Foreclosure property, Bank is currently asking $120,000. May be bought for $100,000??
Payment must be made in Cash as the house has about $5,000 total worth of termite damage. House in located in CA, and we are told that under CA law, banks can not loan on property until damage has been fixed, and house has been treated. We will have in writing a secured loan offer to purchase property back from investor, which will be obtained once the house is fixed, problem is, we can not fix the house until it’s bought, and can’t get the financing until it’s fixed.
Say, it takes 2 months to fix house, and obtain the already secured lending to purchase property back from investor… What type of % is fare as a turn around for fronting the $120,000 needed? What types of questions would you ask if you were considering lending? What type of information do investors like to see when looking over proposals?
And where would I find such investors?
Property will not only be a residence, but possibly home to a relocated Not For Profit Organization that will benefit the surrounding community.
I hope I’m posting this in the right section. If not, please advise
I am not really clear on the deal. When you say a loan will be secured to buy the home from the investor, are you calling the lender you are seeking the investor? Or is the investor you and you are planning to flip the property to someone else?
I am guessing you are trying to say a new loan will be secured to pay off the purchase loan and you are planning to keep the house for yourself.
What I think you are looking for is a Hard Money loan to purchase the house and rehab. Then you will obtain conventional financing once the rehab is complete which will pay off the hard money loan.
This is possible but you have some issues.
One issue is that because you will be the owner/occupant it knocks out a whole subset of lenders who only lend to Non-owners due to licensing and usury regulations. So your universe of possible lenders is quite small.
They will want to know what the After Repair Value is of the house. They will typically only lend 60-65% of ARV.
They will want to know how much money you are investing in the deal. 20% is a number they will be looking for.
They will want to see your finances to determine whether you will be able to qualify for conventional financing in a few months.
They will probably want you to have the house already under contract before they consider the deal. They won’t go through underwriting to see if they’lll do the deal just based on “might be able to buy for $100K”.
You should expect them to charge you in the neighborhood of 5 points and 15% if they do the deal. Maybe even higher points.
What we really want to tell you is to go apply and get a FHA 203K Loan. This loan provides for the purchase and between $5k and $35k in repairs, remodeling, etc. It is one loan and as soon as work is completed it is a FHA Loan.
Find a lender in your area who handles FHA 203K Loans. And “Yes” a 203K is legal in California as the repairs are completed after the loan closes!
I totally agree with GR. The FHA203K loan is the perfect loan if you are going to owner occupy the home, which is the mandatory requirement. The advantage with a 203K is the fixed rates are very close to the traditional 30 year fixed rates on a standard FHA purchase or refinance versus a hard money loan.
If you dont plan on buying to owner occupy the home, then you can use a remodel/rehab loan. These loans are specifically for non owner occupied properties and are more along the hard money lines. If you are planning on keeping the home after the rehab, you can refinance using a Fannie / Freddie loan as you should easily have the equity considering the rehab. Non owner occupied rates tend to run about half a percent to 3/4 of a percent higher than owner occupied rates.
I used to sell real estate in CA. I have never had a buyer have trouble with securing financing due to repairs. The only time that is an issue is on an FHA purchase or VA. VA requires a clear pest. And as of the end of last year FHA can fund as long as clear pest wasn’t part of the contract.
f the bank owns the home, I would suspect you could get it for a lot cheaper than 100K…banks are not in the business of owning real estate and usually want to dump it as fast as possible…
Banks may not be in the business of owning RE, but many of them are holding out for retail prices on houses that need work. Sometimes they get the picture after a few months, sometimes they don’t.