Home Sold For $3,001? Is It Real? Can I Buy A Reo This Way? Can I Buy An Auction Property This Way?
I would like to know the process of buying REO’s, or even auction properties, before they are listed with an agent or are bought by investment firms and turned around to be sold at actual value. I mean, how can one buy a home for about $3,001?
I realize that from other questions on Yahoo! Answers, the bank will hire a listing agent and sell the home close to the actual value of the home. How is it that a home and its land can be sold at such a low price and how I can buy a home or real estate property this way?
You can check with local realtors. We bought our home on 8 acres in the middle of nowhere for 12,000 dollars. It was a 2 bedroom country home built in 1920. We have since added a bedroom, a garage and siding. In total we have spend 36,000 buying and making it ours. Some realtors do not post these “fixer uppers” in hopes of stringing the owners along to get monthly fees from them.
if it looks too good to be true, it probably is.
maybe you’d best look up the deeds in those cases.
These appear to be assumption deals. These are deals where an investor pays a home owner in forclosure a nominal amount to sign the house over and to walk away from it.
At that point, the investor takes over existing financing on the property, and then either bargains for a short sale with the bank, or reinstates the existing mortgage by paying the bank the amount in arrears, and then paying the usual monthly payments while rehabbing and selling the property.
The homeowner is interested, because they realize that once their house goes to the auction, they will get nothing from the
winner. Moreover, if the investor reinstates the mortgage, this
action will cure the defaulted home owner credit for the following reasons:
1) No forclosure on credit record;
2) Mortgage default is cured, and payment history is reistablished.
This means that if the investor pays the homeowners mortgage for six months to a year, the homeowner may
very well regain their credit score losses.
The investor wants this kind of deal for the following reasons:
1) For moderate amount of cash, she can leverage existing financing of the property, negating the need to get new financing.
2) There is sufficient equity in the house to make this worthwhile. Usualy 50% or more.
3) The investor saves on transfer tax, and/or mortgage tax, depending on the area.
You can do the same. It is not easy to find a home owner in this situation, because the person needs to be pretty desperate and there needs to be time for you to research the deal:
1) Usualy they already had 2 or 3 chapter 13 bancruptcies, that were dismissed.
2) Auction is days away, and they know that they will lose the house and get nothing unless they sell it to you for a small amount of cash.
These people wake up and smell the coffee and reach out to investors usualy days before the auction. Sometimes 2-3 days. You will need to inspect the house, pull title and to make sure that the deal makes sense in those 2-3 days.
This is virtualy impossible, as title work takes 5-7 days on average. It would be poor decision to do this type of deal unless you know what other debt exists on the property.
It is very possible that only the primary financing is being forclosed, not the line of credit, or a 2nd mortgage. If you do not know about this 2nd, or the liens(if any), you may buy a house that is not worth the money you paid for it.
ex:
300K 1st where the debt is now 375K
and
50K 2nd
and
50K in repairs
for a house worth 475K
Unless you know the full story, do not do the deal.
So, pull title, and listen to your title clerk, as they
will tell you what the problems are, and even if the
homeowner can legaly sell you this property.
You will also need a moderate amount of cash/line of credit to do this kind of thing. Figure 50K minimum.
But if you do this wisely, you will make money,
Good luck!