All Forum Posts by: Matt Duffey

I am currently trying to decide what loan to take, a 203K streamline or the HomePath Reno loan.

I have the rates differences and know the payment differences with pmi / no pmi, etc.,

I beleive I could refi out of the FHA in 6 months and as long as there is 20% equity as planned from our research and comps, the pmi would drop.

But the big question I cannot find answers to is how difficult it is to refi out of the HomePath once the seasoning period is up. I do not have a problem with the terms of the loan, but I'd like to be able to know what the likelihood of refi'ing to a conventional is for this loan product.

I have a unit in my building that is now out of redemption and just got past the eviction phase - the whole unit has been cleaned and the trash/property has been removed.

The local asset manager has advised them to not make improvements and told them they have a buy ready to buy in 'as-is' condition. Fannie Mae is refusing to consider an offer in 'as-is' and is adamant about making repairs before listing it.

Has anyone had experience with a Fannie Mae REO where you have been able to convince them to not make improvements and sell 'as-is'?

No one bought I at auction - there wasn't an auction. There was a judgment of a consent foreclosure and went directly to the investor. The borrower died a d there was no estate. Took 3 years to get to this stage.

How do the banks respond to offers on their REO's with the ARV x 70% formula?

I have had an eye on a unit in my building that was going through foreclosure for 3 years and it finally just was foreclosed on. I spotted the listing firm that represents the investor and had a nice chat with him to make friends. I now have his son, same firm, representing us as buyers, while the dad is the listing agent.

The unit had a leak years ago and was totally ripped apart and needs a lot of work. We have several 203K quotes that are all around $100K in total repair costs.

The agent representing us has appraisal knowledge and valuation knowledge since it will be listed by their firm. They have the after-repair valuation at $350K.

The problem we have is that we do NOT want the investor to make any repairs since we would like to make the repairs how we would like them. I can see the situation where it is not as major as this where all they needed was some paint, tile and hardwoods, but this is a full rehab down to the studs. Our estimates are around $100K, but I bet the investor could do it half *** and get it in minimal shape for half that.

The property is in pre-marketing right now and is not listed, so they can't entertain an offer from us yet, but I am trying to figure out the best steps we can take to convince them not to make any improvements. Along with our offer, we will include a no-contingency clause for inspection and buy as-is, close fast as we are already approved, etc.

Are investors really investing in heavy rehabs on their REO properties? They KNOW that we are out there as a genuine buyer in the building - not that they care, but the amount of money needed for the repairs seems crazy to think they will actually recoup that.

Any advice is appreciated. Also, since we know their repaired valuation is $350K, and we have a rehab estimate of $100K, and I know there are many factors involved here, but where would you start for an offer? How do you value the time/energy/time of year/etc. in your offer price?

Thanks Mark. Yes, the requirement for the FHA loan is what I am trying to legally satisfy while continuing to live in my current unit and rent out the new unit after the rehab. Yes, that sounds exactly like what I am not supposed to do - but my lender and FHA independent building consultant are recommending the LLC option as if this is done all the time.

I guess I should clarify the situation after re-reading my original question.

Facts:
My wife and I are co-signers on our current residence.
We live in a 3 unit building where 1 unit is vacant, in need of a rehab, and double the size of our current unit.
Our only option is a 203K FHA loan to take advantage of the rehab option.

Issues:
FHA will not approve a deal with more than 10% ownership in the building.

Recommendations:
Our lender who does 203K's has gotten our building FHA approved and advised us to quitclaim our current unit to a LLC before we apply for the 203K.

Questions:
Can this be done legally where we continue to live in our current unit and rent the 'new' unit?

If this can be done and after the loan has been approved, is it possible to transfer our unit back to us out of the LLC and treat the 'new' unit as a rental for tax purposes?

For this situation, I am having a hard time conceptualizing what exactly I can do and how to best approach the situation.

I see. Thanks for the responses, guys. How about the same scenario, but as far as anyone but my wife and I know, the unit we purchase will be our primary.

My wife and I currently own 1 unit in a 3 unit condo building. We are pursuing a second unit in the building and will need to put our current unit in a LLC. We will continue to live in this unit and rent out the unit that we are pursuing.

With that said, I have a few questions...

To be sure that I do not trigger a due on sale or transfer clause, should I have my current mortgage company for written consent to do so?

If I do move my current unit to the LLC, will I give up any of the tax deductions that we currently take as homeowners?