Probate - Short Sale

[Craig P.]

All-
I wanted to share an interesting deal I recently closed. I recently came across someone whose father had passed away and did not have a will. She was interested in selling me the house but because there was not a will she would need to take it through probate.

Being we do quite a bit of probate deals we have a relationship with a probate attorney who will work our deals with a small retainer upfront and the rest paid on the HUD at closing. I paid him $250 bucks to get started.

The house is a 2 bed/1 bath home in a fantastic neighborhood in Denver. The tax value of the home is approx $193k, and the ARV is around $265k as it sits with the current layout. The note was $155k. Repair to get to the $265k is about $40k.

We felt our best strategy with the home was to put a 400 sq foot addition on the home plus a 2 car garage thus making it a 3.2.2 1500 sq foot home, which we believed would retail out $350k+

I determined who the note holder was, and contacted them to let them know I was interested in purchasing the home and was in process of helping the daughter get the house through probate. At that point I was told by the lender that they would short sale the home to me for 95% of the appraised value. They told me because it was a probate situation the short sale is expedited and they could get it approved in about 10 days assuming I could get probate cleared and provided all the documentation they required.
They told me in order to do the short sale I needed the following:

1. Appraisal. Any certified FHA appraisal would work. I could hire anyone I wanted as long as they were FHA certified.
2. Purchase agreement reflecting 95% of the appraised value
3. HUD-1 statement
4. Letters of appointment showing my seller was appointed as the executrix of the estate.
5. Letter from seller stating their intention was to do the short sale for 95% of the appraised value
6. Letter of Authorization for note holder to speak to me on behalf of the estate.
7. Proof of funds.

So while I waited on probate to clear, I hired an appraiser to go get the property appraised. He appraised it at $125k thus I was able to purchase it for 95% of the appraised value. I went ahead and put together all the items but waited to get them signed until probate cleared.
My attorney cleared probate within about 3 weeks. I then met with the seller and got signatures to purchase the property for 95% of the appraised value, plus the letters.

I submitted everything into the note holder and within 5 days I had a response. They came back stating the closing service cost was not an item they would pay for; so I simply moved that cost to my side. Plus they wanted a copy of the tax bill, which my title rep provided to them. 5 days later they came back with the approval.

So in 10 days I was able to negotiate this through and get approval on the short sale.

Now for the good part….here is what the deal looks like.
ARV: $360-380k (my HML had an after repair appraisal completed)
Rehab: $75-85k for addition, garage and house remodel
Purchase: $118k
Typically I do not mess around with short sales because they are typically such a pain. The moral to this story is that I believe many lenders will expedite short sales when probate is involved.

I’ll keep you all posted on my progress once the house gets completed.

Happy investing.