Super Cheap Past Sales Spotted...HOW???

Question

Hi,

I am just getting into the REI game.

I have been looking at past sales on RealtyTrac.

I noticed some houses with an ARV of $362k for example, sold for $3500. (In Portland, Oregon Metro Area).

http://www.realtytrac.com/property/or/portland/972...

Anybody know how these properties are being purchased? Is this from an auction, because even the auctions have a starting bid and I would doubt it would start this low...

Thanks for sharing any thoughts/experience you may have!

Grace Widdicombe · Answer

Hi Erin, I am unable to see the actual sale price of the property mentioned in this post: 6735 SE Flavel,  however what you are looking at is not the Deed to the real estate itself, but the bargain and sale deed to the rights of redemption.   Vantage Homes LLC bought the rights of redemption from the home owners who appear to be in foreclosure; however, I am unable to find the current foreclosure notice in my resources. (The latest one showing in my online sources is 2011, which would not cause this current activity.)  Then Vantage Homes LLC made $1000 profit by selling the Redemption Rights to Top Spin, LLC for $3000.

What you are seeing is just redemption rights being recorded.  I can not even see if there is a Sheriff's sale announcement that would warrant rights of redemption being sold and bought.  In my county (Lane),  I am experiencing that the county is not keeping up with the logging of the sherrif's sales, so I have to drive by the property to see the notice on the door to know the true status.

Robert Klisak · Answer

Yes, just to clarify and bring this conversation back from the dead... the $3000 purchase price is solely for the redemption rights.  All other liens stay on the property.  They will still need to purchase the property at auction or assume the loan from the original borrower.

Most of these companies will buy the property at auction and use the fact that they own the redemption rights to deter other investors from bidding.

Grace Widdicombe · Answer

What I have witnessed here in Oregon, as the past President of the Northwest REIA, is that Rights of Redemption bartering has been a pretty controversial practice among real estate investors. When companies started doing this a couple of years ago in the Portland area, it took a lot of investors off guard. Now that our active investor REIA members are more aware of it, this has become one of the items for the more savvy investor to watch for on their due diligence list before going to the court house, or to factor in when holding that property for 6 months.

How do you factor in this practice of the Rights of Redemption bartering, you might ask? Well, maybe not you @Max Brunke, since you're an attorney, but for others; you should check the court house deeds of records on the property often during those 6 months to make sure that a bargain and sale deed has not clouded the property.  (As the purchaser, you should get a notice from the county.)

The property owner (defendant) can sell the rights anytime before the redemption time-period is up. I'm not an attorney, so don't think that I am teaching law here, this is just what I have witnessed in Oregon.

The laws are different in all states. Cross state lines, and you have new laws. Cross county lines and you might have different practices.  When I step up to a different county's clerk I get completely different results for the same questions in Oregon.  It takes time to work things out, I have found.

As for the two parties in this "case study," I don't know either of them. I do know other companies who have bought redemption rights a lot! And I have bought properties from these companies. :-)

Randy Johnston · Answer

@Erin Deasy, Welcome to BP.

I just took a look at the sales history for this property and really can't tell you why the sales price is so low. It was purchased by an LLC from a company called Vantage Homes, who purchased it for $2000 while it was in foreclosure.

One possible explanation may be that Vantage purchased the redemption rights and when the property didn't sell at auction, they may have worked with the bank to assume the mortgage.

I would suggest that you get involved in our local real estate investor groups. Both Northwest REIA and Rarebird conduct monthly meetings. There is also a Portland based BP Meet-and_Greet, in mid-October, that you may want to attend to meet some wonderful people.

Good Luck.

Steve Moody · Answer

Looks like it was sold on the steps of Multnomah County Sheriffs Office, I'm not sure if the $3500 was accurate or some weird anomaly when listing home sold on the steps. I highly doubt that even land the size of Mill Ends Park would sell for $3500 in Portland. So there's something else at play here

https://www.auction.com/details/6735-se-flavel-st-portland-or-97206-2154797-e_7056h/

Steve B. · Answer

It's not all that appealing in most cases here in Oregon.  You would have to track down any party's with the right to redemption,  pay for those rights, then pay the buyer at the sheriff sales his buy price plus 9% interest.  Most of the legal controversy occured when shady redemption rights buyers waited 89 days to redeem, waiting on uneducated buyers to spend money improving the property then redeeming against them to get free rehab.

Also if you have been following sheriff sales anywhere within 60 miles of Portland you will see the inventory has been decreased tremendously compared to six months ago

Randy Johnston · Answer

@Max Brunke Right of redemption is only available of a judicial foreclosure. The borrower has 180 days after the auction to redeem this right, but must not only come up with the unpaid balance, but also any fees and delinquent taxes. This option varies from state to state. For a non-judicial foreclosure, the borrow has no right of redemption.

That said, purchasing redemption rights is a big business and there are teams dedicated to calling homeowners who receive a notice of default (NOD).

I don't remember seeing podcast on this subject, but if you use the search box at the top and type in "right of redemption," I'm sure there are many threads out there.

Max Brunke · Answer

This Redemption Rights transferability is very interesting to me. Purchasing Redemption Rights seems like a great way to get in line on a property at a mortgaged price (and payments) well below market. It's almost like an option for a subject to transaction, right? Has there been a podcast on redemption rights?

Are they transferable in all cases and all states or is this a Oregon-specific niche, @Randy Johnston @Grace Widdicombe?

Anyone have experience with the Redemption Rights investment method? Anybody know these Vantage Homes or Top Spin folks?

Erin Deasy · Answer

Hey thanks for everyone who responded.

If you search past sales at RealtyTrac.com and look from lowest to highest price, you'll see lots of similar deals.

Just wondering what could have spawned that.

I'm excited for the investor meet ups in PDX.

Maybe I can meet you (locals!) around town soon. Thanks for your help!

Wayne Brooks · Answer

Could be a dozen different reasons for that recorded price......but none of them include someone getting a $300k property for just $3500.  You need to learn how to use the local online public records if you want to understand these things.

Super Cheap Past Sales Spotted...HOW???

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