Got a call from a woman Friday morning - divorce situation where the house is held by a trustee because couldn’t agree upon what to do with it during the divorce proceedings. Both ex’s are on the title. Mortgage hasn’t been paid in 4 months, but not in foreclosure according to trustee because he’s been able to hold the bank off while trying to get it sold. It went to auction, but auctioneer didn’t show because of personal family emergency. Trustee opened bidding at $149K because someone had told him that’s what he would offer for it. No one bid on it at all. Trustee has obligation to get highest price, but wants to get this property sold. Has had verbal offers, but nothing written. No liens, first mortgage only - 63K. On a 1 acre wooded lot, a 2/1 859 sq ft that needs either a complete gut or major rehab. Ex’s hate each other. Supposedly the place was trashed inside; trustee says it stinks to high heaven and there’s probably termite damage. Moved out, left food in refrig after unplugging it. Rats used to be in there. Supposedly vacant; I did a drive-by to see it. From the outside it definitely needs work. and lo and behold, ex-husband was there in the yard walking around. Was not too happy I showed up. Said house was not for sale, proceeded to say his ex-,wife was a crackwhore, yada yada, and I think he was packing heat. Got out of there asap. He actually thought I was an undercover from the sherrif’s department, said that the wife and new honey had just left and they do drugs, etc. . . I felt like I was on Jerry Springer!
Problem is, it’s in a nice residential street where they are building $400K single families no more than a tenth of a mile down the road and I know it could resell for $300K no problem. All wooded and the acre lot is the best feature. Trustee said the neighbors would be overjoyed if it burned to the ground.
I’m thinking of offering 100K or less, maybe even way down to 63K which is the mortgage balance.
Should I do this? At that price I’d still make money even if it was a $100K rennovation job. What additional questions should I ask the trustee Monday?
My MAIN concern is the ex-husband. What if he goes bonkers? The trustee said that the ex has been saying he’s going to get financing and buy out the wife and keep the house, but he hasn’t yet and he (trustee) has to move on this now by October to get it all taken care of. By the looks of him, this dude has no job and a hot temper. I’m thinking he could come back and do some damage not only to the property but to anyone who shows up on it!
Is it worth pursuing? what, if anything, can I do to keep both the ex’s off the property should I acquire it? SHould I look up this dude at the courthouse and see if he has a record?
Should I just pass? I don’t believe in dying for a rennovation. Being a newbie, I have no idea what measures I may have at my disposal in this situation.
Please advise! Thanks!
Where is the property located?? Is it in the Washington/Baltimore area??
I really need to hear from the experienced what I should do - pursue it or drop it.
Basically, has anyone dealt with situations like this - a divorce - in which one party can’t wait to be rid of the house and the other is holding onto it because of a vendetta against the ex.
I’m ready to make an offer on it, but thought I may get qualified advice here to 1) walk away or 2) make sure I do this-and-that when I make the offer.
Please, can anyone advise me?
I have a feeler out on this with another investor whom I haven’t heard back from yet and I’m starting to get paranoid that I may be getting screwed over so I’m not giving up any more info unless I have to.
Immy,
I applaud you for your drive and determination to get something done! However, I’m a little concerned that you seem like a desperate buyer. It is absolutely right to buy a good right on the spot IF YOU’RE ABSOLUTELY CERTAIN OF THE VALUES AND IF YOU HAVE THE MONEY OR FINANCING TO DO THE DEAL.
Sooooo, my questions to you regarding this deal are:
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Are you absolutely sure that this house WILL sell for $300K? That seems like a VERY high price for a 2/1 with only 859 sq ft. Where I’m from, you could buy that house at RETAIL for $50k-$60K. Remember that you need to compare apples to apples. Are the $400K houses down the street only 859 sq ft??? Why would someone want to pay $300 K for a small, rehabbed house when they could buy a larger new house for $400K?
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Do you have the money or credit to buy and rehab this house and to carry it for several months?
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Are you sure that the current owner won’t literally destroy the house if you buy it? Angry owners can put holes in every wall, bust out every door and window, pour concrete down the toilet, tub, and sinks, flood the house, set a fire, etc. This is a very real risk and how will you protect yourself from this situation?
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Yes, I would definitely check the criminal background of the owner and take this into consideration in dealing with this property. Also, if the owner is still living in the house, how long will it take to evict him? You’ll lose every month that he is there AND worse - you’ll have your money and/or credit tied up. Can you afford to tie up your money and credit for six months to a year? Can you do other deals if you have this much money/credit tied up?
No-one can answer the question of whether or not you should buy this property - except you! That’s your decision. IF your numbers are correct, this could be a pretty good deal. However, this is likely to be a very frustrating, difficult, time-consuming, and even dangerous job (due to the owner). Personally, I think it is too much for a brand new investor and maybe even iffy for an experienced investor. There are probably a lot of better and safer deals out there. I’d pass if I were you. Have I suggested patience?
