Justin B. McClelland

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

Short Sale Appraised value, Appraiser, Foreclosure

Thankfully, I haven’t had any recent WTF moments.  However, I’ve got archives for days.  So this comes from the seller of the booty buttcheeks deal…many months ago.  To refresh your memory, I was on track to make 6K on that POS house and the seller backed out because he didn’t quite grasp the concept of a short-sale.  However, this short-sale didn’t involve a bank, but rather various lien holders.

So the following is an excerpt from the conversation I had with the seller at his house, while I was trying to reason with him I took a subtle stab at a threat:

Me: This house is upside-down, you’re not going to net anything at closing.  And I’ll pay all of your closing costs, so you won’t have to spend money to sell your house.
Him: This was my Mom’s house and I’m not going to give it away.
Me: That’s understandable…but it’s not like I’m not paying for the property, it’s just all going to the lien holders.  Besides any one of these lien holders could foreclose on you at any moment.
Him: We agreed on 9K and that’s what I’m expecting.
Me: Paying you money outside of closing is illegal and I’d also be paying double
Him: Well this just isn’t going to work
Me: Well I’d like for us to come to an understanding…it would be best for us to stay out of court
Him: Well I have a few things up my sleeve….I’d like to take my chances in court
Me: (internally): “F#&K!”

What a dumbass that guy was.  I didn’t expect him to call my bluff though.  This deal wasn’t worth the costs of a specific performance suit.  Maybe if the spread was 26K and not 6K.  I’d be cool if I lived the rest of my life without seeing him ever again or hearing his country-ass voice.  That goes for his ignant sister too.  Yes, I said, “ignant”….and I’m almost getting pissed-off just from reminiscing.  So I’m done.

*Accountability Monday tasks will go for next Monday.  My problem is that I need to print out those tasks.  Too many weeks pass when I work on other stuff.

- Peace Out

Series Ass, Foreclosure, WTF

I’m still in ROBOT mode and plan on being there indefinitely. Since I’ve ramped up my offers, I’ve got 1 more potential deal in the works. Just to give a brief synopsis of it, it’s a property that’s literally 2 blocks from the wholesale deal that I’m currently working. This property is listed and has been for a long time and for a price that’s way too high. Way too high when you have the intel that I do. And that is, after some research, I know the property is just a few months away from tax foreclosure. It’s been tax delinquent for 3 years and in the state of Illinois the owner has a redemption period of 2.5 years from the date of the first tax sale. Translation: this owner’s redemption period runs out by April 2010. Once tax-foreclosed, it’s a wrap for them. I hope to get in and seal a deal that get’s them a few bucks for moving expenses and that’s it. I’m not the type to take advantage of people, but this property location and it’s condition won’t allow me to do more than that. Hopefully, I’ll have some good news about that one soon.

Also, the current wholesale deal is moving along…still on life-support however. One decision by one person can make or break this deal. That person is the head-honcho in the liens department of the Illinois Department of Health and Family Services (DHFS). He received my short-sale package earlier this week and we spoke about it. He wasn’t satisfied that I only had a Realtor-prepared Comparative Market Analysis done on the property, he wanted an official Appraisal. He claimed that the CMA wasn’t good enough because “the Realtor could be your friend”. He wanted a bona-fide appraisal by a licensed appraiser who would by default be “putting their license on the line”. So that’s what I did. The appraiser did his thing today and reported to me out of all his houses that he’s ever appraised, this was the lowest. Music to my ears! So now, I’ll just get the appraisal to the DHFS and it will be time to talk business. One good thing that I learned from my most recent conversation with the DHFS is that they’ll most likely reduce their lien to compensate for the liens held by other government entities (City of Champaign Neighborhood Services, Champaign-Urbana Sewage Department, etc). That means that I need only worry about the DHFS. Hopefully, we can begin negotiations as soon as tomorrow, if not early next week I should have a yea or nea to report. Once I get the nod, I just need to get the seller to an attorney (that I might end up paying for) so he can get the (heirship) docs he needs drafted for the title company to close.

