What Would You Do?
I know I have a good deal and I have a few ideas, but I was wondering what approach you guys would make???
This house is worth 250k market value. The owners live in England and the house is vacant.
They are scheduled to go to auction due to 10k in back taxes, and then 1 week after that they are scheduled to go to forclosure because of a 12k lien from 3 years of back HOA fees. I can offer to pay back taxes and lien.
They have the house for sale and they are asking 269k.
The current mortgage owed is at 145k.
I know they are in a bind and I am sure I can convince them to do something, but what??
Time is a big issue, so I probably cant get a mortgage on it.
I am scheduled to preview the house on Wednesday.
What would you do????
Please help me...lol
Thanks so much, Kara
[addsig]
First find out how fast you take possession after a foreclosure sale.
I would go to the foreclosure sale and try to get it bidding up to whatever you are willing to pay the seller. Then I would go to the tax folks and pay the back taxes to stop the tax sale.
yes linlin..., nullbut the tax deed sale is before the foreclosure auctionso if i let someone get it before me at the tax deed auction, it will wipe out the lien and stop the foreclosure auction.
This is why I am confused. Should I try to do a subject to and pay the taxes and the liens?
OR Should I take my chances and try to win it at the tax deed auction? Problem is I only have about 30k....and a house this nice could bid up to 100k, if not more.
ohhh....and I cant see my messages, if you responded to mine. I have not upgraded my account yet. Well, as always, thank you! Kara
[addsig]
Ok so try this on for size.
Realize that the owner is asking for 111k. If the house is vacant and the value is truley 250K I would ask them if they would sell you the house for subject to the current financing and carry back a 33k second mortgage. Once you have their buyin get them to sign a information relase and talk to the gov and HOA to see if they will work with you. By the way are they behind on the first mortgage at all? Anyway if you cant reduce the amounts on the liens you may be able to get sometime which would allow you to sell this before you had to put out any money from your own pocket. Anyway if you do the math there is a nice chunk of change on the table. The current owner has to realize how close they are to losing all of their equity. Something is better than nothing.
Good Luck[ Edited by topher11 on Date 12/04/2006 ]
thank you, topher.
I dont know how to find out how far back their mortg payments are...jeez that could be another 10k...who knows! and they are in England so finding them has been hard. I will have to trick the realtor into giving me their number...does anyone know how to use international 411 to find a person in england?...lol
[addsig]
Thanks for the good ideas on getting info.
I dont even have 2 weeks. I will most likely try to get it at auction, that way it wipes out the HOA lien and the mortgage....I just dont have enough time to negotiate and get things done.
I have an appointment today with the realtor to view the prop...so that is a plus as far as buying it at auction. I am hoping that with x mas around the corner that there wont be many bidders to fight over the prop with.
[addsig]
If you want to try a gutsier strategy. Consider adverse possession.
You need to pay off all liens & keep up the payments with the current mortgage & taxes.
You rent out the property & hope that for 7 years the former owner does not return.
Then file a claim for adverse possession in the courts to get title.
Your risk is that you can recover your initial money spent with rental income. Once that is covered you are betting that the former owner doesnt come back to claim the property.
You will have to run the numbers on this to see how long it would take you to recover the initial cash outlay then weigh the risk.
sanjosee, that is very shrewd. It just might work, but is that ethical.
That is a very fair question about ethics.
I believe it is ethical if you give your best effort to contact the current owner & there is no response.
Using adverse possession is a lawful way to address abandoned properties, that is why there is the law in the first place. If someone doesnt step in to handle an abandoned property then it can become a huge eyesore for the neighborhood & attract unsavory activity.
You are taking a calculated risk in doing so. You are putting your money into the property & keeping up the payments. However, you must be willing to walk away if the owner does come back & desires possession again.
