All Forum Posts by: Brandon B.

Hey @Mike Hern - I have been busy but the "everybody lies in court really got me laughing there for a second. I ultimately was not granted title and received (almost) all of my money back.

Hi @Account Closed ! 

The wholesaler initially placed the bid at the foreclosure auction and won. He esentially was selling his winning bid.

By "the winning bid on the property was $370K" I mean the wholesaler placed that bid at auction and won.

We did run title, and the title seemed to be pretty clear, it seemed to be a run of the mill foreclosure.

I am not sure what you mean by the selling owner having to sign some documents - he really didn't want to sign anything as the defense was that he was foreclosed on without his knowledge and would fight it.

The mortgage lender did have signed documents from the borrower, except the borrower claimed he did not actually sign it and it was not him, even though there were no signs that would lead anyone to that conclusion. Additionally, the lender was a small lender who represented that this was a cut-and-dry foreclosure, and if my understanding is correct, the lender's attorney remembered physically seeing the client signing the loan documents. I do not want to go and accuse anyone of any criminal wrongdoing, but with the facts that were presented to me, one of the parties I was dealing with did materially misrepresent events that transpired. Very puzzling indeed.

I found a "perfect" starter deal in Queens, NY during December 2019. This deal had beginner written all over it - nearly guaranteed profit, simple labor, no major city violations, initially found by a trusted wholesaler. Perfect is in quotes because this deal turned out to be anything but perfect. The winning bid on the property was $370K, with an ARV of $540K and about $20K of work required, doable by a novice in less than 30 days - paint scraping, concrete repair, minor window repair, appliance upgrades. I mean this was a flipper's dream for the area - risk was minimal, profit was all but guaranteed, property was vacant and in good shape, there were offers to purchase the property before any work was done for $495K. That would have turned me $100k in profit just by signing my name twice, giving the foreclosing lender cash, and selling the as-is home to the end user.

It turns out, as I went to close, there was an emergency appeal on the foreclosure suit, claiming essentially what is improper foreclosure and mortgage fraud. The wholesaler who I got the bid from decided he wanted out and suggested I do the same; I declined and took the risk and assumed his bid, effectively making it my bid. Buyer ALLEGEDLY claims that the mortgage that he, again, ALLEGEDLY, took out was not actually taken out in his name, he never received any mortgage bills, and the first time he heard that he was foreclosed on was when they came to tell him "time to go." This initiated a two year process in which the lawsuit proceeded through multiple Queens courts, which to my basic understanding of the law and with some info from my lawyer, ended with the superior court allowing the owner to pay back a smaller amount of money than the initial mortgage was for (the one he allegedly claimed that he did not take out and did not have the money to pay), and in turn, the foreclosure would be vacated.

During the lawsuits, the old owner broke into the property and moved back in, changed locks, did renovations, etc. This likely helped the lawsuit in his favor - how are you now going to foreclose on someone who just renovated their property because they "reasonably believed" that they owned it free and clear. Although the property was being frequently checked on, it was no use for the strong squatter's rights laws in NY. A year-old utility bill was enough to allow him to stay under squatters rights provisions to say "I have been here for over a year what are you talking about? Vacant! No, I was here!" Even after one occupant admitted to being there less than thirty days, the year-old bill provided by a different occupant was enough to invoke squatter's rights.

Throughout the two year process, the foreclosing lender would not let me out of the deal even though it had gone past any reasonable closing date, and had my money tied in a no-interest account. Also during this time, we have seen absolutely historical appreciation in both the stock market and real estate market. The opportunity cost of this perfect deal is now significant. By the time the lawsuit was said and done, the ARV of the property had gone up to $600-650K - a WHOPPING ~15% appreciation. Buying a random property at market value and doing nothing with it at end of 2019 would have now yielded me an acceptable return, whereas this "perfect" deal dealt me a net loss.

KEY TAKEAWAYS THAT BEGINNERS SHOULD KNOW:

When securing a property at auction, even if you have done your research and scouted it before the auction, ANYTHING can happen. An improper foreclosure lawsuit, squatters breaking in with fake bills and leases, violations that do not show up on title searches, etc. When you bid, be prepared to tie up that money for a very long time. Additionally, factor in lawyer fees, mileage, ancillary expenses for travel/accounting/consulting and other deal expenses, and you can quickly be out $5,000 without even closing on the property.

SOLUTIONS:

Learn as much as you can about the local auction market before you bid. Are the courts known to side with squatters, renters, past-owners? Budget that in. Are squatter laws and insurance laws unfavorable to land owners in the area? Consider a different market a few counties over. Can you reasonably find foreclosures from a trusted wholesaler as opposed to risking going through the auction and court system? ?y wholesaler secured 5 other properties, including waterfront deals for a cheaper price, during this time period which would have returned 25%+ for basic manual labor. Network is key here, and had I leaned on my network and trusted my wholesaler in the beginning when placing the auction bid I may have saved myself two years and turned profit somewhere else.

If anyone has any auction advice, please leave me some comments with stories, suggestions, etc. We all need to help each other in the name of fair, transparent, and efficient real estate markets. How can any of us succeed without others sharing stories such as this one where we can learn from each other's mistakes.

Anyone giving you advice here without asking your risk tolerance preferences is not giving good advice.

Let me ask you this. Are you handy? If so, purchasing an all-cash fixer upper and doing work yourself is moderately low risk but can yield incredibly high returns relative to risk. If it is all cosmetic without any foundation issues, you are unlikely to go wrong here.

