Possible Rehab. Need Advice
Hi guys...
I am looking at a home that is selling for an appraised value of 399k. After researching the house, I found out that there is a notice of default on it. The outstanding balance is 209k. So, I am figuring that the possible equity in the house is worth me buying the place.
The house has 5 apartments in it and one empty place for a store downstairs. I live in the neighborhood and its a great town with high income people. The place where this building is at, this is the "bad" side of the town. Basically, its very good but notnose up people in the area. The house was built in 1941.
What gets me is that the house is APPRAISED for 399k and the remaning balance on the house is 209k.
My question is if I pay this 209k off, is that how you do this biz? I can't believe this house is obtainable if I pay off the balance. All that equity. Can this be right?
Thanks again.
Hello Almu,
Pardon my confusion but your scenario is a little vague.
1. Who is asking? You say the house appraises for $399K but there is a notice of default with a balance owed of $209K. Is this property listed with an agent? Is the homeowner running an ad you called out of the paper?
2. How old is the appraisal? Did you pull comps?
3. Are you looking to pay list price or are you negotiating and, if so, with who?
Without more info it will be very difficult for someone to answer your questions.
Dave
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Hi Dealfinder,
The listing is from a realtor. The appraisal was about 3-4 months old. I know the area well. I live in the town. It is FEASABLE that the house can go for about 350. I don't know about 399. The appraisal says 399. I think he/she is being kind. But its possible. The houses in that area go for about 320-350k.
The realtor told me the house is 209k because the bank doesn't want to foreclose on the property. The FORSALE price is the price left over on the mortgage. Which is why I think there is a catch. Does this happen? The house will have instant equity over 100k!!
Sounds like you need to understand more. No sane bank would ignore the situation.
Maybe they are expecting a fast sale given the equity so are saving a little in costs. All costs would be paid off from the sale so this does not make that much sense.
One caution. The building might be hard to finance. It might even be wise to leave the loan in place if you can work out something with the bank. Mixed use is not every lenders idea of fun and from what you are saying it will be treated as a commercial loan. The appraisal will likely be driven by the cash flow given the type and number of units.
Check the present tenant agreements for anyone in the place.
It might still be a good deal but potentially not the deal you are thinking it is.
John
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