This is my first post here. I am a working with a client in pre-foreclosure and I wanted to know what should be done to save this homeowner from going into foreclosure. Here is the scenario.
homeowner owes: $249K
market value: $200k (based on similar homes sold in mid December on the same street as the property.
repairs: $0k - has a great kitchen, old but operational bathroom, no roof damage, etc.
Do you think this is a good candidate for a short sale? What would you offer to the bank if so?
I am not interested in holding any property…so my exit strategy would be to sell to another investor.
ALl homes make a great short sale. They just need to be behind on the mortgage and you need to get your price.
So lets look alittle at the home. Kitchen great but bathrooms are old. This means a rehab is still needed. Avg cost to rehab a bathroom is about $2-5,000 depending on what you want to do and size.
Now the problem is you want to flip to another investor. Banks are starting to slowly allow assignments but very tough and it will most likely need to be a cash deal. Your best option is to close on the home or double close.
To sell to another investor, if home is worth $200K, they will not want to pay anything over $140K in this market I am sure. BUt you need to see what market rent is to see if it can be held and at what cost to still make money. How much will taxes and ins be as well, plus misc holding cost (landscaping, mgmt, vacancies of 10%).
Without knowing all facts, I would recommend an offer in the $90K range at 40-45cents on dollar and do not go over 55cents on dollar…
Will that work? Not sure I am doing the numbers right…if I offer 60 cents on the dollar that would be $149400 to the bank. If I sell it to an investor at 70% of the market value (200K), my target sell price would be $140K…I would lose money. deal over.
Again…this would be my first short sale. But I thought you offer the bank cents on the dollar on what is OWED no the market value. So that would make my offer to the bank $137000 if I went with 55%. (not $110k). Is this correct?
You make an offer based on the FMV of the home, not the loan. Banks already know the home is worth less. YOu will need a BPO. Banks will counter. I like to start low and go up. I max out at 60cents on dollar if no rehab needed. YOu need room to sell, pay commissions, holding cost, etc. That can eat 10% faster than you think… Plus you need to sell at 70-80cents on dollar, depending on your buyer is an investor or enduser…
I recommended 90K as a starting point. If they feel it is really low, and do not counter, you can still make another off, raise is alittle till you get a counter or ask realtor to find out the figure they have in mind. Also keep in mind, banks will pay closing cost, I know in Fl you can gt 3% (the max allowed for a seller to pay). They will want to use there own title which is fine since title ins will still be issued and home needs to be delivered with a clean title. Also title ins polices from my experience in Fl are all the same price anyway. Its based on sale price.
You may want to get a couple estimates for updating the bathrooms and any other stuff and have it included in the offer so you can justify low price to a point.
Thanks for the education. Any other suggestions to influence the BPO? I can get a repair for the bathroom but the house doesn’t need a whole lot of other work. 3 other homes in the neighborhood went for $200K. $205K, and $185K.
One thing about the homes that recently sold. Where they the same size or very close, similar floorplan, br and bath amount. Is the lot size comparable. Anything that can increase or decrease the homes that were sold, such as a corner lot would be worth more money.
Also what condition was the homes that sold. Did they need updating throughout or definitely similar to this homes condition. Also keep in mind about landscaping.
Also for resale/flip…Does the current house have crub appeal???
The ones that sold early and mid Dec are all the same size as the property. Lot size is comparable. No corner lot (smack dab in the middle of the block). Now, I am not sure what condition the previous houses were sold in. They are decent now. Paint is decent but not new. The property in question has good paint but not a new paint job. Landscaping could use updating for all (the sold properties and the one in interest). The current curb appeal is at par with the other ones on the block. Nothing special. The inside however has an upgraded kitchen, fresh paint, great appliances, etc. Only update in the interior would be the bathroom. Again it is dated and could be upgraded…but doesn’t NEED to be updated. Maybe something minor in there would go a long way.
Thanks for all the post guys. This is a great help! I just learned the homeowner had started a ss process with an investor who is no longer in business (evidently this investor had an office in the neighborhood that no longer exists). Cell phone is disconnected. Will this hinder the situation with submitting a short sale after the process already started? I am not sure how far the previous investor got in the process but if they submitted an offer or something to the bank, is that going to be a problem for me?