I am new to this side of REI, but very excited. I have a deal that I think could be really good. First, the house is in foreclosure w/auction 1 month away. The seller wants to wash their hands of it. The property needs some work, paint/carpet/tile. If the rehab is done it will be worth 600K, currently it’s worth 540-550K. It is very dirty inside and does not show well, but is in a great location. The balance on the mortgage is 480K. Is this a good candidate for a SS?
The loan is through Litton I believe. I am confident the seller will work with me, so how do I go about putting together a package to offer the bank. I read on the “Making Offers” thread that banks usually know the condition of the property, so how much should I offer? I was thinking 82% of the current market value, offer 468K and include some pics in case they have not seen the condition. Is this a good strategy? The property is located in Ca, and I would be willing to pay a pro familiar w/Ca to help me put the paperwork and strategy together.
I am working on my first one too and this is how it’s going.We got a three way call to lender.He said we could use a generic letter of auth.(LOA) to fax him at Loss Mitigation dept.So I called back when I got home and he said after LOA he would fax me a few pages to begin shortsale process.Really nice guy,cooperative.He also said I could make an offer and they may accept it or counter.So I guess it’s OK to ask for huge discount. I ve seen other posts in situations like yours where they paid about 300 or 400K on a 600K house!No joke!If you are the only one person with LOA I guess you are the ONLY ONE the bank is working Short Sale(SS) with !?The bank will send an appraiser to do a BPO(brokers price offer) or something like that and you should TRY to be there to really point out the damages etc to bring the estimate down.I ve heard you get all kinds of guys doing BPO’s,some just DRIVE by!Some are surly,maybe just call a lenders Loss Mit dept and ask them hypothetically what is a bid amount theyt would take in various situations so in the future time is not wasted.Spend $10 a a SS book http://www.diyrealestatesecrets.com/newsletter.This guy has a good forum and is REALLY helpful and responds ASAP!I have found there are so many great people in this business dying to help you for free.Another guy said not to buy all those $$$ courses and such and I think he was right.The $10 you need to spend though.
More Details;
After inspecting the place I can say it’s a mess. It will take a max of 20K and my sweat to bring it back. I have found it will be worth between 610-620K. I learned the agent has an offer which will net the bank 501K, 20K short and another slightly higher offer may be coming in. The seller is getting closer to breaking even, and she wants to avoid the short sale from showing on her credit. I think the only way to get this property is to have her Quit Claim Deed the house to me and I bring the back payments current. I would then refi it into my name to pull some cash out and hold for awhile or just flip it. Is this a sound, and legal strategy? The exact numbers for the deal would be; My cost 542K includes rehab, and FMV would be 610-620K. Is this worth it for a first deal of this type? Not quite as sweet as I first thought, but still seems like some $$ to be had. BTW, the agent is trying to help find a solution to help the seller who is a friend of a friend.
Most investors want 30% profit left after all of their costs. That helps protect you since things rarely go as expected. I’d say find a better deal. If your 1st one is a bummer, it can take a long time to recover. Granted, if you are in CA then it can be very hard to find foreclosures discount much if the market is still moving well. I’m in the bay area and you’ll only get about a 10% discount here.