Hello All:
Please share your experiences or feedback to the this scenerio.
With the current credit crisis, I am considering the following strategy to acquire short sale properties. I want to taking the deed to the property while the short sale in progress. Once the short sale is completed, I will refi the loan, instead of taking a new purchase loan.
I have not done this yet. This is essentially something I am contemplating. I don’t know how it will work, but I suspect it could be feasible.
I will appreciate all you veterans investors and brokers to chime in.
Thank you in advance.
Probably not going to work out that way due to the fact that you won’t have title long enough and the bank that has approved the short sale will still have their nose in the deal.
I assume by your suggestion that you are trying to avoid paying the down payment and closing costs. If that is the case, the best option is to get a bank loan for the purchase price and find a private lender that is willing to lend you enough to cover the down payment and closing costs. Secure their money in the house with a mortgage, and after you have held title long enough you can refi to pay them off with interest.
example house is worth $150k
Purchase price $100k
Bank loan (95%) $95k
Closing cost $4k
Down payment $5k
Borrow $9k from a private lender, secured with a second position mortgage in the house, with a 10% APR interest rate, due in 12 months
At the end of 12 months refinance the house at 80% of value ($120k) and pay off the private loan $9,900 ($9k borrowed plus 10% interest, $900). Put about $9,780 in your pocket (less refi costs)
Thanks for the response.
My challenge right now is not necessarily the down payment. Yes, anytime you can avoid paying down payment, it’s great. However, I’ve been doing rei less than two years. I started mid last year. I did not make any money last year. This year, I’ve made some money and acquire a property using sub-2 techniques.
I negotiate short sale, which I try to wholesale. However, I want to hold on to some of my short sales…especially properties in good area, and in good condition. the problem is since I am self-employed, and have not been in business for two years or more, I’m finding it difficult to get traditional financing. My credit score hovers around 700
I’ve become aware of a new refi program, called shortrefi…for people behind on their mortgage. It’s like a short sale except that the property is not sold, just refied, and the owner can stay in it. These program is what I had in mind, to utilize.
I figure the short sale takes 3-6 months, that may be adequate time to satisfy some lender’s seasoning.
If any of you have or know of lenders that may work with someone in my situation, please refer.
thanks in advance.