Love Austin Homes Investing Blog

I work with major banks in the US who are looking to liquidate their
portfolios. You will work directly with the seller mandate to purchase
bank REO’s in bulk from a minimum of 10 million to 1 trillion dollars
nationwide at about a 70% discount on retail value. Our inventory is
mainly residential with some commercial investments available. We are
looking for CASH investors with a minimum of 10 million dollars
documented by proof of funds from your bank. Time is of the essence,
as these deals move quickly and we currently have investors buying in
the billions.

Contact xxxxxx if you are
interested. Thanks.

Response:

There are a lot of these deals being offered lately. Mostly by investors that are pooling money – in other words, depending on who you work with, you don’t actually have to have $10M to invest. Several people can pool together, and most of the investors pitching these have much lower investment criteria.

As for the deals themselves – it sounds great, and it may be great, but the bottom line here is that these lenders are mitigating their losses. They are betting that getting a discount on their loans is better than going through the foreclosure, eviction, and REO process which might only yield 50% on the dollar or less. The discount, is usually based on the original appraisal done when the loan was made, and not on the present value and condition (which is usually not known), which could be substantially lower. In other words, some of these homes could be worth less than you pay for them and others more. Your ability to make money has to do with how sophisticated your system is for foreclosing, evicting, renovating or making ready, and reselling these homes quickly and efficiently, compared to how well the lenders already do this.

Phill

I’m representing both buyer and seller of a duplex in North Austin. He had mentioned to me at first that he was behind in his payments, but that his balance was $145k and that as long as he could “walk away” from the situation, he’d be happy.

There was enough room between $145k and market value to pay our commission and some repairs the property needs – we contracted at $159k.

We were to close this week, but after waiting 4 days for a payoff from Wells Fargo, we were told the guy is seriously delinquent and with late fees and other charges, his payoff is $158k.

At this price, the buyer walks and I find him something else, and the seller has his own fish to fry.

I know that it behooves me now to contact Wells Fargo’s “work out” department (anyone know what Wells Fargo calls it or have a contact there for this?); tell them that they basically can either let this deal go through and get the loan off their books OR they can continue trying to get blood from a stone, foreclose on the guy, and then get less money.

The buyers loan docs are already at title – literally, we could close in 24 hours. The bank would be wise to let the deal proceed.

So, in exchange for graciously allowing me to “re-gift” you a Fleming’s gift card I have sitting here in front of me, anyone able to help? J

Thanks – Robert

ANSWER

Robert,
Essentially, you are interested in doing a quick short-sale. Unfortunately, this is probably impossible.

You need to call Wells Fargo (the number is on the loan statement) and ask them to work out a short sale with you. With a willing buyer and seller and realtor, you have everything you need. They will tell you what you need to do. It will take 45-60 days or longer, in almost all cases, to get a response AFTER you turn in all of the documentation they require. You can beg and push for a faster response, and it will not matter.

During their review period, they will do their own appraisal. Depending on what that comes back at, and various other factors, they will tell you what they will accept for a payoff. It may or may not be less than what is owed.

Assuming you can keep everyone on the hook long enough to make this happen, you’ve got a shot. If you do represent both sides, I would recommend you put another realtor down representing the buyer (and work out a referral arrangement)­, because its is also likely that Wells Fargo will want to negotiate down your commission.

If this looks like something that won’t work for you, you can also refer this guy to me and we will take good care of him to ensure he does not get a foreclosure, and pay you a $500 referral fee.

Phill

I have a lead for a a foreclosure deal going to auction Dec. 5
20K left on mortgage. 100-110K value. Must be experienced working with
bank to bring payments current or pay off before auction. I will
accept 1k finders fee. serious only I’m busy. Thanks

ANSWER

Well, I’ve negotiated about 300 of these deals – does that count as experience?

Give me a call.
Phill

What is the best way to find out how much was due on a loan after a
bank has foreclosed. I am looking at a foreclosure that is listed on
the mls but would like to know how much the bank is out so I know what
to offer. I was assuming the listing agent would not disclose this.

Braxton

ANSWER

Braxton,
Anyone can go down to the records office (off Airport for Travis), and look up the original deed of trust that will tell you the amount of the original loan. If you look at how old the loan is, you can estimate its current balance.

UPDATE: goto to the usefull links section of www.loveaustinhomes.com and you will find a link for searching Travis County liens on-line!

Of course, this amount is probably useless or irrelevant in a foreclosure situation, as any home that is foreclosed on, has had many missed payments increasing the amount owed. Additionally, taxes may not have been paid for a while, and insurance and penalties may have also been piled on by the lender.

But, more importantly, when a lender forecloses and resells the home as an REO, whatever was owed is irrelevant. The lender will in all cases simply list the home for market value (as determined by a realtor or BPO) and get what they can get for it regardless of the history.