On the short-sale front, the homeowner that John Michailidis and I are currently working isn’t looking so good. This lady keeps getting cold feet about committing to the short-sale process. I have a feeling that she is going to wait too long and end up getting foreclosed on. Oh well, we can’t say we didn’t try. Hopefully she makes the right (prompt) choice. There are many more people to help. And now that we have our team in place, it’s game on.

Real Estate DHFS, Foreclosure, John Michailidis

The latest wholesale deal is still kicking, I haven’t lost it yet.  Let’s just say it moved off of life-support but it’s still in the ICU.  During this week among other things, I spent some time wrapping up the details for getting this thing closed.  I now have a CMA from my Realtor, plenty pictures, and a rehab cost estimate.  These documents, along with a letter describing my motives for wanting to purchase this property (assign) and revitalize the neighborhood starting with this house, will be sent to the appropriate parties.  The appropriate parties being the 3 parties that have liens on the property.  There are a total of 4 liens on the house.  One being a tax lien.  The others by DHFS, the city of Champaign, and Champaign sewage.

Let me state a few facts so you can see how my deal came back to life.  Originally, I was very concerned about the 65K DHFS lien.  I’m not anymore.

Here are the facts:
1. The property has been vacant for about a year the two owners on title are now deceased. It will continue to be vacant as the heirs want nothing to do with the property
2. The property is tax delinquent and the taxes were sold to an investment company in October 2009.

Cover via Amazon

*Tangent*  Buy the book “Profit by Investing in Real Estate Tax Liens” by Larry B. Loftis.  This is the one of the most slept-on real estate hustles in existence.  You can thank me later.

With the facts being what they are, let me tell you how “I have the juice”.  In Illinois tax liens are by default 1st position liens.  This means that all other liens are subordinate and if the property goes through a tax foreclosure ALL SUBSEQUENT LIENS ARE WIPED!  Granted that it takes approximately 3 years of real estate tax delinquency to be foreclosed on, this means in the inevitable will happen in 2 more years.  After which, the DHFS, City of Champaign, and Champaign Sewage will walk away with ZERO!

So, now do you see where I’m going with this?  When I lay out the facts and the probabilities of events to the subsequent lien holders, it would be in their best interest to drastically reduce their note and get SOME money this today versus NO money in two years!

So the mission at hand is to develop a “no-brainer” (short-sale) package that even a 4th grader could understand.  This way, I’ll hopefully post again soon about how I got the deal closed.  However there are no guarantees in this crazy real estate world.  I’ve heard of some just-plain dumb decisions being made by mortgagors before, so we shall see.
- Peace Out

All of this work for a measly lil check.  But either way this deal goes, I’ll just consider the lack in compensation as a tuition fee.  It’s coming down to the wire now, I feel like Eminem in 8-mile.

Real Estate Foreclosure, Property tax, Tax lien

I indeed decided to place an advertisement in the 2009/2010 Yellow Pages.  Although I believe print advertising is a dying medium, I’m following my gut on this one.  Deep-down, I really believe that the homeowner who is at risk of being foreclosed on may turn to the Yellow Pages to find who to call.  This would be especially true, if that homeowner is older and is more used to using a print directory vs. the internet.  The older homeowner will most likely have more equity in their house; see how this makes sense in my head?  You should.  And the main incentive is that my ad will be the only one in the Real Estate section about foreclosure prevention…boo-yhaw!

And I just thought about this, but it’s too late now.  I should’ve used an exclusive phone number and had it forwarded to my main phone number, just for advertisement tracking purposes.  It’s too late now, so I’ll just have to ask every caller how they heard about me. The 2″ Yellow Page ad cost me $60 monthly, so $720 for the year.  You should see a blog from me within the next year about how a Yellow Page lead generated “X” ROI.  Everyone told me not to place an ad in the Yellow Pages, all I heard were naysayers.  But when folks turn right, I go left.  You’ll see how this turns out…oh yeah…you’ll see…

- Justin

Real Estate Advertising, Champaign, ChampaignHomes, Entrepreneurship, Foreclosure, Investing, Marketing, Print Directory, Real Estate, Schwaps, Short Sale, Urbana, Wholesaling, Yellow Pages