12 days… - Posted by B.L.Renfrow
Posted by B.L.Renfrow on June 29, 2003 at 12:50:00:
…probably isn’t a realistic time frame in which to find a buyer or T/Ber with more than $7k cash on hand willing to immediately sign a deal. And I’d guess the chance of getting the lender to postpone the sale a second time after doing it once already and being burned is slim to none.
Difficult, yes, but not impossible. Of course, if you have $7k cash on hand yourself that you don’t mind not having available for a while, you can use that to bring the loan current, taking title subject-to the existing financing.
This assumes you’ve checked title and there are no other liens against the property or seller, and the seller is not in bankruptcy.
You say the property was appraised for $160k. You should be aware appraisals don’t mean you can sell it for that. Appraisals are unscientific, and may or may not reflect market realities. The best indication of what the property is really worth is to look at comparable sales.
Assuming FMV really is $160k, and the loan balance plus arrears totals $139k, if you took it subject-to and sold it for FMV your potential profit would be $21k, less repairs, if any, and closing costs. I’m not sure how you came up with only $10k.
You are talking about multiple techniques in one paragraph: short sale, flipping, subject-to. You need to figure out which one is most likely to succeed given your resources and limited time frame.
You can in all liklihood forget about a short sale at this late date, unless you can show the lender a signed contract and immediate proof of funds. Even so, there’s still no guarantee they’d accept.
Flipping? Well, if you can find a “flippee” with cash who can close before the auction, that would work. Yes, a buyer using an FHA loan wouldn’t be able to get a loan for a flipped property in under 90 days. Regardless, no one could get a loan approved and funded in 12 days, FHA or not.
If you marketed the property aggressively as a lease-option or owner finance on a land contract, it’s possible you could find a buyer with enough down to cover the arrears within the time frame. Then, the loan would be reinstated and you say local rentals for similar properties are above the $1100 per month payment, so you would have a positive cash flow. In this scenario, since you would be offering owner financing, you could set the purchase price a bit above FMV.
HOWEVER…DON’T consider this UNLESS you have money in reserve to use if your buyer defaults or you have to make repairs or something like that. Doing a subject-to deal with no reserves is asking for major trouble should something go wrong.
You could consider using a partner who would put up the $7k in exchange for a share of the profits. That would probably be your best bet at this point. After all, getting half of a $21k profit is better than getting none of it.
Brian (NY)