I am a novice investor, this is the first deal I have done all by myself, and my story started as many do, noticing a house when driving around. This one was a neat old Victorian with faded For Sale signs in the windows. There was also a one-bedroom house included on the property as well. It was an unusual arrangement that I ended up doing … not really a short sale, not exactly in a “bad” part of town, there wasn't gang activity there, but not exactly an in-demand part of town. It is located in an older area of town, surrounded by mostly light industrial businesses. I didn't mind the location,it was quiet and I liked it not being in the middle of a bunch of other houses, but some people didn't like the location. If it had been in any other location it would have been a whole other story.
When I got home I called the number in the window and left a message, the owner called me back a few hours later and gave me the details. He had used the house as collateral for a business loan, and owed $150,000 on the loan. The problem is that in it's present location it's worth between $125,000-140,000 in good condition. There's lots of potential, but there's a lot of work, too. A new roof, wiring and plumbing (the wiring and copper plumbing had been stolen) were needed immediately at a cost of approximately $20,000. Then there were the cosmetic touches, flooring, patching walls, interior and exterior paint, kitchen counters, etc. The owner had stopped making payments about a year ago and was just going to let it go back to the bank because he couldn't sell it. The bank hadn't actually foreclosed on him yet though, they were trying to give him time to sell it himself. I told him I would think about it and let him know.
For a week and a half I couldn't get the house out of my mind. During that time I listened to a call on short sales and auctions, and read every story on the REIClub site that had anything to do with short sales. Then I called the owner back and told him I wanted to negotiate a short sale with the bank and sell the house in an auction. I went over that day with my paperwork, signed an option agreement with no money down and left with the keys to the house. A few days later I made an appointment with the bank to propose my offer. At that point I didn't know the full extent of the repairs needed, so my offer was $105,000, with the expectation that I was going to auction the house and give it to the highest qualified bidder. I was told by the bank that they needed to have the house appraised and have an environmental study done on it before they could accept my offer. My next two weeks were spent getting my own contractor bids and compiling my information. (Note: I should have done this first.) After getting my quotes and talking to the appraiser I decided to go back to the bank with pictures and my figures and request a lower offer – $75,000.
During this time I was showing the house several times a week, gathering numbers and names. When I finally received word that the bank would accept my $75,000 offer I called everyone back and advertised my auction, to be held both Saturday and Sunday, a couple hours each day to give every one the opportunity to come by and make their offer. I thought I already had a for sure buyer or two. It was really disappointing when I had only one person show up during the last 10 minutes, and leave with no offer. I only had 3 weeks left of my option contract and I was wondering now if I was going to get the house sold or if I had done more damage than good by getting the ball rolling with the bank, they would for sure foreclose now if I wasn't able to sell the house. The next weekend I had an open house, and again only one person showed up. I was getting a much better response from people just driving by.
I had made another mistake as well in dealing with people. My approach seemed to be turning buyers away, I was telling people the house was $75,000, but there were about $10,000 more fees, taxes and closing costs on top of that (plus the repairs), so I put up a sign in the window with the price of $85,000 and just told them that price would include most of the closing costs as well. I sold it that week! I don't know what happened, but praise the Lord, all of a sudden I had offers coming from everywhere to buy the house, even people who hadn't seen it yet were wanting to make an offer (I had it advertised on Craigslist, too).
I am only making a $3,000 assignment fee off this deal, but it feels good to know that I was able to help solve a problem that nobody else wanted to mess with. This house was fun to show and I will miss not being able to run down and go through it whenever I want, but I take pleasure in the fact that it will once again be lived in and fixed up and loved.
I am now using a picture of this house on my business cards, as well as the front of my REIA binder. I am proud to say the group that I started at the beginning of this year with just a free ad in the paper, has grown a few more members every month to about 20 members now, just 8 months later. I was kind of nervous at the first meeting, I didn't have a clue what I was doing. Our first couple meetings were at restaurants. Now we meet for free at the local library and have guest speakers (who are now calling me to speak at our meetings instead of me calling them, I like that). We plan to join a national organization when we grow a little larger, but what we have is working good for now. I just want to leave you with a couple tidbits of wisdom: 1) Life is too short for “wish-I'woulda's”, if you want to do something just get out there and try it, you never know what might happen. If you make a mistake, learn from it and try again! 2) Become a lifelong learner, there is power and opportunity in wisdom and knowledge!
Hope you all continue to be blessed with many opportunities!