Are you a gambler? You can buy properties that are turn-key in less-than-desirable areas and generate decent yields and have the properties fully managed. Roofstock has a sizable supply of those kinds of properties but I have never bought anything from them so I cannot give an honest review.

Are you patient? You can buy a rental with a decently sized downpayment to learn the ropes for a lower COC return but witha higher downpayment you can withstand vacancies without going underwater and have room to learn from your mistakes.

My first rental property was an all-cash deal and was purchased for less than $200K. I was in for a little bit over $200K after repairs, but the ability to have room to mess up is very valuable. Struggling to fill a unit and learning the best ways to do it was very helpful for learning. If I was in the deal with a low down payment. I would have been in the red from 2 months of vacancy as you absolutely cannot afford that most of the time without a mortgage.

What if you were to put the $600K into a high-yield dividend stock account and then use that stock account as collateral to be able to draw equity from. While you don't have a property, you can earn some decent returns and then when you find something you like you can pull from the stock equity line and buy as if you were paying cash.

TY for the input I appreciate it! This has definitely helped inform my decision @Paul Welden

@Bruce LynnI am in downstate NY. A few near me, all reasonably able to be rehabbed by a noob and in neighborhoods I would want to live in. And I would move into it, it is just a question of that homes I have purchased in the past stuff came up and I left before a full year. Was not HUD, but like I said big family with many different extenuating circumstances that can possibly come up at any time. What may be an extenuating circumstance to one person (need to move closer to an aging relative, need larger housing due to another family member being unable to afford their rent), may not be one to HUD. I am not trying to test the system as you are implying, but I do not want to be locked into something that I really cannot get out of without getting banned or getting a $250K fine.

@Greg H. Thank you for your input. "Only act on what you plan to defend" is great advice. Like I said there is genuine intent to move, but without them publishing an extenuating circumstances list it could be hard to make the decision to say "oh jeeze I want to trap myself here for a year, unable to help members of my family who are struggling with rent" or "aw man my mom needs help with her medicine but HUD told me no" if taking in an additional family member is not a valid reason to move out of a homepath/HUD property. OR even if someone currently in the house needs to move out and you want to downsize. So many possibilities of things that can change and warrant new housing.

Hi, I am looking to buy a HUD home but have several extenuating circumstances concerns. How hard is it to prove extenuating circumstances as a reason to move out of a home early, and who is the judge of what is an acceptable "extenuating circumstance?" Would not be getting a traditional 203K / rehab loan and lender wouldn't care - only concern is being blacklisted from HUD for using an extenuating circumstance to exit the deal. Anyone have experience here?

Before we get into fraud, this is not an attempt at fraud; it is a genuine attempt to serve out the one-year occupancy requirement since I'd rather pay long term capital gains anyway or no gains at all if staying for two years. However given so much that is up in the air with different family members and career changes, what are the true consequences of defaulting on an owner occupancy certification and who is the judge of what is a viable extenuating circumstance.

So we have a deal that is tied up in litigation; basically we have the winning bid, trying to get rid of the bid for $425,000 and ARV is 560,000-600,000, so a completely flippable/BRRRable deal for the NYC market. Property is currently in outstanding shape and the only repair item needed when we placed the winning bid was a cracked sidewalk.

Problem now is that the old owners have taken possession and have appealed their foreclosure, a case which they very recently lost. Given that they are probably going to hang on to this thing until the very end, this can take a while. We are no longer interested in waiting out the deal and we want some opinions on how to go about marketing this deal - who should we be trying to sell this to. The ideal buyer would need to be someone who doesn't mind waiting a year to close and have a really good deal on their hands, but from what I understand wholesalers tend to work on volume and moving quickly, and end-users are not going to want to wait this out. Are there any specialized companies that would buy something like this? Any PE funds I can reach out to and say hey do you want to buy this?

Hey Imran,

I own a two-family property in Albany in the Pine Hills neighborhood. Although the state is tenant friendly, my tenants have been great due to tenant screening. At the 250k price point you can get a 2-3 unit in Pine Hills, and given that you are using a HELOC your offer would be "cash" so it would be competitive for sure. I have not personally run into an issue due to the state's misguided rent laws, but my leases go to students since Pine Hills is a good location for students and owner occupants. I have personally found it to be a worthwhile investment, and while prices have gone up they have not gone up as crazily as the downstate area so I do not expect a drastic swing downwards after COVID goes bye bye.

@Mark Navarrete has the right idea for this market, in that Albany has cash flow and long term hold potential. If Albany does realize success with its Albany 2030 plan, there certainly could be a gap-up type of appreciation but that is a speculative risk and would just be an added bonus to a buy and hold strategy. As long as you stay on top of your property or your property manager, you should be in good shape investing in one of the higher-priced areas like Pine Hills.

Hey Paul,

Is your budget 120 cash so eligible to get a mortgage for like a 300k+ property, or are you looking for a total all-in/purchase price of 120? You should consider looking to try and get a deal in Pine Hills. While I am unfamiliar with the markets in the other neighborhoods you mentioned, I have looked into West Hill and it was something I decided against as I personally did not get the feeling of "hey, I want to live here" due to what seems to be chronic property neglect by other owners in the area. If other properties are neglected, it is going to bring down your property value.

As for Pine Hills, the neighborhood is desirable and you have a good mix of people who would be interested in your property: students, young professionals, owner-occupants, etc. It may be worth trying to find an off-market deal there, or getting a partner to up your price range and try and start in Pine Hills.