“Smart Investor Buys House at Foreclosure Auction and Sells Back to Previous Owner”

You will be fascinated by the math. An investor buys a property for $26,000. At the sale, the property was being sold with the current owner still occupying the property. The house and barn looked like it went through hurricane Sandy.

The note holder was owed $218,000 and the foreclosure process took almost 4 years to get to this point.

The investor went to see the occupant after taking ownership of the property to attempt to work out a, cash for keys agreement. The occupant welcomed the investor and the discussion about how much that he would want to move out rather than going through the eviction process.

Instead of the discussion going as the investor anticipated, the occupant asked if he could repurchase the property. Of course the investor said yes. The following agreement was worked up.

An option to buy arrangement was worked up. $5000 at the time of the signing, a purchase price of $52,000 an interest rate of 12% and complete amortization over 4 years.

That was 4 years ago. The investor had a return of 42% on his investment and the old/new owner now owns the property with no outstanding debt.

As I listened to this story last night, it occurred to me, this is one of those situations that everyone made out accept the bank that held the note. Can you imagine a $218,000 debt and they ended up with $26,000 minus the cost of the sale. I immediately wondered if the institution has been watching this transaction and waiting to go after the property once it is owned again.