Phill

Hello All:

I am new to the investing and am in great need of an investor to bail me out from a possible froeclosuer.

I was in bankruptcy and it was discharged in May 06′ the problem is that when it was discharged the past due became due and the Mtg. company is calling the loan. Our atty did not tell us this would happen I have since sent in around $10K and have deplieted my savings. I do not want to loose my home. I have alot of equity in it and it is being changed to commercial which gives it more value. I have consulted an atty and he advised me to file Bk again I don’t want to do this I really want to pay my debts like we are obligated to do as good citizens.

Thanks
Eloise

ANSWER

Eloise,
Give me a call and I will talk you though a few options.

Yes, a lender will OFTEN foreclose as soon as a property is discharged from a bankruptcy. If you really want BAD advice on what to do with a property that you cannot afford, ask a bankruptcy attorney.

My experience is that bankruptcy attorney’s almost always advise people to declare bankruptcy, as sort of a one-size fits all solution. Most of their clients end up with a bankruptcy AND a foreclosure, when at least 50% of the time neither was necessary to discharge their debt. Most people have no idea until it is too late that a bankruptcy does not prevent a foreclosure – it simply delays it while making it more likely to ultimately occur and less possible to avoid.

Phill

Hi,
I’m new to the RE investor field. First, I spent a considerable amount
of time learning, reading, attending local REIA meetings and
educational seminars. I plan to continue learning but I wanted to get
started ASAP. I have been actively seeking houses to buy for about 3
weeks now. I created my 1st direct mailer (postcard). The post cards
were over sized and an extra thick card stock to get attention.
The card was sent out MLS listing, in the NW side of San Antonio,
which met one or more of the following criteria.
Over 90 days listing
Price reduction
Expired/canceled

I feel like I got positive responses, 5 out of the 190 I sent out
called back. After talking to them, I set up 3 appointments. Of the
3 meetings one is interested in a subject to deal, but wants to try
and sell on MLS for one more month. If it does not sell, I feel like
he will do the deal. The other two were not very motivated to sell
and were fine with over pricing their house and waiting for a buyer.
Over all I feel like I did not reach/find very motivated sellers.

I figure I need to find motivated sellers. I have seen
somelists/systems advertised, but I wonder how many of these have
value. Seems like they re too good to be true. IE they advertise,
“Sellers will com knocking on your door.” They will call you begging
to buy their house, etc.

Any one know were I can get reliable Pre-foreclosure, divorce,
probate, etc list for the San Antonio area?

Sunil

ANSWER

Sunil,
Everyone here is looking for motivated sellers…

My own experience is that you are doing some of the right things by marketing to FSBOs and foreclosure lists, however, remember that these are the same people everyone else is marketing to, so competition is stiff.

5 responses is a good start, however, my advice is to wait until you find a real deal. I frequently look at 10-20 deals to find a good one. I sometimes see newbies get frustrated and try to force a deal where there is not one to be had.

Phill

I have been working with a homeowner to try to stop a foreclosure
scheduled for next week. There is a second mortgage on the property
and I can’t seem to get past that loan holder. They say they don’t
discount loans and that I will have to submit a short sale package.
They have been incredibly difficult to work with up to this point so
I have nothing to make me believe they will move quickly on Monday
to make a decision before Tuesday. With that in mind, I started
looking for other alternatives.

A realtor friend suggested to me that the homeowner should list the
house this weekend and then call bank #1 (the one that is
foreclosing) on Monday and ask them to delay the auction 30-60 days
to give him the opportunity to sell and avoid the foreclosure on his
record. As soon as it is listed, I would, of course, make an
offer. If I ask him to do this, I am confident that he will, but I
have a few questions regarding how this will work before I approach
him.

1) If he lists the house, I am assuming bank #1 accepts or rejects
any offers as they are the one foreclosing. If bank #1 accepts an
offer for less than the total of the two mortgages, what happens to
the balance owed. Does the homeowner owe the remaining amount or
will the two banks divy up the proceeds from the sale and call it
paid.

2) If the homeowner lists the house, does that mean he is
responsible for realtor fees? Is that something the realtor and I
can work out or will the bank want to see the seller paying them?

I have spoken with the attorney at bank #1 and he has assured me it
is not too late to work out something with them. Unfortunately,
bank #2 is less willing to work with me. I am open to any and all
suggestions. At this point, the homeowner has complete faith in me
and I don’t want to jeapordize that trust. In addition, I really
would like to create a win:win situation.

Thanks in advance for any help.
Peggy

ANSWER

Peggy,
The homeowner or listing agent or even an investor (each with authorization) can always call the lien holder that is actually foreclosing and ask for an extension. By the time you get to the week of the auction (or day before, in this case), your odds drop pretty low, but it never hurts to ask. Obviously, if the lender sees an offer and/or listing agreement, it may help.

