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Joe,
The San Antonio market has really taken a hit this year.
This is what I would do if I were in your shoes……
I would conduct a Highest Bidder Sale -( similar to the Bill Effros system in his book, “Sell Your Home In 5 Days”
Here’s how it would work…
About one week before you do an open house for 2 days during a weekend, you run ads that the house will be sold to the highest bidder on Sunday night at 6 pm. The starting bid that you advertise needs to be at not more than 60% of the value.
That low low starting bid will attract buyers – lots of buyers during your 2 day open house. YOu should not allow anyone to see the house prior to the open house and it should be for limited times, like 11 – 2 or 10-3 only for those 2 days.
The objective is that so many people will show up at the open house that it will create a sense of urgency and scaricity and that will get the bids higher and higher. Some who see the house wiill fall in love with it and bid higher and higher for the privelege of being the owner.
Prospective bidders write their bid on an open bid sheet.
I usualy have about 250 people at the house over a weekend and get 25 bids.
Writing their name on the bid sheet is not a commitment to buy, but just an opportunity to participate in the round robin part of the bid process.
After the open house, you conduct the round robin part of the bidding. With this, you call each person ( starting with the high bids) and tell them what the high bid is and ask if they want to raise their bid.
The bids get higher and higher.
In your case, you need to disclose in your ads and all marketing pieces that the sale is subject to lender approval BECAUSE… once you get all the high bid, then you go to the lender and show them what you did. Let them see all the advertising and all the bidders, then show them a contract to buy the house for the highest bid price and ASK FOR A SHORT SALE.
If the lenders agree to the short sale, you have the house sold.
If they don’t, you know you tried everything you could and can walk away knowing that.
For more details about doing the highest bidder sale, read Bill Effros’s book – I also did a conference call about this in 2007 – so look in the learning center under conference calls for details.
You are also welcome to use my web site http://www.HighestBidderSale.com – and I’ve got all the paperwork you need. (free)
Plan B would be to try to discount the notes. But in this case, I don’t like that strategy too much because it would require a lot of cash to buy the notes with NO GUARANTEE that you’d have a buyer waiting to take you out of the deal.
Anyone else have any ideas?
Jackie
I took a SFH “subject to” in a land trust in May 2007 a SFH in Live Oak (near San Antonio) Texas. The unqualified tenant stopped paying rent in Dec 2007 and was formally evicted in January 2008. I have been paying PITI on that vacant house since April 2008. The first is an ARM now at 9.625% under the LIBOR standard and the 2nd is a 12% fixed. The home may sell for perhaps $150K and the 1st and 2nd is owing $142,000. I took control of the house paying a $7500 assignment fee and have added another $4500 in rehab and another $2500 in commission and repairs.
The lender is calling me every day asking for the person on the deed and I cant afford to pay the PITI on the house any longer. The property tax and insurance is rolled into the monthly payment. The total monthly payment is now about $1700/month and I have advertised the home avidly for two months with flyers, lawn signs, newspaper ads, craigslist, etc to offer the home for a 3-year lease where the lessee puts up 5% down and receives ALL tax deductions and a share of the appreciation and principal pay down in return for a higher than market rent. I was even willing to carry a negative a $200/month to accommodate the lessee.
The house is in a terrific neighborhood and is 4 years old and is 2100 sq feet two story and newly rehabbed. Its A 4+3 on a lock box. Ive had dozens tour the home but then they disappear and I fear they don’t understand the benefits of ownership(no credit check and no bank loan to move in).
The people I paid the assignment fee too have offered to buy the house back from me for $5000, but only if I bring the loans and all the penalties current and cut the lawn, etc. That would negate the $5000.
Ive decided its best to let the bank take the house back as a foreclosure. I just want to move on with my life and get out from under the house. I was not aware of the bad financing at the outset so acquiring the house was my fault. Even the tax records didn’t show this and I only found out AFTER I bought the house and then received the original loan docs from the assignors.Any creative ideas or suggestions beyond foreclosure here as letting the house fall into default will ruin the credit of the owners on the deed.
Thanks to All.
Joe Karbus
Another alternative would be calling the note holders and showing them how the house would make sense if they lowered the interest rate.
Read John Schaub’s newsletter on this subject http://www.johnschaub.com/news1.cfm?ID=23
If they agreed to lower it to 5% or so for several years, you would save close to $600/mo in interest (assuming your average rate is 10%) and the house could make sense as a rental.
Or you may be able to sell it on a wrap or land contract for $150k at a higher interest rate.
I like Jackie’s idea of doing the HBS. In that call, she also talked about having people bid on the down payment and you carrying the balance.
Let us know how it goes.
Pedro
Since you live in California and the house is in Texas – it is going to be a constant problem for you Joe – so the best thing would be to try to get it sold. Then you can sleep at night.
Every out of state landlord I’ve ever met has problems with their rentals and most lose money. Since this house has such a bad loan, that makes it even worse.
Jackie
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