Ok this is my first deal and it looks like it might be a good one
House was built in 2002 and is 2000sf
It has a first of 193k and a second for 54k
The ARV is 290k, I havent been inside but im assuming it is in good condition
The owner hasnt made a payment since June 1st, and it is scheduled to be sold at auction of Feb. 5th
My plan is to try to short the 2nd for 20k and then sub2 the 1st for a few months until sold to a retail buyer
So there is a
1st 194k
Back payments and taxes of around 12k
Second shorted to 20k
Repairs 5k
Holding and selling costs around 12k
Cash to seller 5k
Miscellaneous of 5k
Total costs of 247k
ARV of 290k
Possible profit of 43k ??
I am going to contact the seller tomorrow and present the offer, how does this sound this deal sound to you guys?
The second mortgage is listen with MERS INC, does anyone have any experience shorting with them?
There is only 13 days until sold at auction, is this enough time?
100% agree. 20K for the second. You will get no counter as they will grab that and run! Offer them 3K instead. They will get nothing at the sherriff’s sale unless the home sells for a ton of money and the second gets a piece of the pie.
Cash to seller? What! This isn’t a sub 2 deal. This is a short sale. They are already losing their home in 2-3 weeks and they want you to pony up 5K to them. They are fricking nuts. Tell them no way you can do that. You are under the gun right now to get a ss done with the sale being so close. You might not have enough time to do it. It will be close.
Lessons learned here. Lowball the second like crazy and when doing a ss the seller gets ZERO money from you. What they do get is someone (like yourself) who will work hard for them and to save the house from auction. If that isn’t good enough then you have a seller in denial or that is expecting too much.
The house is in nice condition and in florida. The retail value is 290k. Im not sure what nice houses sell for at auction, but im assuming 90% of retail.
Im not too sure on what kind of fees the bank’s incur when they forclose and sell, but on this house im assuming 6% realtor fees of 290k which is 17k and then the attorney fees which im not sure of either, maybe around 30k???
ARV 290k
Expected at Auction 256k
minus
Fees bank would incur 47k
Total of 209k after bank sells and fees are paid.
The first is 194k so the second mortgage holder with 15k after it sells
So should I offer around 10k so they get their money now, and they will most likely take it? I dont want to offer too low and ruin the deal over a few thousand when there is over 40k to be made. Also there isnt much time for them to process counter offers. I only have 8 business days until auction.
The first should bid 194k plus deficiencies, rehabbers will not go much above that, investors will go some were around 217k, land lords and retailers will bid higher. That is if all show up at auction. The only way the 2nd will hope to get anything is the land lords and retail buyer. I have also read that the properties in Florida are slowing a little in some areas. Again I would low ball the 2nd 1 to 3k at most offer the 1st about net150k on first offer and ask that the sale be held off for a time to give you and the bank a chance to come to terms. That’s were I would start I think but then again I do not know your area and how the market is doing.
It’s interesting you say you haven’t even contacted the owner. And yet so many spend time giving their 2 cents. Those that say the 2nd will cave don’t know. They haven’t tried. I know you didn’t get anywhere with this deal. This is a post script.
This is not a post script, I found this deal last night on the local foreclosure database that I subscribe to. Im 18 years old and working my first deal which happens to be a short sale. I sent a letter out today and am going to call him tomorrow.
Thanks to those who replied, I will keep the post updated as I progress
By the way I wonder why EquityHunter only criticise’s people and has nothing to bring to the table except negative comments. I just realized this after reading some previous posts. EQ how would you like it if you posted a proposed deal and everyone called you a liar…get a life
is shorting 1st mortgages possible when your shorting the 2nd already?? and what can be done when there is only 1st mortgage your playing with and the person either owes more or owes what its worth and its about to foreclose …in this situation can we try to short the 1st as well when theyre in 1st position why would they bring it down if the house is say worth 200k and the 1st is for 190k theyre sitting in a pretty good position I’m sure everyone agrees to that but as you guys said the fees, attorney fees and realtor costs would bring them to a loss so is there a possibility to talk that down most short sale articles and books I’ve read really only talk about the 2nd maybe because its easier since theyre sitting in the 2nd position but I’ve heard some talk about shorting the first as well
some help will be appreciated
thank you
so basically 10-15% on the 2nd of 54k would be 5-6-7k no more right? So I can start at 3.5k and go up and with the first of around 211k I should offer then maybe around 185-190 starting off and see if they counter or should I go lower
let me know
thank you very much
Your on track for the second. The first might be to low but low is ok cause you can always come up. Typically the first will hold its own cause they know the second is gonna get wiped out.
from what I have read a first mortgage holder will accecpt a short but there has to be a good reason for them to do so like extensive repairs or a bad neighborhood. You meeting the BPO (brokers price opinion) agent at the property that the lender sends out is a good chance for you to influence them in your favor by showing them the flaws of the property and even providing them with favorable comps. These agents only get about 150 for their work and it is A LOT of work so in most cases they will be happy to take your repair estimates and comps, which in effect will lower their estimate of the value by quite a bit. cheers
short sales are the jam, except for the part that the lenders can still go after a deficiency judgement against the homeowner…but from what I have read they dont care most of the time, they just want out
I see but of course if they do that they will not want to make a deal with the investor so it in no way will put us to harm is that right? so the home owner cant come back and sue us if the bank comes after that if they make a deal with us as an investor and just want out then thats a done deal case closed am I right so we helped out a delinquent payor and made money doing so
thats right for the most part. Ethically and legally you should inform the homeowner that the banks can seek a deficiency judgement (if your state laws permit such, most do). This can kill some deals but it needs to be done to protect yourself. You have the homeowners sign a document saying that you told them this. Most of the time they wont seek it because they are basically beating a dead horse…no money to take.
I see now can you have the bank sign something stating because were closing the deal they can not go after the home owner because I think the home owner will never agree for a short sale if he knows he can be sued even after he loses his house and loses his equity if any ??
Yes you can try to get the bank to sign saying that the short sale is payment in full and they wont seek any judgments, but they probably wont…no reason to. There are basically two things the bank can do after a short sale, but they can only pick one or the other. 1. The bank can write off the loss on their taxes in which case the homeowner is issued a 1099 form which basically says, you earned this income (the difference of the orignal loan, and the short sale amount) and now your going to pay taxes on it ( at your income bracket ). 2 They could also decide not to write it off and be able to seek a deficiency judgement against the homeowner (usually if they get a high paying job, or win the lottor or something). They just want to be able to get their money from you if they come across some fat cash. Your right it is going to turn some homeowners off to the idea of a short sale, but if your state laws permits the banks to seek a deficiency even after it goes to foreclosure , what do they have to lose? If their is enough money in the deal offer to buy something from them outside of closing (like the junk left in the house) for a few grand which will set you apart from the other investors (they see dollar signs)