FORECLOSURE GURUS-need thoughts on discounting - Posted by Marty

Posted by IdahoRob on November 27, 2000 at 24:00:01:

I think you are on the right trail with foreclosures— however this might be the wrong game plan.
Before you go to much farther on this house start adding up the cost. One of the ones I don’t see you listing is the atty fees ---- will be on top of late payments.
Then fix up cost. And holding cost— how long before the home goes to auction??? Someone will have to make up all the back payments plus atty fees before this goes to auction, then—have the owner move — clean up and do repairs before you can L/O this----- then your new L/O buyer will have to have enouph in option fees to cover the back payment fees and showing the payments are all caught up. Then where would your profit come from ???

Trying to show you that this may not be the best of deals to work.

However foreclosures are good–and I would look for homes that have had a mortgage in place for at least 15 years before I would start getting too excited about going after it. And no new seconds have been added in resent years. In that old of mortgage— the home would increase in value, taking care of what the back payments due would more than likely eat up if this was say a 5 year old mortgage.

I am pointing out some of the pit falls—I know you are also looking for advise on discounting — this could make the deal worth while for you—however you will need to show the bank where they will get there money NOW out of the property----so I think trying to sell a L/O with the bank getting paid 2 years down the road —would be like hitting a brick wall very fast. I will be following this thread and just maybee someone has a new angle for pitching L/O’s and or discounting—lets help him out with some thoughts.
Rob H.

FORECLOSURE GURUS-need thoughts on discounting - Posted by Marty

Posted by Marty on November 26, 2000 at 22:27:51:

Hello all,
Found a house in pre foreclosure. Comps show 100k-105k. Owners owe 72k on mortgage plus 7k in back payments plus fees. In addition there are several other liens-Federal tax lien-$5100 and State tax lien $4600. I’ve been in the house, it also needs about 2k in fix up. The house is in a nice neighborhood of mostly owner occ. houses. Rents $950-$1050. I would like to pick the house up and use L/O as an exit strategy. I could L/O for 115k. Not a lot of room here unless I could work some discounting. Any thoughts on putting something together? I have some money but I would like to keep my investment to a minimum (maybe just the 2k for fix up). Suggestions? Thank you & God bless

Re: FORECLOSURE GURUS-need thoughts on discounting - Posted by ScottE

Posted by ScottE on November 27, 2000 at 11:37:08:


As far as tax liens go, if there is reasonable equity in a property, there chances of a discount are next to nil. However, let’s look at the rest of your deal based on the information you gave.

$72k balance
$ 7k arrears
$10k tax liens (approx.)
$ 2k fix-up

$93k BEFORE holding costs, etc.

Considering we are not talking holding/closing costs, commissions (if any), and SURPRISES during fix-up ($2k isn’t much and you could easily double that if you aren’t really careful), it looks awfully skinny.

If the rate (payment) is reasonable, if you think you can get a good hunk down from a good T/B quickly at the price ($115k or above), then it could be a decent deal. Not a homerun, but all you gotta do is knock singles.

Your best bet to limit your cash out of pocket may be to attempt to make a deal with the lender about the arrears. Depending on the terms of the note and mortgage, they may take 1/2 of the arrears now in cash and the other half apread out over the next 5-6 mos. This is very common and usually simple to work out, but the seller’s cooperation is usually needed for financial information and ‘a story’ as to why this happened.

Good luck and let us know what’s up.