I am purchasing a property from the current mortgage/lien holder for 195k. The property comps are looking like 395k but the home needs roughly 55k in rehab. The property was originally purchase by another investor who ran out of money and ended up in foreclosure so I am buying the paper from the current mortgage holder who happens to be a private investor. The starting minimum bid on the property is $247000 so its a win win for me because if it is sold at sheriff sale even for the min bid I make a profit or if it is not sold I can retain/ rehab and refi or sell for an even larger profit. My question is what are the negatives that I am missing? What are some of the possible pitfalls of this? Any opinions or expertise is welcome. Sometimes you need someone on the outside looking in to see the risks better. thanks (sorry for the long post)
Looks like win/win to me. You’ve obviously had the opportunity to inspect the home so there will be no surprises there. Assuming you’ve comp’d it out accurately you’ve got a great deal on your hands. Congrats.
thank you. yes I had my realtor send me comps and they are actually going for $425k but Im being conservative. The mortgage holder allowed me access to the property for my contractors to estimate the cost to repair. Im in the state of PA, Im not too keen on the foreclosure process. However I have been reading the sheriff sale site for my state , my only question or concern is how long would the current owners have to try and redeem and if they redeem would they give me the min bid or would they only be required to give me what I paid?
In PA, the owner is evicted 30 to 120 days after the sale, depending on due process, so figure 6 months from date of sale to redeem. You’d get what you paid plus interest.
You own the 1st mortgage on the property that is in foreclosure? So that means you note is the one foreclosing?
Shouldn’t you be able to go work a deal with the current property owners and have them sell you the house for 10 bucks in exachange you would satisfy the mortgage and stop the foreclosure? That would allow you to own the house with out dealing with forclosure and eviction time and you could get on with rehab or whatever your exit strategy might be?
Am I missing something here? Thanks.
~joshua
“Shouldn’t you be able to go work a deal with the current property owners and have them sell you the house for 10 bucks in exachange you would satisfy the mortgage and stop the foreclosure? That would allow you to own the house with out dealing with forclosure and eviction time and you could get on with rehab or whatever your exit strategy might be?”
[b]yes I am purchasing the note from the current lien holders which is goinig into foreclosure. They have attempted to get the money from the current owners but they do not respond. The property is vacant because it was under construction. They did all of the gutting of the property and put in all new windows and some electrical but that is as far as they got before running out of mone so chances are they dont have the money to pay me.
No, what jsstinson is suggesting is basically accepting a deed in lieu of foreclosure from the current owner. That way you would own the property and the foreclosure would be cancelled. You would sidestep the chance of anyone purchasing the property at auction. But you have to ensure there are no junior encumbrances since this method will not wipe them off title.
Exactly,
Sorry, I didn’t use the correct verbage, but essentially, I would do a deed in lieu of foreclosure and ensure the property came to me and me alone if it is such a smoking deal.
Sorry for the confusion.
~joshua
I hadnt though of that. I will look into it thank you. I will keep you posted as to how it turns out.