How 2 finance a rehab - tax delinquent/sheriff sale

Hey folks - I’m hoping to make the best of a poorly researched purchase. I won a bid at a tax-delinquent sale this week on a property in my neighborhood and am exploring options for financing repairs and/or settlement with the Sheriff’s office.

 My bid was $21,700 with comps within 1 block between $55K and $75K (reported by city tax agency).   Supposedly, we'll be seeing %100+ appreciation rates soon as the 'hood has over $14 million of development in the acquisition stages with the city cooperating.  

 Like many first-timers, I hadn't realized how bad it could be and the home requires some extensive repairs: between $25,000 and $40,000.  :banghead    (check out my post in Rehabbing for the whole story!)

 I have around $15,000 readily available in an existing equity line on my one rental property and at least $15,000 equity in my primary residence, so I can settle on the property without additional funding if absolutely necessary.

 I've found that there's not a single title co. that will write a title policy on it (due to redemption rights??) and know that no conventional lender will touch it otherwise.

 My HELOC is 700, and even at the high end I think the proposed LTV below:

$22K purchase

  • $40K repairs
  • $15K downpayment from HELOC

= $47K total loan

vs. a $65K ARV (my hopefully conservative estimate) comes to a %72 LTV

 Will this fly with any lender?   What variety of lender will work with these sort of terms?

 If my only solution is to settle with the sheriff and refi after the required 9 month redemption period passes (in PA),  I'd appreciate the truth! 

Walking away from this deal and writing off my $2000 deposit as a lesson learned is still on the table, so I would appreciate ANY advice.

I’m not sure where you are but in Colorado, it is considered a foreclosure bailout loan when you are purchasing within the redemption period. Hard money lenders will do the deal. They usually call them “special circumstance” lenders.

If it were me, I would use a HML (70% LTV) for the purchase and use my LOC for the repairs. Once the title has vested in your name and there is no deferred maintenance you can refinance against the “new” value. Hope that helps.

Good luck!