Purchased house at foreclosure sale - Posted by TeddyB_SC

Real Estate Investing
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Posted by Dave T on January 09, 2003 at 23:46:13:

With that much equity in your primary residence, how quickly could you get a home equity loan for the $57K you need to complete the foreclosure sale purchase? If you are able to purchase the foreclosure property, then sell it at retail prices, you can afford to wait 140 days for a large payoff.

I like Ron’s suggestion better, however, about moving into the new house and selling your current home for tax free profits. Even if you use the home equity line approach to purchase the foreclosure property outright, you still increase your net worth by $50K+ and own your home free and clear. The sale of your current home will probably just pay off your mortgage, your credit line, and your selling expenses with very little left over. With your own home free and clear, your disposable income each month increases by the amount of debt service you are now paying on your mortgage.

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Purchased house at foreclosure sale - Posted by TeddyB_SC

Posted by TeddyB_SC on January 09, 2003 at 19:30:05:

The wife and I puchased a home at a foreclosure sale for $60,001, 5% down and the balance in 20 days. When we pay the balance, the judge gives us the deed. As I am a police officer and being in uniform at the sale, my wife did the bidding for us (don’t want any complaints about intimidation). Her name went down as the only purchaser of the property.
We had the property appraised and the appraisal came in at $118,500. The property was completely remodeled prior to being foreclosed on. The appraiser told us that she and her husband are investors and would like to purchase the property from us.
My question is this. Is there any way to sell this property to the appraiser prior to us going through a full blown closing with our bank. Is there any way to assign this deal??
Thank you for any help you can give.
TeddyB_SC

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Listen to JT and Ron - Posted by ken in sc

Posted by ken in sc on January 10, 2003 at 07:32:03:

Sounds like you have a winner with a huge profit. If you are new, get good legal advice so you don’t lose it. In my county, the judge frowns upon assignment, so ask them the question directly. I once wanted to close in my corporate name after bidding in my personal name and the judge warned me NEVER to do that again, although he did let me that time. And like JT said, 10-15K minimum for you.

Also, the appraiser has made an ethical mistake. When an appraiser appraises a property, when he signs the report he ethically is stating for the record that he has “no interest in the property”. He cannot then make you an offer to buy. How can you trust a value given to you by someone who wants to buy it? Other opinions, at least by a couple Realtors, may be wise.

BTW, where are you in SC?

Congrats!

Ken

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Re: Purchased house / Financing - Posted by tyler, nc

Posted by tyler, nc on January 10, 2003 at 07:08:24:

Teddy, if your near Charlotte, NC and the deal is as good as it appears, I would be interested in providing you decent loan to hold house until sold near retail price. Interested?

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Re: Purchased house at foreclosure sale - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on January 09, 2003 at 22:03:00:

Teddy B–(SC)-------------

Good going folks.

I think JT(IN) is prebably correct, you could assign your interest in the property, perhaps fairly easily. However, I think that the $10-$15K assignment fee–plus return of your deposit–is not a lot to settle for here. You might do so if you wanted. However, it seems that you have something like $55-60K of equity in the property once you have title to the property.

Ideally, you would assign your position for very close to the market value to an enduser and make maybe $50K in profit. However, in practicallity, few homebbuyers could close in a couple of weeks.

So, the choice: asssign to somebody who could close in two weeks or so or do something else. If you wanted, you could try to find an assignee who would pay you maximum amount for the assignment. Say pay you $35K or so?

Another way to go would be to borrow money on a short-term basis, close on the property, then resell for market value. This is certainly legal, and probably feasible. However, you would have a large ordinary tax bill on the gains.

You don’t mention your own situation and what your plans are. So it is hard to know what would appeal to you. However, Suppose this house is about as attractive as your own home, in which you currently live and have lived there for at least a couple of years. You might move into this house and sell your old house. All of the gain on the old house would probably be free of federal capital gains tax, because of the $125K a person capital gains exclusion.

If you lived in the current house for at least two years, then you could sell it and exclude gains tax on the sale of it, up to the $125K limit per person. If you wanted more money to invest, you could take out a second loan or a line of credit on this house while you are living in it.

Good InvestingRon Starr*********

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Nice Deal… - Posted by JT-IN

Posted by JT-IN on January 09, 2003 at 21:02:27:

Teddy:

Great Deal… My question is how much are they wanting to pay you for the assignment…? Not that it is really any of my business, but I guess I would want YOU to get a fair assignment fee here… Like at least 10 or 15K… Many folks, after seeing someone make a nice buy at Sheriff Sale, (and that is predominately where I buy most of my properties) think that b/c you have owned (or controlled) the deal for 15 minutes, that you should assign it to them for $ 500. I just want to be sure you get a great chuck of dough for being the risk-taker that stepped up to the plate, and hit it out of the park… Way to go Mickey Mantle…

Anyway, to answer you original question… You should consult with the Clerk of Courts to ask this question. In my state, (Ohio), it is fairly simple to assign a bid to someone, and have the deed drawn in their name. The proceedures vary widely from state to state. If the Clerk doesn’t know, then ask them who to ask… someone will be able to answer that Q for you. Once you nail it down, you may need an Atty to prepare the proper assignment form, and may not… but don’t skimp there if an Atty is recommended.

Again, nice going.

JT-IN

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Re: Purchased house at foreclosure sale - Posted by Heather -Tx

Posted by Heather -Tx on January 09, 2003 at 19:54:44:

Nice profit margin on this! Congrats!!

Heather-Tx

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Re: Purchased house / Financing - Posted by TeddyB_SC

Posted by TeddyB_SC on January 10, 2003 at 14:41:14:

Perhaps in the furure. We have been buying mobile home lots and putting mobiles on them for rentals. Nothing creative. We have a very good relatioship with our bank. We usually bid/buy first, and then go request a loan. This has been good, but I don’t want all my eggs in one basket.
The way I see it, I expect a bank to lend me money on my ability to re-pay, AND I ALWAYS RE-PAY!! Therefore, the day my bank turns me down, is the day they lose all my business. Please send me information about your company and I will keep it for future use. I don’t want to lose a deal if that day ever comes.

Thanks,
TeddyB_SC

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Re: Purchased house at foreclosure sale - Posted by Dave T

Posted by Dave T on January 09, 2003 at 23:31:38:

All good comments. The capital gains avoidance approach is even more appealing when you note that the 1997 tax law changes gave each taxpayer a $250K capital gains exclusion on the sale of a primary residence. A married couple can combine their exclusions for a potential $500K capital gains exclusion if they file a joint return for the year of sale.

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Re: Thanks Ron & JT - Posted by TeddyB_SC

Posted by TeddyB_SC on January 09, 2003 at 22:54:02:

Our exit strategy from the start has been to sell. We were going to put it on the market and list with a realtor, however it may be quicker and less hassle to sell to the appraiser. The appraiser told my wife to “make them an offer,” but I know he who speaks first loses. The good thing with the appraisal is that the homes in this neighborhood listed in the MLS, are selling on average in 140 days for 97% of appraisal.
If we are are going to sell quick, then I would just as soon look for a quick 25-30k profit and move on. This leaves something in the deal for the buyer.
Thanks for your help. I will contact our RE attorney and Master-in-Equity(Judge)about assigning.

TeddyB_SC

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Re: Oops, forgot to mention - Posted by TeddyB_SC

Posted by TeddyB_SC on January 09, 2003 at 23:00:44:

We have lived in our current home 8 years. Appraised in 2002 at $140K with loan balance under $67K. You bring up a good point. An easy 65K here and then two years later another 60K, all which is tax free.