I found a nice 3 bedroom, 1.5 bath, 2 car garage ranch house in a nice neighborhood that was going into bank foreclosure. For the last four or five months I had been sending the owner postcards and letters. I called him and even knocked on his door a couple of times, but was unable to catch him at home.
The foreclosure auction was about a month away, so I had to do something and do it fast. Below I’ll go through the whole week it took me to close the deal day by day.
Day 1: July 6
I remember waking up that morning telling my wife that I had to get the apartment ready for the yearly housing inspection. For some reason, I said that it could wait, and that today I was going to go door knocking instead. (Strange how a simple decision can change your life!)
So, I drove over to the pre-foreclosure about noon and parked my truck. I got out and started walking to the door. My heart started racing–I usually get nervous door knocking. I knocked on the door and heard dogs inside. That was a good sign. Someone was home.
Then the door opened and a man in his mid-50s appeared and said, “Hello.” I respond by saying, “Mr. Swanson, my name is Tim Jensen. I am the person that has been sending you cards and letters about your house. I have not heard anything back, so I thought I’d try to catch you at home. Do you mind if I come in?”
He started telling me that the house was a complete mess because he was getting ready to move out. So then I just opened the screen door and told him, “Don’t worry about it. I’m sure I’ve seen a lot worse.” So he let me inside.
As soon as I got in, I noticed the place was bit of a mess, and he had his two dogs in the kitchen. I immediately started in by asking about his dogs. He started talking about them and telling me all about them. This was good; the guy was starting to open up and be a little relaxed.
Anyway, after about ten minutes of small talk he took me around his house and showed me the place. The place was really dirty, but overall it was in good shape. A little paint and carpet would do wonders for this place. So after showing me the house, we sat down, and I asked him, “What are your plans?”
He told me that the auction was happening on or around August 7th, and he would just try and stay here until then. Then he was going to just leave. I told him how I would give him cash for his equity, so that he could go start a new life somewhere else. He liked that idea, but there was a problem.
He had had a heart attack, and the hospital had gotten a $34,500 judgment against him, and that judgment was a lien on the house. He told me that there were other people that came by to ask about his house, but when they all heard about the judgment they backed off. Not me. I told him that we may still be able to work out a deal.
I told him that I would give him $10,000 for his equity and pay off his first mortgage and another lien. I told him that if the hospital lien was on his house, we may not be able to do anything, but I’ll try anyway. Then I pulled out the option agreement and signed him up.
After he signed the option agreement, I talked with him a little longer then headed over to the recorder’s office. I did another title check and guess what? NO HOSPITAL LIEN. The hospital got their judgment back in February, but never put a lien on his house. I immediately called my attorney and had him get the sales contract ready.
At this point, I had three hurdles to get over. Hurdle #1: Hurry up and get an equity line of credit. Hurdle #2: Close a 2nd mortgage on my house. Hurdle #3: Get this deal closed before the hospital files its judgment.
Day 2: July 7
I met with my attorney and picked up the sales contract for me to get signed. I told him about the hospital lien, and he suggested that we close as soon as possible. He set the closing for a week later. I took the contract over to the owner and got him to sign off on it. I normally have a contract with me when I meet with a owner, but because of the oddness of this situation, I felt that I needed a some special clauses in the contract.
Day 3: July 8
I had the deal all signed, now getting the money. I was a bit frantic to say the least. I called my bank about the status of the equity lines of credit and the 2nd mortgage. Luckily, the bank with the lines of credit called me back and was able to close everything on Monday, July 13 and give me my money that day. I thought great, one hurdle down, two more to go.
Day 4: July 9
I talked to the banker about my 2nd mortgage. She told me that she needed a few more documents. Why? I have no idea, we just refinanced with her about a week before. Needless to say, my wife rushed all around and was able to get her what she needed. I was told that I would find out if I am approved the next day, and the earliest I could get the money was Tuesday morning (the day of the closing).
Day 5: July 10
I found out that I was approved for the 2nd mortgage and that I could get the money on Tuesday. At this point, I was even more excited. I had all the money in place. Only one last hurdle to go, and I was home free. Or was I?
Days 6 & 7: July 11 & 12
Weekend. Just worried about the hospital lien. Hoping that I had acted fast enough to beat it.
Day 8: July 13
This was the day that the title report came back. Make it or break it day, if you will. I went to my attorney’s office to look at the title. Great news: Still no hospital lien. I was really pumped and excited, until another lien popped up.
It was a $2,700 sewer bill I never saw. It was a special tax assessment. I was wondering how to handle it. I didn’t want to pay it. It wouldn’t squash the deal, but the idea of paying an additional $2,700 wasn’t what I had in mind.
Day 9: July 14
Closing Day. Well, as with most closings, nothing went well. As of 9:00am, we had no payoff from the bank. I called to get it and got really reamed by the VP of loan servicing. He claimed that he didn’t get the payoff request until yesterday (a lie–he was faxed it last Thursday) and that we may need to postpone the closing.
Not what I wanted to hear. To make a long story, shorter, I got the payoff from the bank, split the sewer lien with the owner, and closed the deal.
Bottom Line:
I paid $59,000 for a house that was worth between $80,000 and $85,000, “as is.” I will have to put in about $10,000, and then it would sell it for $100,000+. I plan on moving into this place in October and make it my new home.
I’d like to thank everyone who has helped and listened to me go on about this deal in the chat room. That list includes Mark (KCMO), JPiper, ChrisFL, and anyone else I missed. I would like to give a special thanks to JP Vaughan, herself. If I had not found this website two years ago, I would still be plugging along paying too much for my houses.
Finally, I’d like to thank Joe Kaiser. Joe, I have told you this before, and I’ll say it again….You and your foreclosure course have truly changed my life. You have made it possible for me to buy houses at fire sale prices. Once again, THANK YOU!
In closing, I’d like everyone to know that the things you read about on this website do happen. You just have to have the courage and the strength to believe. It can happen to you, too; just don’t give up too soon. You will have to wade through a lot of rejections to get one YES but, when you get that one YES, you’ll know it was worth it. Good luck to everyone.