Your Toughest Deal - What Was It? Share Details!

[Joshua Dorkin]

There are a lot of discussions on the site about starting out, but I find that those discussions where people share the challenges they went through on difficult deals are the best to learn from.

So . . .

What Was Your Toughest Deal?
Share details about the deal, why it was a challenge, and what you learned from it.

[Terri Pour-Rastegar]

My most difficult deal was probably also my easiest money (and the most I'll probably ever make on one deal). Although I think the excitement of it all took years off my life . . .

This all happened about 5 years ago . . . Please keep in mind that, at this time, our own house had cost us only about $175K, and the 3 rentals we'd bought by then had cost us only $55-75K to acquire. . . .

Found a luxury waterfront property in a gated community going up for foreclosure auction in my county. The guy had had it on the MLS for as much as about $1.2M, and he owed a little over $900K total, spread across 4 different notes. Primary mortgage (which was being foreclosed) was about $675, second was around $200K, and ten there were 2 smaller ones to family members--I forget the amounts.

I figured I don't have a prayer's chance, and I'd never dealt with numbers this large, but we decided to go for it. Couldn't get the owner to talk to me by phone or mail to talk about a short sale or to view the place before auction. So, to even attempt a drive-by on this place, I made an appointment for a realtor to show me another house in that neighborhood, then I conveniently 'got lost' on my way out and drove to this waterfront place. My jaw dropped when I saw how gorgeous it was, and what a great view it had! But someone was home, so I did a quit run--really did run--around the house to check it out as best I could. Looked good to me.

Lined up pre-approval with my favorite lender and headed to the auction, prepared to bid as much as the first mortgage, which usually does the trick if you don't have competition. I prayed for zero competition.

Unfortunately, a realtor was there bidding on the place, and she got the house. She said she was going to re-sell it for market price. sigh.

Well, 3 months later the house showed up on the foreclosure list again. Why? Owner had filed for bankruptcy the very morning of the sale, so the sale was nullified. Yippee! Of course, the guy got kicked out of bankruptcy, and the house went back on the block.

Back to the auction, ready to bid, once again. This time, the room was silent besides me and the bank's lawyer, at first anyway. Then some schmuck bids $1K over me. Long and the short is that I got it for $505K--much much much less than the principal balance on the primary mortgage.

Of course, the worrier in me now worries why the bank let it go so cheap and why I was the only bidder. I just wanted to leave and go get my deposit money. But some guy starts asking me a million question, all of which tells me he has no idea how these auctions go. Turns out, he is best friends with the owner, and he was also the one guy bidding against me. He had no clue what he was doing. Then he asks if I wasn't concerned about the big crack in the foundation. Gulp. Didn't see the crack. "I'm not worried about the crack, thank you," I reply, bluffing.

I call my lender with the good news. Good, she says--send me the contract. Contract? What contract? There's no contract--just a little receipt (like you can buy at Staples) that shows my name, the date, the property, the deposit and balance due. That's it. I thought she was going to faint. My underwriters are going to kill me, she says. Well, long and short is we worked it out through phone calls with the court, although the judge wasn't happy.

Meantime, the owner's friend calls me to talk move-out terms and such. Terms? Here's my terms: move out. Right? No, I remained calm and talked with the owner. He was just testing me, but he was looking for a place to go and would be out in time. He calls me again later and says, "hey, we were moving the appliances out and then thought maybe you might want them."

Wait right here. Stop. Please note that these appliances consist of one big side-by-side, built-in SubZero fridge with matching panels; 3 (count them--3) built-in SubZero bar fridges, also with matching panels; 1 Dacor drop-in gas cooktop; a dishwasher; built-in double ovens; built-in microwave. You're removing the very expensive appliances? Please say no.

Good old-fashioned extortion. He was $15K for the appliances. I agree to $6K while my husband is waiving his hands in freak-out mode. He'll get his $6K after he's moved out without damaging or removing anything, I get all keys and remotes (garage, sound system, automated blinds, etc.). OK. Hubby didn't realize how expensive these appliances were.

Thankfully, we closed without a hitch. The owner even moved out a week before closing, and we had easy, advance access.

The easy part of this is . . . the crack in the foundation, although major, would have cost only $25K to repair. On a house like this, it's certainly worth it. We only had to put about $5K into it for some fresh paint here and there and a little repair to the dock and some yard maintenance stuff.

The VERY easy part of this is that--before I could even make the repair to the foundation--I sold the house myself (no realtor) in just 3 months.

I thought the stress and worry over such a very big money deal would kill me, so in that regard it was very hard. Especially, considering that this was the first home I'd purchased at a foreclosure auction. Very dangerous if I make a mistake.

But it was the easiest money I've ever made in my life, and I'd do it again in a heartbeat.