1st Pre-foreclosure/ Rehab deal

[karon]

I purchased a pre-foreclosure from a family friend via quit claim deed. She wanted $3500 to move and was behind $5000 in payments. I now have this house that has a mortgage still in the owners name. I am rehabbing the property as we speak and plan on refinancing and renting it out. The payoff amount is $65K. She lived in the property for 20 years. Comps are between $135K-$145K. Having all repairs done from business credit cards. Is this a good deal? What can I realistically expect after refinancing? Should I have taken the deed via Land Trust? My last question is will this be a seasoning issue since my QCD is not even a month old? Someone please tell me what route to take.....


Thanks in advance...

 

[stantheman]

so you picked up a property thats worth 135 for about 75 on a sub 2? How much does the property need in repairs? Did the seller move out?

I think you will be OK with the seasoning. You should be able to re-fi but I dont know at what LTV. I imagine you could go at least 80%LTV which will pay the old loan off and put a few bucks in your pocket

I think you did ok depending on the rehab.

Good job

[happyrlt]

  You have a great deal....most lenders will lend 80% LTV no seasoning at a slightly higher interest rate.

[cherdwelth]

I think you lucked out and have a pretty good deal. Maybe next time you might put some figures together so you'll KNOW if its a good deal or not before you buy it.  I personally would have gotten a Warranty Deed - with gives you title. A Quit Claim deed only conveys interest in the property - you don't own it.

[reevee69]

To find out if you have a good deal use this formula:

(.70 x ARV) -rehab costs - sales costs -profit = max purch price

Simple Example-

.70 x 125K=87.5K
87.5K - 10K - 7.5K -10K=60K

I assumed your profit was 10K and that your rehab costs was 10K, but it could be any variable you plug in. So to answer your question, I think you did OK, but try to use this or any type of similar formula before you commit to anything. Try to factor in holding  costs and any other type of costs as well.

[cherdwelth]

. . . remember too, add in the profit killing - "holding costs" too! LOL

[karon]

Heres the situation, 60K is actually still owed on the house to be exact. The house goes appraises for 145K-155K. I was assuming that after the house is sold, besides whats still owed on the house, closing costs and additional fees, my profit will be around 50K. Is this accurate? This is my first deal.  

[cherdwelth]

Try the formula -

ARV - 145,000

Less: mortgage
Less: real estate commissions to sell
Less: holding costs, mort. pymts., interest, taxes, etc.
Less: rehab costs - realistic
Less: mortgage reinstatement amounts, fees and interest
Less: judgements, tax and/or IRS liens, if any
Less: monies paid to owner
Less: any other fees

Equals - your profit

Did I forget something?

[JOHNNY Q]

Most rehab lender will do 65 to 80 ARV( After Repair Value)


Here is the calculation:Plug in your own numbers

Offer= (ARV x 72%) - ( Repairs + Holding + Closing cost )
Note: if you want low closing  or no closing  cost will require higher rate.

530,000( ARV)  X 72%= 381,600   is enough to buy  $380,000 short sale  but not enough to do repair of 38,000. ( see below)  That 38,000 down is your repair.

10,000+18,000( example: 386,000@ 10% = 38,600 divide by 12 months. Hold for 6 months $3216 IO X 6 months =$ 19,299)  +Closing cost $10,000 = 38,0000

What if the property  sit  longer. Where is your reserve to cover your ass.




381,600 - 38,000 (10,000+18,000+ 10,000) = 343,600 Offer

Some lender max at 80% due to borrower cash. If you had gotten a higher % of ARV, you would not have to put the cash.That is leverage. the 38,000 I would keep just as emergency to cover my ass if the property will not move. Pad the repair alittle.You pull the wall, sudddenly you have water damage behind the wall.


530,000 -418,000( 380,000 to buy short sale + 38,000- Repairs ) = $112,000 profit

[karon]

Thanks for the valuable advice. I have corporate credit and thats how I pay for the repairs. The house comps for 145-150K. What should I expect. Also, If the mortgage is still in the owners name, how would I go about sellng it and shes in a Chapter 13. Will she need permission from the Trustee to sell the house. I did a QCD on it.

[snavaz]

For the Legal OWNER to sell a house that is currently involved in a chapter 13, that person must go to the trustee and they must get the judge to approve the sale of the house. Then when the sale is made the creditors named in the court papers, will be able to be repayed. Where you come in at this point is anybodies guess. I would consult an attorney ASAP.

[JOHNNY Q]

If you can not make a quick $25,000 0r $50,000. Move on .Time is money.She is still under the protection of Ch 13. Pass on the deal. To much time. There are other deals.

[real money]

If you did a QCD then should have got it notarized and walked the paper work thur at the court house in that county my family did a deal earlier this year with the same issue the house is ours we did refinance we took a lot of money out didn't use any lawyers and we were fine "lawyers don't make your money they take it" 8) 8) 8)

[snavaz]

I love it when people say stuff like "we were fine" , in refernce to taking money that is under federal control. As long as the feds don't catch up to you. Thats what "Real Money" meant when he said "lawyers don't make your money they take it" reffering to the Federal Gov't's lawyers.

Just because you could get away with the money, doen't mean you should try getting away. The people in the court house probably had no idea of what was going on and if they did know, they don't understand the Federal laws relating to this issue.

Even if you don't want to pay a lawyer, do some research and you will see that this Deal creates some real problems for you and the Family Friend. I took the time to speak to a judge about your post, they would not do this deal.

[cherdwelth]

I agree with the many posters - but didn't want to open a can of worms just in case my feeling was incorrect. I would not do this deal either - just to complicated and lengthy.
There's just too many EASY deals to do than to get tangled in something like this.