Short Sale Potential?

Question

I found a seller that is looking to sell her parents' home.  Here is what I know:

They owe $125k in principal (1st position...no 2nd's to my knowledge)

They owe $19k in back escrow

They haven't paid since February 2015

Wells Fargo is the bank and the interest rate is roughly 8.9%

ARV is $250k+ (Fantastic neighborhood and school district)

It needs everything...easily a $100k rehab

I would need to buy this for $85k roughly.

I started the process of one short sale and the seller got cold feet.  It was going to be listed and I wasn't even sure I was going to get the property.

I've heard of taking the property Sub 2 so you have control, but that mentor also said that you shouldn't count on discounting a 1st lien.

****If you've successfully purchased a short sale before, can you let me know if this may be worth the effort?  My thought is to let an agent do the work for me.

Thanks!

Jim Keller · Answer

Hi Dan

I would question a 100K rehab on a 250K ARV first off.... But lets assume your right on.  I have done this a few times and its very simple.  Go to the owner and write and offer to purchase his home for the 85K you want to pay and in the agreement write that they agree to cooperate with your short sale agent.  Then "assign" the contract to your favorite agent, this is an important step. The agent you give this to should be the agent that will be "giving" you access to their future short sales or investor cash only selling situations they come in contact with.   The owner and your assigned agent will come together and list the short sale and the agent will negotiate the short sale.  I would be sure to assist the agent in understanding that 100k worth of repair is needed to make this home livable.  An estimate from a State lic. GC is a must, as well as 5 low low low comparable sales.  All of this is needed and in the end you have no control, and you may or may not get approved for the price you have offered.  If it turns out the approved price is over what you can buy fix and flip for you might find a buy and hold guy and just give the contract to him, that will be your agents responsibility.

What ever you choose to do, do it this week and move on.  The key to working these type of deals is to spend as little time as possible on them until you really have a deal to work on.  When Short Sales were on every corner in my market southern California, I had as many as 15 of this type of contracts going at one time.  Out of those 15 I completed 5 and the agent I gave the deals to found me 5 other deals,  so choose well and move fast and you will be a winner in this type of transactions.

Good Luck

Jim

Brent Coombs · Answer

@Dan Costantino, I don't see Wells Fargo quickly agreeing to write off $40k just because of a random Offer. They will be obliged to their shareholders to get the BEST Offer (likely to to cover what they are owed). And if you already had a sub-to Contract, why wouldn't Wells Fargo force you to pay the full $125k?

Your mentor seems to know what they are talking about...