Power of Sales Income Property

[donksky]

Anyone here with in favour of the above? I`ve heard/seen horror stories here & elsewhere about buying power of sales from owner-occupants who trash the property & heard that power of sales in Canada are not really too far off market price/value (is this true?)
But for income properties that are tenant-occupied and remains so the owner wouldn`t be able to trash the rental so are they any better? Or even if you buy directly owner-occupied power of sales, how do/can you avoid a bitter owner trashing the property?

 

[markl]

Hi Donna,

Banks are obligated to get Fair Market Value they can be sued if they do not. I have tried to buy a couple but could never work a deal.

When are we getting a cup of coffee?

Regards,

Mark Loeffler
www.homeownersoon.com

 

[donksky]

Thanks, huh ? (cup of coffee??- haven`t tracked the people who`ve helped with answers but if you`re one of them - sure I`ll fix you one at the next workshop

- no - after I buy my first investment property...

)

 

[rbrander]

QUOTE (donksky @ Nov 22 2007, 07:30 PM) Anyone here with in favour of the above? I`ve heard/seen horror stories here & elsewhere about buying power of sales from owner-occupants who trash the property & heard that power of sales in Canada are not really too far off market price/value (is this true?)
But for income properties that are tenant-occupied and remains so the owner wouldn`t be able to trash the rental so are they any better? Or even if you buy directly owner-occupied power of sales, how do/can you avoid a bitter owner trashing the property?

I will have to toss my hat in here and say that PoS can be very worthwhile. Yes, the properties are most often trashed, and major pieces of equipment removed. From my own experience, a unit that I purchased had the AC removed after the foreclosure. On the up side, it was properly disconnected (versus being ripped out). There is always major work to be done ie; cleaning, new paint, some carpentry, light fixtures - these always seem to disappear! - and cabinetry, as a minimum.
To the point: most PoS`s will be sold at market rate. The only flexibility that I have seen with the banks is when you talk cash, large deposits, and very short closings. On the upside, within 2 to 3 years the properties have increased 50 to 75%.
As always, do your homework! Know the areas that you are investing in, who you want as a tenant, and definately use something like the ScoreCard and you will do fine.
Good investing!
Cheers!

 

[Dan_Eisenhauer]

When a lender initiates a POS or foreclosure the loan is called. That means ithe mortgage can be paid out without penalty. You can pay out that loan any time up until the sale takes place... without penalty.

One technique for purchasing foreclosed properties is to contact the owner and try to work out a deal with them before the sale actually takes place. Once you have a deal with the owner, the existing lender MAY be willing to talk with you about financing the purchase. After all, they are about to get rid of that dead beat owner, and not have to take that property into inventory. Lenders detest owning foreclosed properties. If the existing lender wants out, you are still free to find another lender and payout the existing one.

Some may regard this technique as ambulance chasing, but it is legal and does work. All you have to do is learn where to find properties that are about to be foreclosed on. That varies from jurisdiction to jurisdiction.

 

[TorontoRealtor]

QUOTE (markl @ Nov 22 2007, 09:37 PM) Hi Donna,

Banks are obligated to get Fair Market Value they can be sued if they do not. I have tried to buy a couple but could never work a deal.

When are we getting a cup of coffee?

Regards,

Mark Loeffler
www.homeownersoon.com

Loeffler`s right. Dead on. The law says that fair market value has to be attained... or at least a really good shot at it has to be made. Having said that, we bought a power of sale some years back that was at least 20 percent below market.... but having said that, the property was in rough shape without lighting or door knobs and with plumbing pulled out. No heat with antifreeze in the toilets and with dead weeds higher than the windows and no front porch. The bank was very anxious to get out of it and the owners had "walked" on the property with a big delta between the mortgages and the value. No chance the owner or second/third mortgage holder would see a penny anyway... so the bank felt free to close quickly for cash, which we were prepared to pay.

Just be SURE. Absolutely SURE that you have the property inspected by a VERY VERY good inspection firm with an engineer on board. The last thing you want to find out is that the basement fills with water every time it thaws because watersheds have changed or the water table has changed, etc. Not to mention older properties... we found a humdinger in London and put a deposit on it. Didn`t have to go beyond Phase One ENV. There were pipes just below ground level that had been capped and when uncapped reaked of oil.... a core sample indicated oil leaching into the ground. Lord knows the cost of cleaning up THAT mess. Power of sale is still a good bet for saving a few bucks if you are very lucky, but you need to CYA in spades as nobody has any responsibility for anything... except you that is.

Murray Lampert
Realtor, Great Spaces Realty
NB Opinions expressed are personal, non professional opinions. Always seek out the best advice money can buy before taking a blind leap.

 

[RedlineBrett]

QUOTE (TorontoRealtor @ Dec 17 2007, 04:11 PM) Loeffler`s right. Dead on. The law says that fair market value has to be attained... or at least a really good shot at it has to be made. Having said that, we bought a power of sale some years back that was at least 20 percent below market.... but having said that, the property was in rough shape without lighting or door knobs and with plumbing pulled out. No heat with antifreeze in the toilets and with dead weeds higher than the windows and no front porch. The bank was very anxious to get out of it and the owners had "walked" on the property with a big delta between the mortgages and the value. No chance the owner or second/third mortgage holder would see a penny anyway... so the bank felt free to close quickly for cash, which we were prepared to pay.

Just be SURE. Absolutely SURE that you have the property inspected by a VERY VERY good inspection firm with an engineer on board. The last thing you want to find out is that the basement fills with water every time it thaws because watersheds have changed or the water table has changed, etc. Not to mention older properties... we found a humdinger in London and put a deposit on it. Didn`t have to go beyond Phase One ENV. There were pipes just below ground level that had been capped and when uncapped reaked of oil.... a core sample indicated oil leaching into the ground. Lord knows the cost of cleaning up THAT mess. Power of sale is still a good bet for saving a few bucks if you are very lucky, but you need to CYA in spades as nobody has any responsibility for anything... except you that is.

Murray Lampert
Realtor, Great Spaces Realty
NB Opinions expressed are personal, non professional opinions. Always seek out the best advice money can buy before taking a blind leap.

While banks have to get as close to market value as they can what that `market value` is is someone subjective.

When a lawfirm representing a lender files for foreclosure they have an appraisal done on the property to establish MV. Very seldomly can the appraiser enter the property and do a complete job of the appraisal. As such, when I have reviewed foreclosure files (in calgary anyway) I find that the appraised value can be a little low since the appraiser wants to play it safe and they also know that their client (the bank`s lawfirm) wants to get the property sold. So yes the courts will shoot for market value but that market value has a little bit of play in it.

Also, regarding an inspection - it can be very difficult to get a full property inspection done (at least in Alberta) because inspectors quite often cannot get into the property if the owners are in there and refuse access. Buyer beware!