Not sure which way to go

JackB03 · January 17, 2011, 4:24am

I found a 4 Bed/ 2.5 Bath house. Its been on this site since 9/13/10. It is a motivated seller and they are selling because of foreclosure/death. Its a 2700sqft home and is occupied.

They said the ARV is $180k. I looked at a few sites and even the appraisal district and I came up with around $155k-$160k. They show $6,000 in repairs.

Here is the hard part…for me atleast…

There 1st Mortgage - $140k
There 1st Mortgage rate - 7
There 1st Mortgage Payment - $1,225
They are behind $7,000

Is this a possible short sale or wholesale or lease option or what???

I was wanting to flip it but with them behind on payments and mortgage $140k, not sure which way to go. They are asking $150k lol.

Thanks,

Jack

javipa · January 17, 2011, 5:03am

Probably a short sale is the option here. The effective price would be:
$140k loan balance
$ 7k back payments
$ 6k repairs
or
$153k total

$150k asking price?

It’s gonna take $13k to repair and bring up back payments…

This means that a lease/optionee will have to fork up at least $13k so you can break even as a seller, if you fixed everything and brought the payments current … Then, if you paid the seller anything, that would increase your overhead on this deal.

Then, if it took you any time at all to make repairs, get the seller out, and pay him to move (LOL) you would have to get even that much more.

Then, to make a profit, you’d have to get even more than that from the buyer.

This deal sucks drain water from every perspective I can see, except a short sale deal. It shouldn’t be a hard short sale to negotiate, since it doesn’t have to be large discount to be attractive to an end/user. However, I don’t think this is a good “investor grade” prospect. Maybe for $13k you might want to take over the loan and make it your personal residence?

RenttoownCole · January 20, 2011, 3:01pm

Jack,

If I were you I would look elsewhere for a better deal.

Not much there to work with.

pilot76180 · January 20, 2011, 4:28pm

You don’t want to lease option behind on payments. Someone asked me to put a post up about that so I’ll try to do that later.
Colester! The Cole man! Nice site…like the little video…although…what’s with the background music? Lay down some Pantera on that thing and you’ll be rolling! HA!

Groveren · January 25, 2011, 12:31pm

I have a similar situation and i have in a fix ,how the solve the problem. But now , as i have read this forum and i have a very good idea to tackle this situation.The discussion very very informative and to the point and indeed very helpful and practical in approach.
Thanks fellows.

nsu1997 · February 2, 2011, 8:27pm

javipa post:2:

JackB03 post:1:

I found a 4 Bed/ 2.5 Bath house. Its been on this site since 9/13/10. It is a motivated seller and they are selling because of foreclosure/death. Its a 2700sqft home and is occupied.

They said the ARV is $180k. I looked at a few sites and even the appraisal district and I came up with around $155k-$160k. They show $6,000 in repairs.

Here is the hard part…for me at least…

There 1st Mortgage - $140k
There 1st Mortgage rate - 7
There 1st Mortgage Payment - $1,225
They are behind $7,000

Is this a possible short sale or wholesale or lease option or what???

I was wanting to flip it but with them behind on payments and mortgage $140k, not sure which way to go. They are asking $150k lol.

Thanks,

Jack

Probably a short sale is the option here. The effective price would be:
$140k loan balance
$ 7k back payments
$ 6k repairs
or
$153k total

$150k asking price?

It’s gonna take $13k to repair and bring up back payments…

This means that a lease/optionee will have to fork up at least $13k so you can break even as a seller, if you fixed everything and brought the payments current … Then, if you paid the seller anything, that would increase your overhead on this deal.

Then, if it took you any time at all to make repairs, get the seller out, and pay him to move (LOL) you would have to get even that much more.

Then, to make a profit, you’d have to get even more than that from the buyer.

This deal sucks drain water from every perspective I can see, except a short sale deal. It shouldn’t be a hard short sale to negotiate, since it doesn’t have to be large discount to be attractive to an end/user. However, I don’t think this is a good “investor grade” prospect. Maybe for $13k you might want to take over the loan and make it your personal residence?

