I’ve been doing some “chunkers”; i.e. “rehabs” or “fix or flip”. Looking into what appears to be a great opportunity with pre-foreclosure &/or short sale candidates. Here’s a couple of leads that have contacted me recently:
1). Young couple in process of divorce, both still occupy the house. Appraised Value @ $235K, listed with realtor (had a contract at $226K, but financing fell through). Mortg Bal of approx $187K (combined 1st & 2nd by same lender). Monthly P&I payments of $1207, PITI payments of approx $1500. Rentals in area go for $1500-$1800. They are approximately 3 mo’s begind and there is a $10K pre-payment penalty with approximately 11 months to go before pre-payment penalty passes. No HOA dues. No repairs needed. House is in great shape.
2). Owners already bought and moved into a new home. house has been vacant for 5 months. Appraised Value @ $239K, listed with realtor (had a contract at $229K, but financing fell through). Mortg Bal of approx $192K (combined 1st & 2nd by same lender). Monthly P&I payments of $1227, PITI payments of approx $1500. Rentals in area go for $1500-$1800. They are approximately 2 mo’s begind and there is a $10K pre-payment penalty with approximately 2 months to go before pre-payment penalty passes. HOA dues is $600 annual. No repairs needed. House is in very-good to great shape.
The buyer whose financing fell through loves the house, has a 630 FICO, and can pay $1800 a month, just doesn’t have a down payment.
My initial thoughts were to buy them subject to, bring payments current, and find an owner/occupant with RTO/Seller financing. But I dont have the funds to bring them current, nore do I care to place my capital at risk. So I’m wondering if these are short sale candidates that I could then use a HML to close on one, do the RTO re-fi in 6 months for cash flow & wholesale the other off at 75% of appraisal.
Thoughts? Suggestions? Am I on the right track or way off here?
If the market value of the homes are higher than the balance, why will the banks be interested in a short sale? You also need a very good permanent harship, you may have this on #1 but #2 if I understood correctly, owners already moved to another house that they purchased… so your short sale will fail at this point. Houses that are “in very good shape - no repairs needed” is actually a bad thing for a succesful short sale. Also, I dont recommend doing a short sale on homes that are listed w/ an agent. Sub2… but remember there are agents w/ contracts right? what about their commissions? the numbers may not work out…
Most investors don’t want to pay more than 70% of market value for a property including repair costs, so none of fit. I’d verify those PITI payments because they aren’t making sense. You’re saying $200k houses are only $1200-1500 per month including taxes and insurance?
Most investors know that PITI will typically be close to 1% of the property price. You have a lender who can loan money to the average person that has a low enough rate to equal $1200-1500 per month AND includes all taxes, insurance and escrows?
#1. They owe $197k at close not including realtor fees and closing costs. The home is only worth $226k if they’re able to get another offer that matches the one that fell through. Pass on this one. They just need to sell it at market unless the lender will accept a short sale on a nice house (hmmm).
#2. Second home had a contract for $230k with loans of $192k plus possibly $10k due, not including closing costs and agent fees? Pass.
Yes, the payments for both homes PITI are approx $1500a month.
Update: House #1 the husband has moved out. He is a FT student, and his spouse lost her job (ironically at a mortgage co). She just started back to work but can not afford the house and the OCt 1 payment will be her 4th missed payment. She isready toabonden thehome.
The house has a 20yo roof. It doesn’t leak, but only a year or two left in it. I will use that fact and the typical paint/floor coverings for repairs to attempt a SS. They have had the home for sale for 4 months with only one offer and it fell apart.
She has a legitimate hardship, what am I missing?Why isnt this a viable SS candidate?
House #2, the seller was able to bring his payments current. So I’m just doing an old fashioned lease w/option and putting a RTO tenant/owner in the house.
Thanks again everyone! If you have anything else, fire away!
She may have a hardship and you may be able to squeeze a bit out of the lender on it but a SS is not the right solution for this homeowner. She only owes 187K and she had a bite at 226K. Which means if she lowers the price to 210 she can probably get a bite at something over 200K. That lets her pay her mortgage and the fees and move on.
We shouldn’t be forcing these homeowners into SS when there are better alternatives for them.