Interesting Deal

[Adam King (MI) 1]

Hey all,

Tied up a property last night as a CA. Actually, it's kind of a CA with a consulting twist. I'm going to try to negotiate the lender to freeze 4 months worth of arrears payments for 12 months so we can lease it to an end buyer. Trick is, there's a first and a second. Should be interesting since I haven't ever had to negotiate with two banks in which both are national lenders. (Republic and Bank One)

 

Here's my dilemma.

The house has almost NO equity and needs repair. When I sat in the kitchen last night signing docs, it looked beautiful and freshly remodeled. That is until the mountain dew that was offered to me forced me down the hall into the bathroom. The whole house was unfinished drywall and flooring.

 

I went back today and handed the seller (A Realtor) signs to put up. (Had four calls by the time I got back from showing another property) I then went inside and got a real good look. I came back up stairs and told her that there was no way I would receive my $3,000 fee I negotiated the night before. There was just too much work.

 

I am thinking of putting someone into this property for only a couple of thousand so they can do the work. That is of course, if I can negotiate the banks to chill on the foreclosure.

Any other ideas or experiences are more than welcome. I have moved distressed properties on LO before, but I'm always looking for new and fresh ideas. I'm sure there's something that can be done to make it go a little faster.

Regards and thanks in advance,

Adam

[MichaelC 160]

Adam, I like fixers and distressed properties when using a lease purchase exit strategy. My experience is that the market for such properties is huge, and I will find my phone ringing off the hook with folks who want to stop renting and start owning. Sweat equity is one way to accomplish this.

Based on your numbers and details I don't see a lot of money in this deal for you, though. You're right when you say if the house needs work your likelihood of seeing $3K is fairly slim. Most t/b's doing these type deals are short on cash. The very reason they are going the sweat equity route. Adding spice to this mix is the uncertainty of needing to convince not one but two banks to accept the arrears for a year.

Personally, I think there's a heck of a lot easier deals to be had, and for more money in my pocket, too. Let me know how the banks react to your inquiry. You just may be on to something if you can pull this off. I may be an old fool, (so says my 15 year old daughter), but an old fool who is not opposed to learning new tricks.

[Adam King (MI) 1]

Michael,

Great advice. Although as irony would have it, I changed my mind and took the deal as a consultant and the banks did accept the offer, but there's more. I figured I would ask for about $1K or so and have the seller work on moving the property herself because of her Realtor experience. But, I made the mistake of telling them what I was going to say to the banks.

 

After being turned down countless times trying to get a rental in the last 48 hours, they called the banks themselves this morning. They did what I was going to do and the banks accepted their offer. They are now going to stay in the house, I lost the deal and gained a new team mate for that area to work in.

I'm actually kind of relieved. They were very happy with the help and thanked me....of course.

We'll keep truckin,

Adam

[jseamless 0]

A different approach may be more lucrative.

 

You might be better trying to short sale the second and first and doing a retail flip. Reason I say this is because many times folks say they are handy and six months or a year down the road, they have not done anything to improve the property. You should request they make repairs before they move in, which is not going to work with your time deadline.

 

Get the deed. Check title make sure no crazy judgments or leans.

 

See if the lenders will entertain a short sale, since the property is trashed. Stress to the lenders how much it will cost in holding costs and repair to make the deal work. Have the borrower right you a hard ship letter then I would take the ugliest pictures you can of the house and get the worst comps in the area. Some really high bids from a contractor for the repairs.

 

Have the seller say I have a buyer but he can only qualify for 45-50% of the loan balance. If they will do a short sale with you, make sure in the contract the owner will be forgiven of the outstanding balance.

 

Then advertise for a week in your paper that you will be selling this handyman special for 50% of your strike price with owner financing. Hook up with a mortgage specialist who has access to private funds i.e. hard money and bam!

 

Just a couple ideas.

[David Garcia 0]

You can try to negotitate a discount on the 2nd. You can even try to short sale the 1st.

 

 

 

 

David Garcia

[Gary (MO) 0]

You know Adam, if you've gained someone new to work with, your future profit from this deal could be immeasurably more than any profit you might have realized if they had not "stolen" it from you.

 

Just out of curiosity - how did you lose the deal with a signed agreement? Also, what were you going to say to the banks?

 

Thanks again ole' boy!

Gary

[Adam King (MI) 1]

All,

Thanks. You're input is appreciated, as always.

 

First off, I'm not a short-sale guy and I don't know if I'll ever be. And yes, I explained it to them because another investor already pitched it to them. During a short sale, the seller is still responsible for the investor's profit. I have seen a deal where the investor short-sold the property and made $40K. The bank then called up the seller and said they still owed the money. That's not something I want to do to someone.

 

And as for what I said to the banks (Or would have said), I wrote that in the first post. I ask them exactly what I wrote and then explain what a LO is.

 

I'm not bummed out at all about this deal. It was a consulting deal that would have been a huge headache, but I don't turn deals down often. They should be calling back if they can't get things together. I offered to teach the Realtor CREI in exchange for leads. Money talks....

Regards,

Adam