just a side note, when the appraiser goes to appraise the property...remember to bring the contractor's repair estimates for the appraiser to review when evaluating the property. It may help with his opinion of the value of the property to know the extent of damages and the cost of bringing the property to market value.
Tanya
Thanks Tanya. I will work on that next.
What happend? Did this deal go through? I am dying of curiosity.
sorry, my mistake. I was looking at the dates where members joined the forum thinking it was the posted date for the message.