HOW DO YOU BUY PROPERTY FROM COURTHOUSE STEPS? - Posted by Tammy S.

Posted by Tracey King on February 26, 2002 at 15:20:16:

Although paying off your own home may seem to be the noble thing to do, it might not be the right thing to do. Example: You make 50K on a flipper, you have 2 choices, pay off your house or buy 1-10 more houses. Which choice is going to make you more money in the long run? Your house doesn’t put money in your pocket. It isn’t truly an asset by the definition that assets put money in your pocket. It is a liability. Reading Rich Dad, Poor Dad or the Cashflow Quadrant might help you understand why paying off your house might not be the best use of your money.

HOW DO YOU BUY PROPERTY FROM COURTHOUSE STEPS? - Posted by Tammy S.

Posted by Tammy S. on February 19, 2002 at 16:44:51:

I found a house that is in pre-foreclosure. It will be auctioned off at the courthouse on Tues. 2/26.

According to the information listed, the amount owed is $77,000 and the value is $111,000.

I do not have the $77,000 cash to purchase the property, therefore, what is the best way to get the money and buy this property in time for the auction?

I contacted a hard money lender and they said that hard money lenders don’t usually give money like this because “they can’t get clearance on title”.

Should I contact the property owner?

What’s the best way to get this property.

Thanks

Re: HOW DO YOU BUY PROPERTY FROM COURTHOUSE STEPS? - Posted by TDK

Posted by TDK on February 21, 2002 at 16:59:59:

We almost made the mistake of buying a home on the steps with that kind of LTV. First of all, it isn’t going to go for 77K because of lawyer fees. It will probably go for 85K. Then, you won’t know if there are any liens unless you do a title search before you buy. Also, you’ll have to have about 2K in cash at the courthouse JUST to be allowed to bid. Then you have a short period of time to close on a loan or do whatever financing you need to do. Long story short: Either find the owner and see if he’ll assign the title to you and you make up the back payments with the bank (check with the bank to see if they will allow it) OR wait until the bank buys it back. More than 90% of foreclosures are bought back by the bank who holds the title. It then ends up in their REO office or larger banks have a RE agent that they use to handle all of their REOs. Find out the mortgage holder’s procedure.
If you are flipping, you won’t be able to find out just how bad the inside is until it’s turned over to a RE agent, so you won’t know how much needs to be done. If you are renting it out, same thing.
Spend a few times at the steps watching the pros. Write down what they pass on and what they buy. You’ll find that they won’t buy anything with that little of a spread. It’s just too risky, and they can get a better deal once the bank takes it back and is hurting to get rid of it.

REO’s good or bad? - Posted by Trisha Webb

Posted by Trisha Webb on February 25, 2002 at 17:12:58:

Along these lines, by going through my local tax records, I have dozens upon dozens of REO’s owned by banks that I thought I could work with. I’ve been told though that it’s too much trouble to work with REO’s. I have not done my first deal yet, though I am trying. (I want to start with flipping and need to find investors who have hard money sources so as not to deal with the seasoning issue.) So are or are not REO’s worth investigating? Some of the banks I have found have several houses in my area; wouldn’t it be nice to buy several of them at once? Or am I dreaming?

Re: REO’s good or bad? - Posted by tdk

Posted by tdk on February 25, 2002 at 18:26:44:

How much trouble an REO is depends on the bank and how much they want to get rid of them. For instance, Compass bank has REO’s on their website. They clearly state the price they want, take it or leave it. Other large mortgage institutions use re agents in the area and depending on the amount owed they can be a great deal. You might want to call the re brokers in town and find out who does a lot of foreclosures. With so many people doing the 125% re-fi’s and then defaulting, you’ll have to sort through several before you’ll find one that might work. Also, if you are going to use a hard money lender, factor in the higher cost of the loan. You’re best bet might be to set up an LLC, open an account for it at a bank and fill out a line of credit form. You could get $50k to use at an extremely low int. rate. Bank of America is advertising 3.75% for $100,000. Compass offers $50K for a little higher rate. AND many banks have no fee checking accounts. You’ll want to set up some sort of entity to use in purchasing RE anyway, you might as well go ahead and do it. Because you’ve set up an entity, if anything goes wrong you don’t loose YOUR house and cars.
Remember, the money is made when you buy, not when you sell. AND, always cover your butt. People sue for anything these days, you don’t want some contractor thinking you’ve got money and ‘accidently’ getting hurt on the job and trying to sue you.