I found this website as a result of a search, and I like the balanced attitude of trying to be helpful and informative to both investors and the distressed homeowner I see here. I have bought one foreclosure in No. California thus far this year and it turned out well but, it was a deal fraught with legal minefields.
Anyway, I would like to ask a question about the ?unconscienable? clause of the civil code regarding equity purchases of homes in foreclosure. How do you determine what to offer a homeowner in preforeclosure? Do you believe offering 50% of equity based on Fair Market Value is sufficient (or overly generous in a declining market)? If so, how do you determine Fair Market Value ? internet sites, realtor comp values, a professional appraisal at your expense, etc.?
Here is a case example of a house facing trustee sale in 20-some days:
Rough estimate of FMV=500,000,
Loan plus arrears=325,000,
realtor selling expenses6%=30,000,
carrying costs(piti)x4 months=14,000,
Closing costs upon resale=3,000,
Repairs=3000(house in very good shape).
Therefore, it seems the equity in this house is 125,000. I would consider offering seller half of that (62,500) if I knew I could resell house at 500,000. But the market is declining rapidly and houses are not selling so I do not believe FMV will be 500K in four or five months but more likely 475,000 or 480,000. So it seems I should offer the equity seller a number based on my realistic resale price. But if I do that I will be paying seller less than 50% of his equity as of right now thus possibly triggering the unconsciencability clause. I am curious if anyone dealt with this situation. I know the law does not say an equity purchaser has to offer 50% of FMV but I am curious what to offer that would be fair to both homeowner and investor. Thanks for your time.
(PS?If this question is too technical or not appropriate for here then I apologise. Still like this website)