Is this worth pursuing?

Question

I have been informed on a pre-foreclosure deal. The comps are in mid 150k. The owner owes this much on the property. The property would need new carpet and painting on the inside. The owner owes 140 on the first and 15 on the second. I would have to get the property around 100-110k. I would have 3-4k on the the initial purchase closing cost, I would need to assume  6-8 on holding cost at 700-800 on a interest only loan, that would be 6400 on the high side. Need to assume closing for the new homeowner 5-6k and if listed 6% on commission for the sell. That would be roughly 9k and any misc like utilities. That would be a total of 26-27k. How would I get the bank to go for a price around 100-110k. Would I pull the lowest recent comps and then subtract rehab cost. What else could I use for negotiation. What about the second loan. Would the home homeowner be responsible for the negative portion of the deal. I live in North Carolina. I'm not sure the terms of the contract yet. Thanks for any help.

Dave P. · Answer

krlovill,

Just to chime in what others have said, keep looking for deals. As far as short sales and pre-foreclosures go, keep making offers. Banks will often accept an offer that is 80% of an independent broker price opinion. They will sometimes take less. The key is to not fall in love with any particular deal. Make multiple offers. Be indifferent. Definitely do not be desperate to do a deal.

By the way, when you say "comps" are 150K, what do you mean? Is that what comparable properties are listed for? Does that mean that's what comparable properties sold for? This makes a huge difference.

One of the key points of the short sale is your ability to dutifully influence the broker price opinion (BPO). The BPO is the bank's validation of value. They are normally more concerned about this value than they are with the loan amount. If you are serious about investing in SS, then I would master the process of the BPO (or appraisal) pricing.

Good luck.

Lynn Z · Answer

Did you hear about this deal at your local REIC?  I'm in S.C. and there's alot of misinformation that goes on at those meetings (as well as decent information from time to time).

I read some time back that the foreclosures we see today have been in the works for an average of 2 years.  The house next door to one we own has just gotten the owners out and they haven't made a payment for 2 years.  So that would confirm the first statement.

The files I look at the courthouse look like fee ridden, long term deals to me and the bank representatives buy back 99% of the properties.  Investors with cash are there but aren't given the time of day.  Banks are arrogant and  must have realtors/wholesalers they like to slip the houses to.

I know a young investor and his father who paid decent prices for our rentals and have access to plenty of money.  He bought FSBO so that's a place to look.  Charlotte, until recently, was one of the only cities in the U.S. that had any appreciation at all so we're luckier than many investors.

Look for a year and find one great deal.  You won't be sorry. And try not to take two loans out to get any investment house.  Remember in 2006 25% of mortgages being processed were for investors. That's realtors, second home folks, appraisers, EVERYBODY.

Kevin Lovill · Answer

I'm chasing any lead this point. I can't find a solid deal as I've posted before. I'm not sure if is because there's a lot of novice investors in my town or if it's my negotiating skills. Mls hasn't worked for me yet, I've been at properties on the first listed date and still missed the deal. I've had a referral or two and haven't closed those either. Looking for different strategies to close a deal that's sound.

Charles Whitaker · Answer

All strategies are good for finding deals, some materialize faster and more often than others. Each method is good for a few deals per year; follow every method and your sure to find more than enough properties for yourself.

The MLS is a good resource but has high traffic, noob investors will shut out a deal quickly here. Any lead must be tracked over the long term. if the first contact is of no prevail then try again. Many owners are not ready to sell at any given notice but time changes all. I have lost numerous deals from a lack of following up with prospective clients. Now, though, I realize the importance of following the marketing plan. Marketing is where it ALL starts.

Good luck

Charles Whitaker · Answer

Find a deal that is closer to an actual deal and then try using your creative mind to put it together. You can't make something out of nothing.

Kevin Lovill · Answer

Thanks for responding, I was hoping there may be some creative way's to negotiate this deal. The only thing is the home homeowner owes what the market value is  and maybe a little more. Since the property was not listed and not a foreclosure yet, I thought I could get a better deal.

Charles Whitaker · Answer

The bank most likely will not accept anything that low since the house needs only minor cosmetic repairs. Foreclosures rarely turn into short sales, certain criteria must be met and repairs are accounted for. I wouldn't put too much time into this deal.