Should I?

Question

I live in Miami and I have the oppurtunity to invest in a personal home. I know a woman who has missed a few payments on her mortgage and her bank is allowing her to do a short sale. The comps in the area are between 350-420K. She only has 250 left on her mortgage and I am going to offer 200k to the bank. The roof needs about 15K in work, the taxes are about 3800, and i was approved for an FHA loan for 30 years @ 5.85%. I dont know if anyone lives here in Miami but there are homes being foreclosed on everywhere and the deals are abundant. Does this deal sounds feasible??

Jay Feldman · Answer

Equity has everything to do with it. The reason a bank will "normally" consider a short sale is because they think they will be better off (and most times they are) taking less then they are owed then taking the house back (Foreclosure or Deed in lieu) and then having to sell it. In your case the bank should have no problem auctioning or other wise selling the property and getting back what they are owed. Now if the property was worth say $275 and the mortgage was $250 they might still take a small loss and sell it for slightly lees then owned (Say $240) because when you add on the foreclosure costs and the re-marketing cost they might still come out ahead or at lest even and it would be done now not later.

Assuming you try to work the short sale (by the way if you are not good with details and negotiating don't bother because SS have a lot of details, negotiating, paperwork and follow up) the bank is going to want to get a BPO or an appraisal and if that comes in at anything close to $350 I think your deal is dead.

In regard to your statement can they force here to refi? No they cannot but the can definitely foreclose on her for defaulting on the loan.  Now maybe I miss something somewhere but that is how I see it. 
Let me know I can be of any help (I guess I have not been much so far) 
As I said before Good luck. 
Jay

Tamara Campbell · Answer

Question: what does equity have to do with it if you cant pay your mortgage?? what is the standard practice? will the bank force(can they?) you to refi?? if you have time, can you expand on what equity has to do with it.

Tamara Campbell · Answer

I am a inactive realtor(that has never sold a house) so I have access thru a former broke friend. You are confusing me!! LOL. I thought the short sale was agreeing to sell for less that the balance of the loan. If she owes 250 and I offer 200, wouldnt it be better to take that than risk waiting it out in this market. I think the market conditions are playing a huge part. Please correct me if I am wrong.

Jay Feldman · Answer

Sorry, did not mean to confuse you. You are correct as to what a short sale is. Maybe I missed something but you said the property is worth $350-420K and the lady only owes $250K. Most banks i have dealt with would not consider a short sale on that . Too much equity. Therefore I would qustion is it really worth $350K+. up here in CT (which might be different where you are) the banks are not just giving properties away. (at least not if they think there is a pile if equity in them) If you are sure of the value and the property does not need any work, it sounds like a deal. Good luck
Hope that helps
Jay

Jay Feldman · Answer

ilovegoob
My only question is, You say

Don trying to kill the party just giving 
My 2 cents
Thanks
Jay

Timothy W. · Answer

If it's what you want then go for it.  We have a way of making the things we want possible.  If your worried about value....well it's not like they're going to build another Florida....

Ironically I was reading "The Millionaire Mind" yesterday and one of the traits of the millionaires interviewed at that time was they bought their personal residences as foreclosed property in the post RE crunch of 1987 when a lot of homes were being foreclosed on.  If you buy your home in this current market, you're mimicking millionaires.  Not a bad idea.

Tamara Campbell · Answer

I definetly want to live there, the house is twice the size of my condo! I have a duplex that I rent out but as you said, buying a personal home is far different. I guess i feel like i am getting too good of a deal so something must be wrong with it. I bought the duplex at a discount with equity so I have an idea of what i am doing. I plan on going the section 8 route with the condo as I have done with the duplex.

Richard Warren · Answer

The rules of engagement are very different if you are buying the house for your own use.  Is this where you want to live?  If so, go for it.  If you don’t want to live there but are tempted because it is a good deal, keep looking.  A personal residence is about more than just the numbers.

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