Here’s a quick run of the situation:
- Established neighborhood in small Midwestern town (100k people)
- Similar houses in the area selling for $125-140k
- Owner owes $100k on the house, looking to get out yesterday (recently bankrupt from a failed business)
- House is in decent shape except for a major foundation problem, quoted from several companies between $7,500 and $10,000
- House needs new water heater, fix gutter system (to solve root of foundation problem), etc totalling about $7,000 more
- FSBO after an agent’s listing expired, on the market for 6+ months
- Area is growing rapidly (up 15% last year, and a MAJOR development is less than a year from being finished, about two miles away)
- Corner lot, huge fenced-in yard, nice looking house
The problem is that the owner doesn’t haven enough equity to lower the price past $100k, and the cost of repairs plus the purchase would negate any profit after a rehab. I’ve looked into a 203(k) loan, which I could probably do, but aside from removing the negative cash flow issue during the six-ish months of rehab, I don’t see an upside here.
This seller is MOTIVATED. He wants out yesterday, but his $25k in equity is cancelled out by repair needs. He doesn’t have any other assets (recently declared bankruptcy).
Do you think I should try a short sell with the mortgage holder? Any ideas are greatly appreciated!
Thanks very much,
Dave Muscato
davemuscato@aol.com
Dave if you are close to working a deal why not have the owner pay a inspector! This will give you the ammo you need to short sell the bank! Also have the bank do a B.P.O. or brokers professional opinion! This will give you more ammo. If they see that there is foundation issues they will not want that house in there inventory also keep in mind you will have to disclose the fact that there were foundation issues when you re-sell that house! I personally have done projects with these issues and have had decent luck with them in the past! Sometimes they get hard to re-sell on the other hand if you can get the correct price for the home why not do it!
Figure high on everything though Foundation $13,000.00
hot water and gutters 8,000.00
Other repairs 4,000.00
Then work numbers backwards 125,000.00
Current Loan 100,000.00
Repairs 25,000.00
Right there you are at a break even point (0)
So what ever you can short the bank is going to be your profit Remember to tell the bank that it is going to cost them 20% to take it thru the process of Foreclosure not to mention that they need on avarage of $7.00 in reserves for every dollar that they owe on that property! Then if they ask you if you work for R.E.O. Consultants just laugh they know my lines all to well!
interesting post, REOconsultants.
If you don’t mind me asking, roughly how many of these particular deals have you done?
what is your success rate with the ‘bank’?
thanks for the insight
m
I did over 200 short sells last year!
they are aton of fun!
I have a guy that works for me that is all he does is short sell banks!!!