Is this a deal?

Question

Hello,

Let me introduce myself first; My name is Ben, I am an electrical engineer, MBA student, and small-time entrepreneur in Cincinnati Ohio.  I got here from searching to learn about foreclosures, flipping, and REI in general.

I have been researching my area and wanted to get opinions on this deal:

House: Sold in '02 for $200K
Will be auctioned for $135K min bid (appraised 200K).

I am interested if this sounds like a good deal or not.

Here are my questions:
1) Is it too late to contact the current owner and try to work out a settlement ahead of the auction?  Would this possibly bring a lower price than the min bid?

2) In these kinds of auctions, is there a lot of competition?  Is the house likely to be bid up, sold for the min, or not bid on at all?  Cincinnati is a pretty slow RE market right now.

3) What happens if the house does not get any bids?  Will it become an REO?  followup: Will it be listed on the MLS?

4) Is this house priced too high for a rental?  Does that mean fewer people would be interested if I birddogged it or wholesaled it?

5) What would you do?

Thanks for any responses!  Thanks for this great forum, I have learned so much already!

Ben

N/A N/A · Answer

Thank you all for your thoughts, I really appreciate the guidance and insights!

It seems there is about $260K in 2 mortgages against the property, minus any equity (doubtful).  What factor does this play in determining minimum price, if any?

If the current owner sold tomorrow for example, would the banks have to approve the offer?  I think it is too soon for that, the current owner could sell but would still owe the difference.  Is there a reason he would want to do that?

Alternatively, I could go to the auction, or wait after the auction until it becomes an REO on the MLS.

Jim Gordon · Answer

Thats my thought but the State mandated minimum bid only comes into play on tax sales. On forclosures the plaintif has to bid at least the judgement amount.

N/A N/A · Answer

Thanks Mike, atarget, and Jim for all of your tips.

I agree it's not a good deal, but this was a great exercise for me to do the analysis.

Is there a Cincinnati REIA meeting tomorrow?  I see the OREIA meeting on their website.

I will keep looking, and thanks again for this great community!

Ben

Michael Rossi · Answer

worksmarter,

The bottom line is that this is not a good deal and will probably not become a good deal (at least until it sits on the market as a REO for many months).  The owner is upside down and the bank is foreclosing.  You have done the research and at this point, I would just move on.  I would start looking for DESPERATE sellers.  It is much easier to find a desperate seller than to try to turn a retail sale into a deal.

I would suggest joining your local REIA (real estate investors association) and making friends with the SUCCESSFUL investors in your area.  You would be amazed at all the good deals you can get just by knowing the right people.  In addition, the annual OREIA convention is being held October 25-28 in Columbus.  It is very inexpensive to attend and is an excellent opportunity for a newbie to learn a lot (just leave your credit cards at home).

Good Luck,

Mike

Michael Rossi · Answer

worksmarter,

How much does the current owner owe?  You can look up their loan(s) on your county recorder's website or at their office.  If the current owner owes more than the minimum bid, the lender will bid normally bid that amount.  So, you can determine from your computer if it's even worth going to the sale.

Ohio Realtor is right, in Ohio, the redemption rights end at confirmation of sale.

If the sale is getting close, then I would simply go to the auction and bid.  It's probably getting too late for a short sale.  As an alternative, you could always buy the mortgage from the bank and then foreclose yourself.

Mike

N/A N/A · Answer

Recovery is possible up to 8 days after sheriff's sale in my area.  It varies widely, that is for sure.

N/A N/A · Answer

Correct, it's a sheriff auction.  I guess it seems like a pretty good deal?

I think the best strategy would be to contact the owner and try to buy from them.  Would this possibly get a better price than the min bid?  Does it depend on how much equity is in the house? (there's probably none)

Waiting until the lender has it (and it's an REO) would only raise the price, correct?  My impression is that lenders are unwilling to deal unless a house has been on the market a long time.

Jim Gordon · Answer

Your best bet at this point is to try to contact thet owner and work out a short sale. You will need to have financing in place and be ready to close quick if it needs to get pulled from the sale.

Jim Gordon · Answer

In Ohio the redemtion rights end at confirmation of sale. So when the sale papers are filed that is it.
 If you are getting a loan the lender will require a title search about 200.00.
 A short is your best bet because even though all the fines and legal charges have been accumulating the lender will normally go short to keep it from going into inventory.

Blaine Hubert · Answer

Looks like the standard 2/3 of appraisal to me...   if its a sheriffs auction?