The question that you should ask yourself isn’t whether this is a good deal, but is this the best deal that you can find for your first deal? Is this the best use of your time and money? Will you be risking your future real estate career by trying this tricky project?
You’ve already located a couple of deals in a short time. There are a ton of good deals out there. The key to being successful is to only do deals that are a sure thing. I don’t gamble - I invest in sure things. You will find a deal that is a sure thing and that will get you started on the right foot.
Good Luck,
Mike
Mike,
Yes I freely admit I sound like a desperate buyer, desperate to finally really get into the game. However, I do have the ability to walk away from this deal, if you want to call it that yet, and will do so if my gut tells me to on Monday morning after rediscussing this with the trustee of the house in person. I’m going to go by the house again with my husband tomorrow and I’m also going to seek out a neighbor who lives across the street diagonally from the house that was on her porch when I went by Thursday afternoon. I think the neighbors will give me a good education on the state of mind of the ex husband.
To answer your questions, yes I have the money and credit to finance and carry this project to completion and it’s all lined up from various sources. The house is empty according to the trustee but I will certainly investigate that further tomorrow if opportunity presents itself onsite. And yes, crazy as it sounds this house could sell for 300K. I have sold comps within the last 6 months that are around 920 sq feet on less land. Those 400K houses are bigger (3,000 sq ft living) but on less than a quarter acre of land. This house is on a full wooded acre. This is in Maryland so you’re talking East Coast market prices in a Washington suburb - very high compared to tax assessed value. I would improve the square footage if I get it at the rock bottom price I want - and that’s the other thing, I am putting in the price I want with the trustee and it’s take it or leave it. His obligation is to get the most money so I already know there is a very good chance I wouldn’t get the house anyway. But it’s almost too good of an opportunity to miss at least trying for; the trustee is very motivated at this point to get anything in writing and he may well take the first thing that comes across his desk.
I’m certainly going to check out the criminal background of this fellow at the courthouse, which is right across from the trustee’s law office. From what I understand, the house has already been trashed beyond belief. I also need to get from the trustee a time when the interior of the house can be inspected. If I can’t see the inside, I can’t do the deal.
Thanks for your sage advice. I just want so much for everything to start coming together and it is hard to be patient though I know patience is a virtue!
Immy :-\
Immy,
Hey, if you’re sure of your numbers, then go for it! Make a lowball, take it or leave it offer. If it works, great. If not, then at least you tried.
However, let me point out something. You say that you’ve got comps to prove a $300K sell, yet you also say that 3000sqft homes down the road are selling for $400K. Let’s compare. A 3000 sqft, I’m sure at least a 3/2 home sells for $133.00/sqft., while your 2/1 900sqft home sells for $333/sqft. Maybe that’s how it works in your market, but that seems a little off to me, regardless of where you’re at. Personally, I’d review those comps.
I know that this may sound a little hokey, but when you stop trying so hard to find/make deals happen, and you start letting deals find you, you’ll do alot better.
BTW, I simply love your tagline. I hope that you use that in your marketing.
Raj
Raj,
I agree that many of the buyers on this site sound so desperate to make a deal happen. The thing that almost all of them have in common is that they are yet realize that this is a business. Lets say that they do get the first deal, what is next for them. The need to relax and the deals happen.
There was a time last year that I went almost three months without even sniffing a deal. This year however, a get a deal offered to me every few days and I turn down 90% of them. The ones I always take are from my personal contacts. I buy every deal they call me on. The reason: If I start saying “no” then I will no longer be the person they call to buy the property. I have bought loser where I either broke even or made a few dollars just to keep the contacts alive. Are you guys prepared to do this to survive in this business?
Does this mean you buy deals where you know you’ll lose money just to keep the contact alive - or are these people up on your “criteria” and make sure they only bring you what you’ll buy?
I think I could have done a better job of wording my whole scenario here. My main concern is with the ex-husband - and I should have just asked if anyone had any stories to share about people going beserk after their property was sold to an investor. One thing I am not is desperate; if that was the case I could have bought a few things here in my own backyard already if I wanted to speculate.
I realize this is a business which is why I mine the wealth here everyday, and I appreciate all the advice.
These people do not ask what I do with the property, nor do they care. I do not wholesale everything I buy. I rehab or prehab many of the properties.
Yes, I buy properties knowing that I will lose. I also know how to limit my loses. My contacts know that I will buy anything if it is very cheap and in very bad condition. They also know that I will buy anything if it is way underpriced. All I tell them is a yes or no and the deal is done and they know I will settle ASAP.
masoning, no offense and with all due respect, that is just plain stupid, in my humble opinion.
I am NOT in this business to lose money, and I definitely WON’T buy a property where I know I’m going to lose money, period. And I especially would not buy something just to keep a contact. If that contact isn’t offering me real deals, then I don’t see the reason in keeping them.
Immy,
We’re just trying to help, here. I understand that you’re bothered by us bringing up the value of this property, but $300K for a 850 + sqft 2/1 home seems high for ANY market, especially when compared to your own $400K 3000sqft home.
