22 cents on the dollar

[Calvin N.]

For many of you this may not be a big deal, but for me this was a great deal. I located a property 20 months ago and started researching it. Finally, today, we foreclosed on the house and now own it.

We found out who held the note; it had been sold twice and was a non performing, first position note. The orginal loan amount was $140,000 with a second mortage of $40,000. We bought the 140K note for 30K. After many up and downs from dealing with the title search - assignments not recorded, businesses using DBA names that were not on record, to going before a municipal judge to delay the demolition of the property to actually taking possession, this has been a blast! Now the work begins this week on the renovation. The property, once repairs are complete, should sell for 180-220. As many will tell you, you make the money when you buy, not when you sell. More details to follow.

[Calvin N.]

BostonHome, I learned a lot going through this the past 20 months. Here is a little more of what happened. Over two years ago the house was purchased by an out of state investor who began rehabbing. They failed to get the proper permits and a STOP WORK order was issued by the city. That is when I first noticed the property.

The owners owned several properties in other states. They ran into some financial difficulties and filed bankruptcy. Since the property appeared to be abandoned the city set a court date to determine if the property should be demolished. There was another investor that tried to purchase the property, but due to complications of it being tied up in a bankruptcy they were not able to close the deal.

Almost a year after that I contacted the city and got a contact at the lending institution. The orginal mortgage and the second mortgage was with Suntrust Bank. The first mortgage was sold to EMC Corporation. Since the loan was not being paid on EMC sold it as a non performing note to a holding company in Arizona. Suntrust still held the second mortgage.

I talked to the holding company and explained that the house was condemned by the city and they were going to bulldoze it. I offered a very low $22,700 for the $140K note. They didn't accept and didn't even counter offer. I waited a few weeks and called them again. I asked what they would consider for this note and reminded them of the approaching demolition date. If the property was torn down, they would be lucky to get 5K for the vacant lot. They then countered with 30K.

We then appeared before a municipal court judge to get the demolition order suspended. We presented our estimates for repair, showed proof of funds from our bank and a complete list of all the renovations we planned. He gave us the extension we asked for. Then we were able to go ahead with the purchase of the note. I could not buy it until I knew the city would not bulldoze the house.

After we purchased the note and recorded the deed we started the foreclosure process. Our attorney handled the details. On the first Tuesday in May, we met on the courthouse steps. No one else bid so we "bought" the house for 30K. The second mortgage is wiped out by the foreclosure on the first note. So, to finally answer your question, we are "all in" for 30K. The house is probably worth 90k as it sits now. After we finish the rehab we expect it to be worth 180-220K, depending on the market here. With all our estimates our budget for this flip is 55K.

Like I said, we learned a lot during this process. It will be our second flip, but the education we received in going through the foreclosure process was great.