All Forum Posts by: David Sabine

 Nicolas,

Thanks for the in dept explanation. Your explanation makes clear why the bank does or has an obligation to bid. You answered questions that I didn't even know I had yet. Love BP! 

 Thanks for the reply Wayne! That was what I was missing and that makes perfect sense.

you said you don't understand my reference to $140k and the bank liability.

Here's what I mean: If I as the borrower default on my loan owing $70k and now the bank/plaintiff bids at the foreclosure auction $70k (what's owed) aren't they now out $140k? Three bank now has to now write a check for $70k + $100k they originally paid the seller - the $30k that was paid back to the bank prior to defaulting in the loan leaving $140k.

What am I missing? Of the approximately 50 or so properties that were most recently sold, only about 5 weren't purchased by the plaintiff. The vast majority of the properties, that had anyone bid against the bank, were run up to CLOSE TO the "appraised" value (yes I know that isn't a reliable number) but this is where they ended.

Thanks!

My question is, why do, at least from what I’ve seen here in Ohio, Hamilton County, do most of the foreclosure sales end up with the plaintiff purchasing at what is owed?

What am I missing? Please point out what I have wrong because it seems like I have to have SOMETHING WRONG! Here is the scenario as I understand/see it.

1. Jane Seller has a house and puts on the market for $100k
2. John investor get financed by his bank and purchases the house with 20% down and $80 mortgage.
3. John Investor defaults on loan 5 years in and property is foreclosed.and balance of principal is ~ $70K
4. Foreclosure AUCTION. Seller bids what is owed on the property???
   1. HOW DOES THIS MAKE SENSE???

Am I misunderstanding what the sheriff’s auctioneer stated? That for the most part, the plaintiff will win the bidding because they are going to bid up to what is owed. If that is the case, doesn’t the bank now have a liability of $140K for a property that originally sold for $100K???

Actual case:

Hamilton County Ohio:

Case: A1204637Plaintiff: Bank of America

Appraised at: $168K

Min bid: $112K

Plaintiff (WINNING) bid: $112K

What am I missing?

So I'm getting deeper with this potential rental and numbers are looking OK without specifics yet from the seller so, I'm looking to the BP experts on specific questions I need to ask of the seller. Below is what I've come up with so far. Looking for suggestions on what else to ask, WHAT I MAYBE SHOULDN'T ASK, and suggestions on what to elaborate on. Thanks in advance to any and all responses!

1. Price? ??? She is still checking comps. I believe she is looking for ~$49K
2. Why are you selling? Retiring and just doesn’t want to mess with it after relocating to AZ.
3. Are there any known issues with the property? No
4. Neighborhood grade? C
5. Any known issues with neighbors? ???
6. Is the property under lease? YES
   1. How long has the resident been at the property? 18 months
   2. Rent? $600
   3. What remains on the lease? ???
   4. Documentation? Yes
   5. Any known issues with the tenant? No, good tenant.
7. Age of property? 1966
8. Type of structure? Brick, multi-level condo/apartments
9. Parking (on/off-street, car port, garage, lot, gated)? Assigned parking space/single
10. What s included?
    1. Age of these items (roof, A/C, furnace, appliances)? Appliances
11. What isn’t?
12. Last capital expenditure and do you have documentation? ???
13. Condo (yes/no)? If yes,
    1. HOA fees? $196 p/month
    2. Last assessment? Amount? Approx 3 years ago. $200 for retaining wall. Assessment insurance available through HOA approximately $5 per yer
    3. Known issues/problems with HOA? Sometimes slow but they do get work done. Sometimes just have to keep on them.
    4. Investor restrictions/rental restrictions? None
    5. Percentage of renters to owners? ????
14. How long has the property been on the market for? Not on the market yet. Seller was just starting to think of selling.
15. Are there any covenants, caveats or any regulatory restrictions on the property? ???
16. What owner responsible costs are there aside from the normal mortgage and taxes, i.e., sewer, electric, garbage?
    1. Sewer?
    2. Garbage?
    3. Electric?
    4. Water?
17. If a condo, is:
    1. Separate meters?
    2. Costs not covered by HOA?

Thanks again to ALL!!

 Chris,

Thanks Again....PERFECT! I understand exactly what you gave me. I do think she is motivated, I'm pretty sure she said flat out, that she is close to break even but a little upside down. She also expressed that the fact we could possibly do something without the agent or associated costs would be a big relief for her. 

Like I said originally, this feels like it fell into my lap with a big bow on it. I know I still have to get detailed numbers but if hey work, I want to do right by her, the current tenant and if there is a decent cash flow, for a FIRST DEAL, I'd LOVE IT!

Thanks!

 OK Luc....So here is another follow-up, hope you don't mind.

If she would agree to terms along those lines, GREAT!! No agent, no commissions, etc. 

Now SHE HOLDS the note, how is that typically handled? Is the note held in escrow somehow, is it just in legal documentation filed with he county??? This is where I'm still a little lost how SELLER FINANCING WORKS to protect the investor.

Thanks ALL in ADVANCE!

Luc.....GOT IT! Thanks for the explanation. 

 Jay,

Thanks again. In answer to your questions:

1. I am planning on getting pre-approved just so I know where I stand. If just looking at FICO my score s considered excellent but I'd rather not put 25-30% down if I can avoid it and since this would be a rental, that's where I think it would be.

2. At first glance, YES she may be willing to carry the note based on me having told her, that we could make it work in both our favors. She did say, she is very motivated to avoid an agent because she may be SLIGHTLY upside down but said she's getting close to not being and paying a broker is what she said she wants to avoid.

1. With that, would I potentially offer her cash up front with a lower interest say maybe $5K and she carry at a reasonable APR for whatever term. She's 65 getting ready to retire to Florida so it's not like she'd want to do 30 yr.

3. From what I could tell, she had lots of pics on her phone of the area around the property and based on her info with the HOA, NO CAP-EX required to start. The property looks to be in good condition. She said if we agree on things she could arrange for me to see the inside of the property.

4. Side note....Sean Cole is correct, Price Hill area. Comps seem to be in-line. The  conversation she and I had went so quick that I wasn't quite prepared for all the info she gave. I do still need to get details and I asked her to think about what she's looking to get, her big thing is no agent and she doesn't want to owe. Iknow I still need to analyze but IT FEELS GOOD FOR NOW UNTIL THE NUMBERS DON'T WORK.

Chris Ramos and everyone that ha already replied....THANKS!! Gotta love BP!

Chris, again....I'm still in my self education phase so can you elaborate? 

1. You said to seek a mortgage lender/broker with preferably in house underwriting to shop it around. I understand that I think...
   1. ...then the mortgage company would hold the note like any other traditional mortgge, yes?
   2. From what I've been hearing/reading/research REI property through traditional lenders will usually require 25-30 percent down?
2. You said if I the owner and I did make the numbers work and we decide owner financing, "Also for example if you set this up with seller financing to pay the seller off in 3 years then you'll want to be sure your heading down a path to be ready in 3 years."
   1. Three years SEEMS short to me??? If I did three years, I'd be seriously cash flow negative.....yes it would be paid off in three years but what am I missing? 

Thanks again Chris!