A Successful Short Sale Negotiation
I found this deal from another CFRI member. They purchased the property subject-to an existing mortgage which had a $350K balance. They had spent four years trying to get a short sale approved, but hadn’t been successful. The property was located in Apopka, was zoned A2 and had three houses on it. They were built in 1948. Two of them were block construction and the other was frame. All totaled 4,430 square feet under air.
Over a 15 month period there were 12 Broker Price Opinions (BPO’s) done on it. The BPO’s ranged from $45K to $140K. I figured it would be worth $350K-$375K after it was fixed up.
The county code enforcement was after them for years because of the bad roofs which had tarps on them. The owner didn’t want to put any money into fixing the roofs because the short sale hadn’t been approved yet. Code enforcement had ongoing daily fines for about 25 different violations and all together the fines totaled up to $110k.
The property was used as a rooming house which the county didn’t seem to be happy about. Most of the residents were mentally challenged. One resident had a girlfriend show up to take him to a doctor’s appointment and instead shot him and committed suicide. The fire department wasn’t happy because they had weekly disturbance calls for stabbings and fights. They were taking people to the hospital for all kinds of reasons. It isn’t easy to get good tenants when you have interior damage caused by leaky roofs and layers of multi-colored tarps. The county ended up condemning all the houses which meant all the tenants had to move out.
When the current owners finally gave up on the short sale attempts, I asked them to deed the property back to the previous owners and that’s who I went into contract with. It took many meetings showing the inspection reports over and over again and it appeared the bank wanted to try to find a way to justify a higher price. When the BPO inspectors came to the property they saw broken glass all over from vandals that had smashed a bunch of large TVs and busted the windows. The air conditioners were stolen and there was extensive hurricane damage. The grass hadn’t been cut in a year.
I was shocked when Bank of America agreed to a $30K purchase price. My negotiator thought the land alone was worth $90K. When the bank said yes to $30K I said, “Let’s close quick before they change their minds.” I partnered with CFRI Business Member Rob Arnold of Sand Dollar Realty, Inc.
I insisted the new buyers meet with me in Rob’s office with him as a witness to make sure they knew it was not a quick fix, and that the county had set a time limit for repair completion. The county wanted 60 days but I asked for 120 days. They agreed, and also were willing to settle for $2K as payment for the $110K in liens in advance of closing, which the bank paid.
We had put new roofs on all three houses, and cleaned up the trash and hurricane damage. Before the roofs were fixed, it was too scary for a lot of buyers. Replacing the roofs made it easier for a rehabber to get in and start doing work right away. We found the buyers by putting signs out front. They agreed to pay $149K as-is. We had spent $26K on roofs, cleanup and closing costs. We made $87K profit in eight weeks.
Reprinted Courtesy of Central Florida Realty Investors. Source: November 2018 CFRI newsletter. Visit www.cfri.net or call (407) 328-7773