WTF! Wednesday v6
Good ‘ole volume 6 of this series. Don’t have a bunch of time so I’ll hop right into it.
A few posts ago I spoke of a short-sale that I lost. Well I fell victim to what happens all-to-often to investors nationwide. There was a guy (yeah him) who inherited a property from his Mom and made it into a rental a few years ago. He said that he had problem tenant after problem tenant, poured a lot of money into the property, as he did nothing but make repairs and evict people. The last tenants caused him to become delinquent with his lender (American Home Mortgage) and he wanted to prevent foreclosure.
I was put in touch with this guy way back in January after he responded to one of my signs. I collected the required paperwork from him and submitted the “short-sale package” to the bank. The first appraiser (AHM used appraisers with me and not BPO’s) they sent out, probably appraised the thing for over 30K (I don’t know what it came in at exactly). The house was really only worth about 30K, but they countered my original offer of 19.8K for 32K. I requested another appraisal and they said I’d have to order my own and present it to them. So I order another one and the appraisal comes in at 20K. They then said they’d accept 27K.
I called up another investor who primarily does short-sales, he told me that sometimes banks will try and pull this (asking for more than appraised value). The only thing you can do is stick to your original offer and explain why they should take it. Sometimes they’ll come down…sometimes they’ll foreclose. So I told them that 19.8K was the best that I could do. They said, “Ok” and foreclosed on the guy.
The crazy thing is, at the sherrif’s auction last Friday. The property’s beginning bid started at 13K….yes 13K. And nobody even bid on it. Oh well….sucks for the bank…and the homeowner.
I learned a good lesson throughout this ordeal. And that is to stay away from properties when there isn’t much of a spread to be had. Also, I now know that the bias of the BPO/appraisal is the name of the game. An 80% below norm BPO bias creates a smaller spread on a 50K property versus a 150K property. It’s all very clear to me now. Honestly I dodged a bullet by not getting this property. At least I now know the rules of the short-sale game.
- Justin