Only problem with a short sale is it’s not in bad enough shape for the bank to discount it enough to pay all cash. They likely won’t lower the payoff to below MAO, and you should never pay MAO. Yes he could sell it retail by getting an end-buyer to close on it in the small short sale approval window but I can testify that’s tough…everything has to fall into place, plus somebody is likely gonna have to do repairs to get it sold…even if the end buyer is fine with it FHA will find something.

So what I’d do is pass this off to a Realtor who does short sales, and have them pay me for the lead, or pay me a point or so when they resell it.

Another possible solution would be a sub-2 mortgage assignment. Get it under contract for what they owe on it ($147k), then find an end buyer who wants seller financing, and assign it to them for $15k. $7k of that will go to catch up the back payments, a few grand for closing costs, net profit will probably be $5k or so. Cosmetic repairs passed on to the end buyer which they should be happy to do since they’re getting to buy a home with no bank qualifying. No dough for the seller…they don’t have equity.

idhomebuyer · February 5, 2011, 11:21pm

I would not take any house that’s behind more than maybe 4 months tops. I like the sub2 mortgage assignment. Or, you could still do a L/O with this. Do not offer the seller any more than what is owed. Offer to catch up their back payments and make the mortgage payment every month. Use the MAPS method of explaining what different options they have, the pros n cons, then bring up the least worst option which would be lease option.

If they would go for it, see if they’ll let you do a 7 day L/O sale aka “Round Robin” auction at the home. I hear its effective if you wanna find somebody who has more down payment, through an auction style approach. I’ve seen somebody do this & it works. And if you have any money left over, you can give it to the owner to help them move. You never know, though.

nsu1997 post:6:

javipa post:2:

JackB03 post:1:

I found a 4 Bed/ 2.5 Bath house. Its been on this site since 9/13/10. It is a motivated seller and they are selling because of foreclosure/death. Its a 2700sqft home and is occupied.

They said the ARV is $180k. I looked at a few sites and even the appraisal district and I came up with around $155k-$160k. They show $6,000 in repairs.

Here is the hard part…for me at least…

There 1st Mortgage - $140k
There 1st Mortgage rate - 7
There 1st Mortgage Payment - $1,225
They are behind $7,000

Is this a possible short sale or wholesale or lease option or what???

I was wanting to flip it but with them behind on payments and mortgage $140k, not sure which way to go. They are asking $150k lol.

Thanks,

Jack

Probably a short sale is the option here. The effective price would be:
$140k loan balance
$ 7k back payments
$ 6k repairs
or
$153k total

$150k asking price?

It’s gonna take $13k to repair and bring up back payments…

This means that a lease/optionee will have to fork up at least $13k so you can break even as a seller, if you fixed everything and brought the payments current … Then, if you paid the seller anything, that would increase your overhead on this deal.

Then, if it took you any time at all to make repairs, get the seller out, and pay him to move (LOL) you would have to get even that much more.

Then, to make a profit, you’d have to get even more than that from the buyer.

This deal sucks drain water from every perspective I can see, except a short sale deal. It shouldn’t be a hard short sale to negotiate, since it doesn’t have to be large discount to be attractive to an end/user. However, I don’t think this is a good “investor grade” prospect. Maybe for $13k you might want to take over the loan and make it your personal residence?

Only problem with a short sale is it’s not in bad enough shape for the bank to discount it enough to pay all cash. They likely won’t lower the payoff to below MAO, and you should never pay MAO. Yes he could sell it retail by getting an end-buyer to close on it in the small short sale approval window but I can testify that’s tough…everything has to fall into place, plus somebody is likely gonna have to do repairs to get it sold…even if the end buyer is fine with it FHA will find something.

So what I’d do is pass this off to a Realtor who does short sales, and have them pay me for the lead, or pay me a point or so when they resell it.

Another possible solution would be a sub-2 mortgage assignment. Get it under contract for what they owe on it ($147k), then find an end buyer who wants seller financing, and assign it to them for $15k. $7k of that will go to catch up the back payments, a few grand for closing costs, net profit will probably be $5k or so. Cosmetic repairs passed on to the end buyer which they should be happy to do since they’re getting to buy a home with no bank qualifying. No dough for the seller…they don’t have equity.