It’s been a while since I’ve posted…not so much because there’s nothing going on, but more because everything seems to be moving very slowly these days. But, here’s a general overview of what’s going on with the business:
House #26: The Fourfecta House
As I mentioned a couple weeks ago, the lender for The Fourfecta House went out of business the day before we were to close on the house. As we hoped, the entire loan team (including underwriters) was able to move over to a new direct lending company, and has been working to get approval to work with the downpayment assistance program the buyer is using for part of his financing.
We were originally told that we should be able to close by the end of November (today), which obviously didn’t happen. We’re now being told that we should be able to close by the end of next week. Considering we’re leaving for vacation at the beginning of next week, it doesn’t leave us much of a window, but we’re hoping to close before we leave.
The buyers for The Waffle House completed their inspections over the weekend, and sent us their list of requested repairs. Luckily, the list is short and the repairs are minor — replacing a few window screens, fixing a loose hinge on the fence gate, fixing the weatherstripping on the garage door, supplying a fireplace grate, and fixing reversed hot/cold water lines on two of the faucets.
The lender ordered the first appraisal today, and hopefully that will take place before we leave for our trip next week. Currently, we’re still on track to close before the end of the year.
Offers & Contracts
We’ve made lots of offers over the past month or two, and have actually gotten several properties under contract, but nothing that’s panned out. Here is a quick run-down:
- I mentioned the potential House #28 a couple weeks ago. Ultimately, the bank agreed to a $3000 price reduction and a short due diligence period. During that due diligence period, we found several issues with both the foundation and the house’s brick facade that would have increased the renovation costs by a good bit more than that $3000 reduction. So, we choose to terminate the contract
- We received word from HUD that a property we had bid on several weeks ago had come available again and that they had awarded us the contract based on our old bid. We had two days to submit the finalized contract if we were interested in the property. During that two days, we discovered that the county tax records were incorrect in their flood zone classification for the property, and that the house was in a 100 year flood plain. While we were trying to decide if we still wanted to go through with the deal, we received another email from HUD telling us that they had made a mistake, and that we hadn’t actually gotten the property.
- We’ve been working on a short sale deal for about two months now. The house is scheduled to go to the foreclosure auction next Tuesday, so that was the deadline for getting the deal done. The first mortgage holder approved the deal about 6 weeks ago, but the second mortgage holder has been holding out for more money. They apparently decided today that getting a little bit of money through the short sale was better than getting nothing through the foreclosure, and it sounds like they’re going to sign off on the deal tomorrow. Hopefully they will…and hopefully we can get title pulled and closing scheduled before the foreclosure.
- We currently have about a half-dozen other offers in on properties, waiting for responses from various sellers. Hopefully we’ll get at least one or two of these, as things are pretty slow around here these days and we’re looking forward to our next projects.
Two mortgage short sales are really a pain. I hope everything goes fine with your Fourfecta house. thanks for the update.
M Stephanie
Gotta love our government agencies at work…one day you have the house the next day they call you to say sorry, you don’t have the house…wtf??
I wasted my time with short sales last year just to find they are not worth the time consumption. Are you getting a good enough of a discount on the price to make this worth your while?
Hey Luis,
This property was listed for $84K and we picked it up for $57K. It’s in the same (relatively small) subdivision as The Lake House, The Leak House, The Trifecta House, and The Fourfecta House, so we’re fairly confident that we know exactly what it will sell and appraise for and what our profit will be (and there’s a lot of demand in that particular area, so resale should be very easy). We’re buying it for about the same price we paid for each of those, and it will require a bit less rehab than the other ones.
How were did you find out that they were wrong about the food zone?
Sorry – I meant flood zone* – and how do you tell in the first place if a property is in a flood zone?
The mortgage company for the buyer will do this search and let the buyer know that it is in a flood zone. They do this so that they will then require the buyer to carry flood insurance on the property.
You can confirm this by going to the FEMA website and doing a search for your property. I know this because I had to go through this exercise with one of my flips and it turned out that the property itself was not in a flood zone but right behind it was a retention pond that was. Since the property was close enough the lender requested for the buyer to carry flood insurance.
Another way is to go to the court house for the county and look at the flood maps. I went there too and found the same thing I did in the FEMA website.
Hey Jeff,
Everything that Luis said above…
We generally go online to the FEMA website, and can look at the flood maps directly. If the flood maps seem to disagree with the public records, we’ll call our surveyor and ask him his opinion. In this case, he was certain from the maps that a small part of the property was in a 100 year flood plain.
Now that J mentioned surveyor…I forgot to mention that in the house I talked above I hired a surveyor to do an elevation study because initially the lender claimed the house was in the flood plain and would not approve the loan. After the survey proved that it was not in the flood plain the mortgage was approved but the house was close enough that buyer would have had to carry flood insurance which was about $400-500 per year if I remember correctly…