Found a house, now what???

Question

I’ve been looking for a deal for all of 2020. Today my wife and I drove out to a house that has river frontage and a ton of potential in Jacksonville Florida. The home was remodeled. Supposedly 70k and is ready to live in. Huge lot. Old shop that can be turned into a rental/vrbo with some work.

Ok, called two relators. The home is a short sale. She’s up to date on the mortgage but got married and wants to sell. House on market for like 300+ days. (Apparently some issues with pending offers and stock market losses, now Covid-19), blah blah.

She apparently owes 280+ she has an SBA loan on top of the traditional mortgage. Price dropped again this weekend by 5k and they now are asking 244k.

I would love to make an offer. Would love to get a 203k loan and fix up that separate building out back and add on extra square footage to the main house already under the roof (now a patio) could make master bed for example.

How do I even make an offer? Money down? I wasn’t actually wanting to buy or look for loans until September. Credit score about 640 today. Can scrape some down payment together.

Please advice:-)

Alexander Roeschmann · Answer

@Eric James Slater

This is what I'd do first, go thru the numbers and see if it is actually something you want: (I'd go for at least 18% cash on cash return, Income Expense Ratio of at least 1,2% and a cash on cash ROI of 20%.

1.) Look at MLS
Listing Systems (Agent only), if you have an Agent let him send you all
the information to you. If not there is a lot provided on Zillow,
Estately, Realtor etc.

2.) When looking at maintenance there
is an easy way. First determine how old the property is, what things
need to be done, what has to be done. For example a house usually
requires a new roof every 20-25 years (rougly about $12.000). Calculate
those in. When you decided you are pretty sure you want to buy it, get
an Inspector (about $200) to check it all out and confirm your data.
Update it and if you're comfortable you're good to go!

3.) I usually determine the rent via Rentometer.com For me it's an easy way to see what you can use!

4.) Taxes are usually in the advertisement and insurance can be guesstimated at about 0.31% of the property value.

5.)
always be conservative: if you're unsure, use conservative numbers
(like 12% property management, 10% maintenance, 8% vacancy etc.)

P.S.: If you want dm me and I can send you the spreadsheet I use to determine those factors

Alexander Roeschmann

Joseph ODonovan · Answer

@Eric James Slater Question, why would the lender approve a short sale on a mortgage that is current? Did the listing agent tell you it was a short sale? Do you have a pre-approval yet from a lender? A 640 credit score may not cut it in today's environment. Good luck

Minna Reid · Answer

All that the term short sale means is that a sale will not satisfy the liens in full, and the lien holders must agree to take a short payoff. There is still a process to go through to get to the short sale approval. This usually takes several months and the seller may or may not qualify. Just because it is a short sale, doesn't mean its any kind of deal.

Eric James Slater · Answer

@Carolyn Morales man, I do feel like I found a gem. Been in business for myself my whole life. Recently moved to Jax. Been getting ourselves set up this whole year and so a bit tight on funds but not hard up or anything and getting better everyday.  Lived abroad the past ten years. Hence the rough re-start. I’m not afraid to round up some cash, was planning on having it all set by September (when our lease is up) but would hate to pass on a one of a kind deal...

Eric James Slater · Answer

@Minna Reid thanks for your insight. Look, whether it is approved or not, I’m not 100% sure how to confirm or deny this term. I have spoken to two separate realtors. Both say “confirmed,” it’s a short sale... One guys name and number was on the fence when we drove up to the house and the other was the realtor who responded off realator.com.

I think I may not be asking the question correctly. Assuming it is a short sale. Why is this important and is this a deal above other deals?

Saying the home is worth 280k (listing agent said this is what is currently owed on the note, effectively making it “short”) and asking 244k on the MLS.

Minna Reid · Answer

It is possible to have a short sale approved while current, but how do you know this short sale has been approved? Unless this is FHA, there is generally no approval until there is a buyer in place.

As far as your financing - you need to talk to a local lender and determine your financing options.

Eric James Slater · Answer

@Joseph ODonovan yes, the listing agent told me the mortgage is current. (Not sure why the bank approved the short sale). I’m reading my butt off  tonight what that even means...

Carolyn Morales · Answer

Can I have the address?  Just kidding!! With all that is in limbo right now with Covid 19 and credit scores and lending..if you do not have all cash ready NOW...why try?

Are you expecting to borrow on this as a hard money loan going in.

Found a house, now what???

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