Foreclosures bank owed amount

Foreclosures, Short Sales, Tax Foreclosures
1

Hello, I’m a very beginner just searching around hoping to buy some good deals for rental. I came up with a few foreclosed houses by banks or HUD, etc.

Is there a way to find out what the last loan outstanding balance was when the house was foreclosed? I’m thinking that would be the bank’s bottom line, and my negotiating point. So, if the house is listing for $150k but the bank was only owed $120k, I could really push for $120? Am I thinking the right thing?

I found on zillow.com there is a last sale price, and the date matches the last deed recording date on the appraisal district website. Is that reliable? Thanks!

2

Hi Tang,

I am always happy to hear about people starting out in real estate investing, there is certainly enough for all of us, good luck in all your future deals!

The amount owed the bank is generally listed as UPB (unpaid balance), but…I have found that has very little to do with what the banks “bottom line” is.

The best example I can offer is a short sale I successfully completed last week.

The property was in default, (60 days plus past due) but the foreclosure process had not begun yet. I contacted the homeowner and obtained their permission to talk with the lender.
Here is how the numbers looked;

a. Original loan amount due $136,000.00
b. Late fee’s due $786.00
c. Unpaid principal $6790.00
d. Unpaid property taxes $5470.00
e. 2nd mortgage $21,322.00
Total due lender - $170,368.00
The home needs approx. $12k in work to make it a nice livable property. This is a property in a town about 30 minutes from where I live but is on 1 1/2 acres.

This property was appraised last year for $161,000.00

Based on those numbers, what would you offer the lender?

Here is what I did on this deal;

a. Obtained a letter from the lender stating they were willing to sell me the property. I utilized this when talking with the homeowners to lend validity to our negotiations. They asked for $10k to sign the Quit Claim Deed, but after an hour of talking, settled for $1k. I had them both go to the same lender the loan was with to have the QCD notorized (this way the lender cannot claim they didn’t know I was doing this or didn’t agree to it)

b. I then offered the bank $105k, with them paying off and showing me proof they paid the past due taxes and the 2nd mortgage. In addition, they needed to agree to waive in writing, all late fee’s and unpaid principal. I only wanted this property if they agreed to sell it to me free from all encomberances.

c. I gave them $6k down with an agreement that I would pay principal payments only, for 6 months on the original unpaid balance. Yes, they agreed to a 6 month no interest loan. And agreed to cash them out on or before the 6 months.

d. I paid for an insurance policy on the property.

The property currently appraises at $163k and I haven’t started remodeling it yet, the subject too appraisal is $240k - $260k.

In all fairness, for every offer I make like this I obtain 3-5 out of 10. It doesn’t always work. And, this is with a regional bank. I’m not sure how the larger lenders would respond, many times it based a great deal on the person your working with.

This deal was a win, but you can sometimes put a great deal of time, effort and a little money in a deal and it goes away. I have had that happen as well.

Go Get’em!
Ray Rochefort, mgr. mem.

3

Thank you Ray for the reply. They more I read, I more I realize how little I know. How did you find this property that is in default, but not yet started foreclosure? Was the property listed on the market, or it’s from a source at the lender? or somewhere else???

4

Once a property becomes a REO, the previous loan balance is irrelevant. At this point, banks go by their “perceived value” of the asset. For the most part, they use the value derived from an appraisal or BPO. Don’t base your offer on the previous mortgage, it will get you nowhere.

5

Good Morning Tang,

Historically, the sooner I get involved with properties after 2 payments have been missed, the better. Almost all of the homes I purchase I obtain from the lenders I have a relationship with.

Go Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC

6

usually an REO is listed for sale at what the bank won the auction bid at plus the legal fees to get it foreclosed. the less time it spends on the market and the strength of that market give you less wiggle room. just make sure the numbers make sense. do not become a motivated buyer. make sure ur offer is based on what your exit strategy is i.e. flip, rental, OO…good luck

7

REO are NOT usually priced by the auction bid amount. Most asset management companies don’t price their REOs, their investor does. Governemnt properties(HUD & VA) are priced based on their appraisals and BPOs. A majority of the REO reps do not have any info on the foreclosure sale in their file; different departments. Condition of the property will also be a contributing factor. IMO, when an REO is priced “high”, they have more than likely used the BPO “Suggested Repaired Value”, the highest value we can put on the BPO form. It stinks.