Posted by Bill K. - FL on April 26, 2000 at 07:45:42:
I think you are oversimplifying this. First of all, using the above example of a pre-foreclosure you mentioned, have you checked for other outstanding liens on the property in additon to the mortgage in default? As you know, they will remain with the property. I would say fifty per-cent or more of these pre-foreclosures have them.
Secondly, someone has to bring the mortgage current so you need to know the exact figure necessary.
Third, you will have to find someone with that amount of cash available to buy if you don’t have the money or don’t want to pay yourself.
Fourth, when you say you are going to be able to sell higher than market value, how much higher do you think you can go? 5-10% maybe? What kind of condition is the house in?
So basically, your idea hinges on the proposition you can find a buyer with substantial cash available to buy a house for an inflated price in the time frame left before the foreclosure sale. Not necessarily an easy thing to pull off. In theory it can be done, in practice nothing is ever as simple as theory. Also, the seller might need some $ to go along which would add to the cash requirement. Plus you will need title insurance and have other buying costs. Do you expect these costs to also come from your buyer? Using the example you posted the total cash requirements could easily be in excess 10K. My experience with buyers for these priced properties is less than 10% have this kind of cash available.
I hope I have made you aware of some of the things you need to consider when dealing with these types of deals. Since there are some many of them around, I look for the ones with more equity involved. That way I don’t have to sell above market. I also try to get the deals before they have accumulated a large arrearage so the cash requirement is less. Good Luck.