Analysis help of a deal from auction website

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Analysis help of a deal from auction website

Dominik Gajor
Monroe Twp, NJ · Member since 2015 · 8 posts · 0 votes

I've been following the forums and listening to podcast for some time now. I slowly want to apply theory of what I've learned into an action. 

Please forgive me if some of those questions might be hectic or not in order but trying to find some answers. I found this condominium on the auction website, they even listed title information there (not sure how common that is, posting a copy of the title as well). From looking at the title how do I know what type of sale is it? On the front page of auction website it says it is a Bank Owned Condo, but I cannot find any details once I click on the property being sold. When I was looking at the title, it mentioned bunch of liens for the HOA ($4K in 2012, $13K in 2014, and $20K in 2015) and in the description it says "Any delinquent HOA/COA assessments shall be paid in accordance with the applicable Purchase Sale Agreement."

I researched a little bit more and found out that in NJ if the auction is for the HOA foreclosure, mortgage is superior to HOA. Meaning if bank forecloses on the loan, house will go to the new owner. Also heard people make some money trying to rent the houses/appts in the mean time until mortgage foreclosure happens. Honestly I'm not looking for this type of arrangement I'm trying to figure it out is it being sold because of the bank/mortgage foreclosure or HOA foreclosure. I have no interest going after HOA foreclosure at this time.

My goal for this property is to flip it maybe rent is as an exit strategy. Currently property looks vacant. My wife worked in the credit collection and was able to trace the owner to a new address. Don't ask me how she did it but she has her ways. I'm not even asking how, I know she's good at it.

Questions:

1. What type of sale is it?

2. Can I determine type of sale from title information?

3. What happens to HOA liens if Bank Owned property is sold?

4. Do these HOA liens are added all together or the one from 2015 is the most current one?

5. HOA foreclosure will only get me a deed to the property temporarily until bank sells the loan?

6. Is there anything else I need to investigate?

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  • Dominik Gajor
    OP
    Monroe Twp, NJ · Member since 2015 · 8 posts · 0 votes
    11y

    Trying to find a way of posting a copy of a title it is in pdf

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    11y

    @Dominik Gajor

    The auction website says it is a bank owned condo.  You are buying it from the bank.

    I don't know what you mean by title info. My guess is you are not looking at a full title review (that would be many documents from many different places.) You are probably looking at the record from the tax assessment website or something similar.

    No you can not tell from the tax record what type of sale. But I am not even sure what you mean by "What type of sale is it?" It is an auction you are buying from a bank. What more do you want or need to know?

    What does it say in the  contract?

    What does it say in the contract?

    It is not an HOA foreclosure - it is a Bank owned property by your own words above.

    Yes lots of stuff. Have you evaluated the numbers on this deal? Do you know what you can bid and still have it be a good deal? Have you looked into the HOA and see if it is solvent and if the properties are finance-able? What regulations does the HOA have regarding renting? Will you be able to rent it out or is the HOA already at rental capacity?

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  • Dominik Gajor
    OP
    Monroe Twp, NJ · Member since 2015 · 8 posts · 0 votes
    11y

    @Ned Carey

    I was able to upload the title pdf file to my file place for viewing https://www.biggerpockets.com/files/user/Dominik/f...

    As far as the contract is concerned there is not much info on the website, the files they posted there are samples so I cannot go by them, here are the details:

    "Transaction Details:

    • Buyer will not be charged a Buyer's Premium for this property.
    • If you are the Winning Bidder, an Earnest Money Deposit of 5% of the total purchase price or $2,500 (whichever is greater) is required.
    • Buyer may receive a Special Warranty Deed or equivalent if Buyer is able to purchase title insurance without delaying the closing (title fees typically cost between $500 and $1500 and are based on the purchase price of the property). If buyer does not purchase title insurance, buyer will receive a Quitclaim Deed or equivalent, with no express or implied warranties of title.
    • Buyer is responsible for all escrow fees typically ranging from $850 to $1,375.
    • While this property is reported to be vacant, buyer is responsible for obtaining possession.
    • Any delinquent HOA/COA assessments shall be paid in accordance with the applicable Purchase Sale Agreement.
    • Property is being offered as is, where is.
    • Until the seller's reserve price is met, Auction.com may counter bid on behalf of the seller. Counter bidding gives buyers and sellers more flexibility to find a mutually agreeable price. Counter bids do not occur after the seller’s reserve price is met."

    I analyzed the deal and it looks like there is a potential there. From few recent comps you can sell this house for 250K being conservative, two smaller houses sold for 255K and 260K within last 3 months in the same community.

    Here is how I came with the numbers:

    ARV = $250K

    Repair = $80K (I'm pretty conservative on this one)

    Purchase Closing costs = $6500 (I assumed this one, without potential HOA liens)

    Monthly Costs = $2000 x 5months to complete the rehab = $10K

    Selling costs = $9000 (I assumed this one)

    Agent Commision = 6% of ARV = $15K

    Shooting for profit of $30K

    It comes out I could go as far as $100K, now if I have to pay all those HOA fees then this price goes down. That why I'm trying to understand those HOA liens and from what you're describing it looks like I don't have enough information. According to the site bidding starts at $60K.

    Thanks for heads up on the rental in the HOA community, it skipped my mind.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    11y

    If you cannot get exact auction terms or a copy of the contract you are expected to sign then assume you are paying those fees and bid accordingly. 

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