Any Ideas?

[pmire]

I’ve got a seller who called me with the following situation:  He owns a house bought from a builder for $152k in 2/2002.  The comps for the area show the house value to be no more than $138k :eyes now (in fact I think he got taken by the builder).  PITI is $1660 at 9.9% with $151k still owed.  The owner has lost his job and is one month behind.  There is a max of $1500 in repairs (has dogs, smelly carpet).  I’m thinking this is a pass, but I thought I’d see if anyone else had some ideas.  Anyone have experience doing short sales with lenders?  I don’t see the lender shorting the price enough to make it worthwhile.  Comments?

Thanks
pjm

[tedjr]

A lot has changed since 2/02. Values have gone down. House was worth price at time your guy bought it. Builder probably did not cheat the buyer. Anyway the best you could expect to buy the property for would be $125,000 to $138,000 and that will take weeks to work out and for what. It will take years to obtain any profit or equity. If you could find some with no equity and no repairs and nothing down and the seller make a payment or 2 or 3 until you lease or lease/option then you may do some of the 0 equity deals. Save your time and money and fine one that has some meat on the bone.  It can still be a win win deal for all parties. Do not mind being like a vulture, even they clean up mess.

Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas  78737

512-301-9171 home
512-587-6177 mobile

[Eric C]

Hi -

Ted's given you some good advice here and a couple of points to think about.

Why is it that everybody thinks that RE goes up forever -- ain't so.  I agree with Ted -- the builder didn't cheat the buyer any more than a new car dealer cheats his customer.

Your guy paid a retail price at (or very near) the top of the market.  Or, as least the market (for that property) was higher when he bought it than it is now.

And the lesson for today is?

First, there's a retail price and a wholesale price for everything -- you won't make it very far in the investment biz if you don't learn to distinguish between the two.

Second, quite often the wholesale price still isn't low enough for a healthy profit (for you). Most of the time, you'll have to better than that. There are exceptions, but you need to discover what your investment needs are.

How much money do you need to make ? (please don't say a percentage -- come up with a real number)

How long are you prepared to wait for that profit to materialize?

What level of risk are you willing to accept in order to secure that profit?

What happens if everything you plan doesn't exactly work out?

My point is that this is a great biz and there's more than enough for everyone. But the fact is that most of the money you make in RE (as in almost every other business) is a direct result of your ability to think.

The better you learn to think, the more money you will make.

Simple as that.

Take care,

Eric C