First, let me say that I’m pretty much confused on what is actually happening here. You say that the property has NOT been foreclosed, but a trustee has it up for sale. How did a trustee get control of the property without either the bank foreclosing and appointing one, or the owners appointing one, or the judge in the divorce settlement appointing one?
As to the ex-husband: The answer will probably change based on the answer to the trustee question above, BUT…
If the ex is still on the deed, and if the property is NOT foreclosed, then the only way for this property to be sold is IF BOTH husband and wife sign off on the deed.
Now, if that happens, unless the husband is totally insane (which it sounds like he is only very mad, not insane), he’ll understand that he just sold the property and it’s no longer his.
If that is not the case, if the ex-spouses aren’t required to sign off on the deed, then you may have a potential problem with the ex-husband and your property. If so, then you’ll have to add that to the “costs” of doing this deal and determine if it is still worth it.
Raj
A judge appointed a trustee as part of a divorce action; they couldn’t agree on what to do with the house (she wanted to sell, he didn’t) - so a trustee has it. Since that happened, no payments have been made and the husband trashed the place before moving out. The trustee has been able to stall of the bank starting foreclosure but time is running out. He’s been trying to give the ex-husband the opportunity to get a preapproval letter and buy the property out from his ex-wife. I’m going to call the trustee again this morning and I will ask about whether the parties are required to sign off on the deed. I know both are on the title.
I’m actually thinking of asking the trustee if I can short-sale this thing because upon reflecting this weekend and driving by it yet again, this time with my husband, I think it needs either a complete gut job or to be razed. I think a BPO would show it’s worth less than the 63K mortgage on it. The only thing worth 63K is the 1 acre lot it’s on.
Masoning,
I’m voting with Raj on this one, as I usually do (he makes a lot of sense). It is crazy to buy a property that you know will lose money. I don’t need any “contacts” like that. What kind of “business” model is that???
Immy,
So, basically you will be involved in new construction - a long way from where you started wanting to rehab a house. With a trustee involved, with the house in such bad shape, with a project that could take months (or even a year) to complete, with an angry husband involved - this is not a project for a first timer. It may not even be a project for a seasoned veteran - opportunity cost and all that! Personally I wouldn’t touch it with a 10 foot pole because there are a LOT of better deals out there.
Therefore, I’d like to change my vote to INSANE (by reason of motivated buyer syndrome).
Mike
I hear what you are saying Raj and PM, but as I stated, there are ways to limit your loses.
The two deals I have done where I lost were for $59 and $1,000. What I should have said was that each deal came with 10 to 15 properties in the package. I only lost on one property in each of the deals for the above amount. I made an avarage of $10,000 per property wholesaling them.
Although I agree that you should not lose money to keep a contact, the difference is that I buy package deals and there may be losers. On the losers you have to just limit the losses. Sometimes my title company will reduce their fee or my realtor may reduce his fee so that I may not lose money. In the end, everyone makes $$$.
masoning,
That’s completely different if you are buying packages of 10-15 houses. In that case, each particular house isn’t a deal in and of itself. The package becomes the deal. If you are making money from the package of 10-15 houses, then you are making money, period. It’s not a loser if it costs you a $1000 to $100,000. Just trying to make it clear to the newbies, here.
Immy,
I’d run from this deal as fast as you can. It gets more and more involved everytime you post. And personally, you’ve only added to my doubts about value. Now, it might be possible to short sale a $63K note because it’s not worth that, BUT it’s ARV is $300K? Does that sound reasonable to you?
Definitely more red flags on this one than green. Two votes for insane!
Raj
Well, my investor bud came through and looked at it. It definitely is on the pass list at this point; the only thing would be if the trustee gets no bids, we come in with a ridiculous, but valid, low bid and got it.
Yes, it’s a complicated situation and I know people can’t believe an 850 sq ft on a 1 acre lot could be worth $300K ARV but you don’t live in a 50 to 60 mile radius of Washington DC and Baltimore then. I absolutely know the new construction will sell for no less than $400K and probably much higher - they are framing up and I didn’t see any signs on pricing - looks like individual building lots. I looked at the sold comps in the past 6 months around this house and the tax assessments, sq. ftge, lot size, bed/bath comparison and I’m telling you $300K is a definite possibility. People will spend much for land because around here you have new houses that almost butt up against each other, they are on such small lots now, that 1/2 an acre is premium and a full acre - like this one - is something straight out of heaven. The job market is solid here and there are more people who need houses than there are houses. Supply and demand at its finest.
Anyway, unless my buddy who has been rehabbing very successfully for the past 3 years will agree to a joint venture with me on this one, it’s a no go. We;re taking our time trying to figure out all the pros and cons and get some professionals in to look at it, so we won’t be rushed. If it’s still available and the trustee takes an offer when/if we’re prepared to make one, then we’ll see what happens. Otherwise, just another set of experiences to file away for future reference.
So I really am not insane nor totally foolish!!!
;D