Finance a sheriff sale with hard money loan, then refinance

[Andrew James]

Hello - First time poster here.  Eventually I'd like to get into real estate investing, but for now this is about financing my primary residence.  I've done quite a bit of research on this deal, but there are gaps in my understanding.

My basic scenario is this:  Get a hard money loan to buy a house at sheriff sale at auction and get clean title, get livable and move in as primary residence, then refinance 6 months later with another lender to pay off the hard money loan.

Here are the details:  The home will go to sheriff sale in central Ohio in May.  The sheriff's site lists the appraisal as $250,000 and in Ohio the opening bid starts at 2/3 of that....so $166,700.  You have to bring 10% deposit of the appraised value on day of auction, with the balance due within 30 days.   Researching the property via auditor and recorders websites, the only liens appear to be original mortgage for $205,000 done in 2004.  Assuming they made payments for 10 years, or through 2014, they would have a principal balance around $170,000 (assuming 4%, 30 yr fixed)....not critical that this be precise, but needed to estimate what lender will bid up to on auction day.

So, the real question is about the refinancing.....because if I can't see a reasonable path to refinance, then there is no way I'm getting involved with a hard money lender. I'm also not considering refi with the HML for now, though I'm sure that will be pitched to me, so conventional or FHA products for now. Assume I will be in the house, that it's livable with all working systems (HVAC, roof, utilities, secure), and that I've fixed it up to where it would appraise for say $250,000.

1)  Will traditional refi lenders payoff a hard money loan?  

2) How soon will refi lenders use new appraisal for their LTV calculations? 6 months, 1 year?

3)  Will they payoff more than the hard money loan, say $20,000 more if I can provide great documentation (before/after photos and receipts for contractors or material in cases where I self perform).   

4) What if that refi (HML+$20K repairs) is still below 75-80% of new appraisal? 

I have other questions about the hard money loan, but honestly those are simpler and probably just revolve around not getting totally ripped off with points, rate, and payoff timelines.  Also, I would obviously pay cash to do a good title search, quite possibly buy title insurance.  Sorry for the long post - thanks to anyone and everyone that can reply.

[Kyle J.]

Hello and welcome @Andrew James. 

Your biggest hurdle with your plan is actually going to be finding a hard money lender that will lend on an owner-occupied house.  All the ones I know of will only lend on investment (non owner-occupied) properties.  I'd see if you can even find one that will before worrying about the rest of it.  Good luck.