How to deal with hard money lender and foreclosure - Posted by David G (OR)

Real Estate Investing Real Estate Financing
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Posted by David G (OR) on July 10, 2002 at 03:40:08:

Sorry, I forgot to mention when a house goes to foreclosure in my county, it is auctioned at the courthouse steps where they require a cashiers check of the full winning bid amount. They don’t do financing.

The house needs about 5k of work and 2 similar houses in the neighborhood sold in less than a week.

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How to deal with hard money lender and foreclosure - Posted by David G (OR)

Posted by David G (OR) on July 09, 2002 at 19:55:54:

There is a foreclosure going to auction for 170k (second and third of 50k will be wiped off). I’d like to buy it and sell it retail. Houses in the area are selling in less than a week for 240k. I have 70k to invest.

How do I come to an agreement with a HML to lend 100k? I’m trying to figure out the mechanics.

I can think of many ideas but not sure what will work best for all of us.

  • Do I have to secure the 100k with something else since I don’t own the foreclosure yet?
  • Will the HML accept a promissary note for the 100k plus his terms?
  • Does the HML have to come to the auction with me and bid for me and when it sells he gets his money and terms?
  • Do I form an LLC and use it like escrow?

I don’t know if I’m even close. I need some experienced help.

David G.

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Re: How to deal with hard money lender and forec - Posted by Fred B.

Posted by Fred B. on July 11, 2002 at 10:01:31:

David,

When you say it is going to auction, when is that date ? How much time do you have between now and then ?

If there is some time, say a few weeks, you could approach the owners, talk to them, tell them you want to talk to their lender ( which is foreclosing on the 1st ) by getting a signed "Authorization Of Release ) form. Then call the lender, and ask if they will accept a short sale or discount on the loan.
If they say “YES”, make them an offer. You can take
it from there.

Hope this helps. Email me for more help, questions, etc.

Fred B.
Atlanta, GA

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Re: How to deal with hard money lender… - Posted by Cal, Balto

Posted by Cal, Balto on July 09, 2002 at 20:26:28:

David,
Why do you feel you need to deal with a hard money lender. If you have that much cash to put down you should be able to get preapproved from a conventional lender which is much better to an auctioneer. And you probably wouldn’t have to use all of your 70k. Less out of pocket the better. Does property need work? Are you sure you are going to get it for 170k or is that opening bid? Lots of variables. Have you added up your carrying cost, closing cost, cost to sell and don’t forget Uncle Sam. Make sure you know your numbers going to the auction and don’t get caught up in the hype. There is always a better deal around the corner.
Make some calls and talk to some conventional lenders. If you have good credit you could get into the property for only closing cost. Think about it. Cost 5k into property. Resale for your project spread of around 70K minus any expenses. As you can see the return on your investment is phenominal and with 70K you could do multiple projects at once rather then putting all your eggs in one basket. Remember if that house sits for whatever reason your capital is tied up. The more in the pipeline the steadier the income from real estate investing. Good luck and happy investing

Cal