If the house sells for less than total amounts owed, yes, the homeowner is responsible for all short-comings including closing costs, commissions, etc. unless of course you negotiate a short sale, in which case you might want to turn this over to a short sale expert

Phill

Does anyone have suggestions for how to help someone facing
foreclosure on a mobile home & lot and they are approximately $45,000
upside down on loan:retail value? The bank would have to discount the
loan nearly 40% just to break even.

These folks would really like to avoid foreclosure.

Thanks,
Peggy

ANSWER

Peggy,
On the Topic of Mobile Homes –

It is possible but unusual for a lender to accept a short payoff on a mobile home, with this large of a discount. Even if they did, the deal would depend on someone else wanting to finance and buy the property – and it’s hard to find buyers for these properties, unless selling them with owner financing (which is not done in a short sale situation).

In most cases, when you buy a mobile home, unless you bought it used at a 75% discount from new, you should go ahead and start filling out the bankruptcy paperwork, because you will need to have it completed by the time you eventually need to sell.

The economics are:

· Used single-wides are worth $5-15K or less

· Under single-wides with land are worth: $land value + $5-15K or less

· Used double-wides are worth $5-25K

· Used double-wides with land are worth: $land value + $5-25K or less

The ‘or less’ has to do with condition or the cost of demolishing or removing the mobile home from the property. Unfortunately, I see people buying these things new for $30-90K, or $60-$140K with land (even when the land is only worth $5-25k). Why do people buy these? It seems like a good deal to get a home and 1-5 acres for <$1000/mo or a home alone, for < $600/mo… until/unless you go to sell…

The only way I’ve seen people get out of these are:

1) The land has intrinsic value that has appreciated to compensate for the huge write-off of the mobile home (this is rare)

2) The homeowner decides to live in the home for the duration of the 30-year loan (this is sad)

3) The homeowner finds some other misinformed buyer to take over their payments through owner-finance, lease, or lease/option (this is common)

a. These buyers are often other family members or friends

b. Of course these deals usually eventually fall apart and become #4

4) The homeowner walks away and is foreclosed on (this is typical)

5) The homeowner wins the lottery, gets an inheritance, or is otherwise successful in life and/or business to the extent that they are able to pay off the loss and get out (this is a miracle)

We’ve had dialog on this topic from time to time, but I have yet to see a solution for people in these situations. I know there are some people, like Dan Francis and Jack Burns, that can sometimes help find people to take over payments on mobile homes, but usually these are for properties that are not already many payments behind, and on the verge of foreclosure. If these buyers a can catch up, this may be an option.

Phill

I have a client who’d like to make an offer on a property in which the seller is attempting a short sale. The seller would like some language in the contract to protect against a 1099 and a deficiency judgment. Do you have any good language that I can add to my contract?

Darryl

ANSWER

Darryl,
A 1099, if one is issued, is issued by the lender. There is no way that a buyer can guarantee that the lender will not issue a 1099. I have heard of people putting such things into contracts, but I honestly can’t see what difference it would make given that the contract is still always between the buyer and seller and not with the lender, who is only agreeing to a reduced payoff.

It might be possible to ask the lender to sign a separate document stating that they will not issue a 1099 if the short sale offer is accepted. I would suggest not asking for this or telling the seller you would try to negotiate becasue this is risky because the lender will likely do whatever they want and such a request could gum up the rest of the deal.

Additionally, it is my experience that it is very unlikely and even unusual for a lender to go after a deficiency judgment even if they say that they will or might…

Phill

Do you know anyone that can work a short sell on these types of homes?

i have a friend in PFL in a double wide in eagle point that they will let go to foreclosure if no one can assist…..and another customer whose palm harbor hm is 3mos behind on land & hm payments.

any suggestions? thank you.

Cordially,
Chris

ANSWER

Chris,
I have asked this question repeatedly over the last year, and generally found that NOBODY wants doublewides. The only partial exceptions are if they come with some really nice land, the land may have value, and/or if they can be purchased for about $.30 on the dollar. There is some market for used singlewides.

I have encountered about 20 people that bought home/land doublewide packages for $100-140K. That’s what they can cost new. In most cases, these are only worth $45-75K retail, and $30-50K wholesale – and that’s for the nice ones with nice land! Because everyone these days finances 100% of everything, when these people need to sell, they discover that they need to come up with a check for $50K+… Needless to say that most people in doublewides don’t have an extra $50K, so they either give them up to foreclosure, sell them with owner financing to some other less-than-fully-informed person, or just continue to live in them for 30 years until the loan is paid off.

My personal opinion is that they should provide you with a bankruptcy application at closing when you buy a doublewide, and just say ‘hold onto this, you’ll need it when you sell’…

All that said, if anyone else out there knows someone interested in doublewides, please let me know…

Phill