正文
這是一個真實的買法院拍賣房的項目。因為貸不到mortgage，所以隻好flip；如果能貸到款，則不會這樣快就賣。
Purchase Date: September 2nd, 2008
Property Data: 1999 construction, three bedrooms, two baths, 2,300 sqft. With a swimming pool.
Auction final price: $133,500.
Tax Assessment Value is $192,000.
Listing Price: $169,900
Mistake 1: I priced this property too low, when the buyer's bank appraised at $190,000, they asked why I priced it so low. Well my bad, this is a wrong start already. Actually my partner suggested the price, and he was supposed to know the local market! But it is still my bad, because if I did not agree, the price would have been changed higher. The property should have been price $10,000 higher.
Mistake 2: I thought I would only need to part of the whole year's property tax, but I was wrong. In normal sales, I would only pay for the time I own the property, which is less than four month, so I pay less than one third of the property tax. But because it is a foreclosure, the previous owner did not pay the tax, and I end up paying for the whole year.
Mistake 3: This is the biggest mistake of all. It is actually my partner's mistake, but both of us end up paying dearly for it. This is a third party tax lien: basically the previous owner did not pay the property tax for the last two years, so the tax liabilities were bought by a third party, who paid the city, and then put a lien on the property. My partner is supposed to be an expert on this, but he thought the municipal taxes would be wiped out during the foreclosure process, and he could not be more wrong! He was very apologic for the mistake but it is too late. The lawyer thinks he can get the foreclosing bank to pay for the tax liens, and I hope he is right and succeeds in doing that. I will get half of what he gets back, but I am not in high hope, and I will just forget about it until he has the result.
On hindsight this is a very good investment for an investor to buy the tax liability because the interest on it is 14%; I myself may consider such investments later.
Mistake 4: It is a normal practice nowadays for the seller to pay for some of the closing costs for the buyer, but because this property was priced very low, the buyer was very keen in purchasing this, the closing costs should not have been agreed to.
FHA Rule: The FHA rules says that when a buyer buys a property, if the seller bought it from foreclosure, the property must have been held by the seller for at least 90 days before it is re-sold again, otherwise the FHA will not finance it. This is the reason why the completion day was postponed from Nov 2 to Dec 5.
Cost of Money: The money I used to purchase this property is from HELOC. The HELOC's interest rate is at the prime rate. The prime rate has been dropping during the year, dramastically recently. Right now the interest rate is at 3.5% percent, but in Sep it was higher, and I got the money out sometime in August, so I use 5% interest rate and four months as my time frame to calculate the money cost, which come to $2,200 total. When the completion date was postponed from Nov 2, the buyer already gave notice to terminate his rental agreement and he did not have a place to live, so we worked out a lease of the property of $2,000/month before it is completed. He ends up paying $3,000 rent because if the delay and that is more than covers the interest incurred. Otherwise the interest expenses should be added to the total expenses.
Anyway, this is my first sale in US for me. It is a milestone for me, even though it is a small one. I was not clear about the various costs involved, now I am. It is a good learning process for me.
Purchase Date: September 2nd, 2008
Property Data: 1999 construction, three bedrooms, two baths, 2,300 sqft. With a swimming pool.
Auction final price: $133,500.
Tax Assessment Value is $192,000.
Listing Price: $169,900
| Bought | Set 2nd, 2008 | |
| Listed | Set 19, 2008 | |
| Got Offer | Set 25, 2008 | Too fast is not a good thing |
| Postponed | Nov 2, 2008 to Dec 5, 2008 | FHA Rule |
| Postponed | Dec 5, 2008 to Whenever | Everyone was slow/lazy |
| Completed | Dec 22, 2008 |
| Sale Price | $169,000 | Mistake 1 |
| Property Tax 2008 | $3,950 | Mistake 2 |
| First Tax Lien | $11,403 | Mistake 3 |
| Travel Expenses | $2,500 | |
| Costs to buyer | $3,000 | Mistake 4 |
| Title Insurance | $1,211 | |
| Other(3% to buyer agent, and others) | $7,936 | |
| Final to Seller | $139,000 | Each party got $2,750. |
Mistake 1: I priced this property too low, when the buyer's bank appraised at $190,000, they asked why I priced it so low. Well my bad, this is a wrong start already. Actually my partner suggested the price, and he was supposed to know the local market! But it is still my bad, because if I did not agree, the price would have been changed higher. The property should have been price $10,000 higher.
Mistake 2: I thought I would only need to part of the whole year's property tax, but I was wrong. In normal sales, I would only pay for the time I own the property, which is less than four month, so I pay less than one third of the property tax. But because it is a foreclosure, the previous owner did not pay the tax, and I end up paying for the whole year.
Mistake 3: This is the biggest mistake of all. It is actually my partner's mistake, but both of us end up paying dearly for it. This is a third party tax lien: basically the previous owner did not pay the property tax for the last two years, so the tax liabilities were bought by a third party, who paid the city, and then put a lien on the property. My partner is supposed to be an expert on this, but he thought the municipal taxes would be wiped out during the foreclosure process, and he could not be more wrong! He was very apologic for the mistake but it is too late. The lawyer thinks he can get the foreclosing bank to pay for the tax liens, and I hope he is right and succeeds in doing that. I will get half of what he gets back, but I am not in high hope, and I will just forget about it until he has the result.
On hindsight this is a very good investment for an investor to buy the tax liability because the interest on it is 14%; I myself may consider such investments later.
Mistake 4: It is a normal practice nowadays for the seller to pay for some of the closing costs for the buyer, but because this property was priced very low, the buyer was very keen in purchasing this, the closing costs should not have been agreed to.
FHA Rule: The FHA rules says that when a buyer buys a property, if the seller bought it from foreclosure, the property must have been held by the seller for at least 90 days before it is re-sold again, otherwise the FHA will not finance it. This is the reason why the completion day was postponed from Nov 2 to Dec 5.
Cost of Money: The money I used to purchase this property is from HELOC. The HELOC's interest rate is at the prime rate. The prime rate has been dropping during the year, dramastically recently. Right now the interest rate is at 3.5% percent, but in Sep it was higher, and I got the money out sometime in August, so I use 5% interest rate and four months as my time frame to calculate the money cost, which come to $2,200 total. When the completion date was postponed from Nov 2, the buyer already gave notice to terminate his rental agreement and he did not have a place to live, so we worked out a lease of the property of $2,000/month before it is completed. He ends up paying $3,000 rent because if the delay and that is more than covers the interest incurred. Otherwise the interest expenses should be added to the total expenses.
Anyway, this is my first sale in US for me. It is a milestone for me, even though it is a small one. I was not clear about the various costs involved, now I am. It is a good learning process for me.
評論
changchunman
2009-02-28 19:26:42
回複
悄悄話
did you buy it from auction sale or bank REO? Have you got the tax lien yet? If not, have you got any update from your lawyer about the tax lien?
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