I have an opportunity to possibly buy a short sell house. I've made a bid and of course the lender has to approve before it goes through. According to the agent, the lender has already tentatively agreed to this low price. I was wondering what I need to watch out for? Is there any way I can get defrauded? The other odd thing is the house sustained some damage during Hurricane Ike. The seller dropped the price even further because of it. But what we found out is that the house does not have insurance on it. My agent says that this is odd because even if the seller failed to pay on the insurance (and of course the mortgage) then the lender usually automatically picks up that bill... since it's in their interest to have insurance on the house. Anyway, so to buy the house I would have to get a loan. To get a loan the house has to have insurance. To get insurance the house would need to be fixed first. But to fix the house I'd have to own the house first. See how convoluted that is? And the seller won't fix it because he's got no money. And the lender won't because it's a short sell. Any ideas?
Only advice I have for this is get a hard money loan. Fix up the house and have it refinanced. I've done this twice, where the lender wouldn't loan because the house was not up to their standards.
I take it you haven't been in the house or know the real problems with the house? You are taking quite the gamble. It reminds me of buying a foreclosed house during auction where you can only see the outside of the home. It's a big gamble.
I have been in the house twice. The hurricane dmg is really not that big a deal to me. A tree did fall on the roof and punch a hole through the plywood. There was a little water damage in the master closet... no other living areas. It did what looked like superficial damage across the three AC compressor units. Other than that the house is immaculate and not a 'rehab'. But I think I might have to treat it as such with a bridge loan or whatever it's called so I can get it fixed.
Oh and to add. Usually, if you're quick enough to fix up the house and pay off the hard money loan, you wouldn't have to make a payment for the hard money loan. (usually higher interest rate of 14's and up) And make sure there is no pre payment penalty.
Oh my bad. I understand what you mean. Hard money to fix it up. Then refinance with traditional lender.
Have an inspector come out and thoroughly look at the house. He should check for foundation damage, electrical problems, termite damage, fire damage, water damage, quality of roof, and other things that may end up costing you a fortune. Also, be careful - today's market has seen a LOT of foreclosures and unless the house his high-end, there may be not enough demand and it might not sell. Also, watch to see what legal area it is in. For example, some people say they live in Jersey Village, but they don't - they leave NEAR Jersey Village. There's a big difference there - JV people have their own police department, their own fire department, etc. People who live NEAR Jersey Village must use services provided by the county. So, the value and demand for that house may not be as high as a house that's actually in Jersey Village. Is the house near power lines? Near a drainage ditch? Near railroad tracks? Near a prison? Is the house in a flood plane? These are things that will devalue a house. Is there anything else nearby that will devalue it?
All good points, drox. It is a large, high-end house in a very small gated community - 20 other large houses (1+ acre lots). Outside this small neighborhood is another very nice neighborhood of 'smaller' ~3500 sq ft houses. I will definitely do an inspection. It's a 2 year old house so looks good, but will definitely pay for house inspection plus pool, plus termite, etc. And good points on flood plain and all that other stuff. Thanks.