I figured as much, homeowner rarely leave that much on the table unless there is death, divorce, or destitution. better luck next time. there are lots of tax sale props to buy. be careful, know the law. oh by the way, interesting stratagy with the adversed possession. legal-yes, ethical- depends, would I do it- probably,
good investing.
adverse poss seems like a hefty gamble....you have a lot to loose or a lot to gain...I am gonna tell this law to some homeless people down here...they live in abandoned houses anyways...im not even joking. If I was homeless, this would be a great thing to know.
[addsig]
After reading his blog for the past few hours, all that I can do is shake my head.
BTW I do hope that he gets time for this. That may get his attention.
You need to find out your holding times based on your area. What are the comparable sales doing in your market?
What type of buyer are you trying to flip to?
Thomas
When you look at your local market, focus on the homes that are selling. Many people are stubbornly sticking to high prices and simply changing realtors but not selling the homes. In my area, the homes that sell are the ones that cut their prices faster than their neighbors, or are perfect inside (staged, nice upgrades, etc). Ask three realtors if you wanted to sell the home tomorrow, what would they list it for if it is ready to sell. The holdig costs can really get you in a flip situation, especially in a flat to declining market.[ Edited by finniganps on Date 11/17/2006 ]
Thanks for the suggestions! I think offering items such as a home warranty (around $400), a free computer, or maybe even maid service for three months would also help move them. Does anyone have little perks that work for them and that gives their properties an edge over others?
Thanks for the suggestions! I think offering items such as a home warranty (around $400), a free computer, or maybe even maid service for three months would also help move them. Does anyone have little perks that work for them and that gives their properties an edge over others?
In my opinion the major driving force in a downward trending is really making sure you buy the properties right & discounting that reduction in value in your market. I believe you will be able to sell a well priced house if you buy it at a deep discount & if you sell it at a discount to the market as well. If the house you have for sale isnt selling its probably priced too high or something is wrong with the house.
I strongly agree.. No matter what market you are in as long as you can deeply discount a property and still come out ahead you are doing well.
Quote:
On 2006-11-17 16:36, sanjosee wrote:
In my opinion the major driving force in a downward trending is really making sure you buy the properties right & discounting that reduction in value in your market. I believe you will be able to sell a well priced house if you buy it at a deep discount & if you sell it at a discount to the market as well. If the house you have for sale isnt selling its probably priced too high or something is wrong with the house.
85%-25k is how they are lowering the homeowners monthly payments.
This strategy definitely works. An investor friend of mine does these deals all of the time. I’m working on my first one right now. Basically what happens is the investor takes ownership of the property, which is then held in a trust, refinances the property pulling his cash out and leases back to the owner with an option to rebuy the property (I’ve still not heard of anyone actually buying back).
As for lowering the payment. You can pay a couple of extra points and lower the interest rate. I do this with all of my properties (only 3 so far). The deal I’m working on the owner will get six months with no payments so he can catch up. I just added this into the amount I will pull out in the refinance. If you’re clearing 25K then eating $100 a month to lower their payment for a year is not a big deal. As you can see, you have to have a big equity deal for something like this to work.
If you plan on doing deals like this make sure you do your homework first. Study the statutes in your state. If you structure it the wrong way the courts could say that the transaction is a loan and not a sale. You’ve got to make it obvious to everyone involved that the owners are selling the property.
I would not recommend the sale leaseback approach. The way Panic posted how it works is the reason states are adopting legislation making it more difficult on legitimate investors.
It is also very risky. If you seller cries foul play they can have a judge reverse the transaction giving the house back to the seller. The judge will say that it was really a loan. If you are making a huge amount of profit and the percentage is higher then the federal madated rate you can be charged with rackateering. There are certain things the judge will look at but I do not recommend it.[ Edited by tbelknap on Date 07/23/2006 ]
do usury laws apply to private investors? laws governing max interest rate charges?
I was interested in this last year until I found out the lease-buyback process is illegal in Georgia for foreclosures due to the amount of fraud and predatory loans.[ Edited by sickofcallctrwork on Date 10/10/2006 ]
in MN what you described is illegal and considered stripping