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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Analyzing Notices Posted by SeanW on June 21, 2003 at 4:45 PM After months of reading this forum and others, I finally sat down and spent a day going through my paper's notices of sale. This was my method: (1) Find the amount of the foreclosing DOT. (2) Subtract 1 month from the recordation date and look up the interest rate data from this site. Add .5% more to the rate, and presume a 30 year loan. (3) Calculate the balance that it SHOULD be if it was current, at the presumed rate. (4) Multiply that by 8% to reflect late fees and trustee's fees. I call this the "Projected Bid" (from the bank.) (5) Find the year the house last sold under a warranty deed, and it's price then. (6) Using the price change adjustments for my state, (from www.ofheo.gov), determine what the house would be worth today, if it was in retail condition. (7) Subtract 8% from this hypothetical price, to reflect realtor fees, title and escrow fees, buyer incentives. Then subtract the "Projected Bid" from this value. What remains is "Transactional Equity". The cost of repairs, insurance, etc. must come from this. I figure there should always be at least 15K of transactional equity in any purchase. (7.5K for repairs, 7.5K of profit.. or at least, "safety margin".) As a backup check, the bank's bid should be around 75% or less, of the estimated retail sales price. If something appears to be a deal, I look for some comps in the neighborhood, to support that sales price. (And of course, a final trip to the courthouse is a necessity, if I decide to persue any of these!!) --------------------------------------------------- Some conclusions after seeing how the numbers play out... You can't see deals without doing the whole process. I had been under the impression that my area was ripe for the pickings, compared to CA. But even here, I'd say only about 25% of the properties up for bid will make sense as investments. (Fortunately, few other investors are attending my sales.) My assumptions may be slightly conservative. Perhaps less can be spent on realtors. Maybe the bank will ask less than anticipated. The main thing is to just weed through the list, hunting for "potential." My first purchase will probably be one in a relatively "good" or convenient area, since I do plan to live in it while repairing. But Ward's right-- deals happen everywhere. There doesn't seem to be any relationship between how "good" a neighborhood is, and how much profit can be made in the purchase. Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : After months of reading this forum and others, I finally sat down and spent a day going through my paper's notices of sale. : This was my method: : (1) Find the amount of the foreclosing DOT. : (2) Subtract 1 month from the recordation date and look up the interest rate data from this site. Add .5% more to the rate, and presume a 30 year loan. : (3) Calculate the balance that it SHOULD be if it was current, at the presumed rate. : (4) Multiply that by 8% to reflect late fees and trustee's fees. I call this the "Projected Bid" (from the bank.) : (5) Find the year the house last sold under a warranty deed, and it's price then. : (6) Using the price change adjustments for my state, (from www.ofheo.gov), determine what the house would be worth today, if it was in retail condition. : (7) Subtract 8% from this hypothetical price, to reflect realtor fees, title and escrow fees, buyer incentives. Then subtract the "Projected Bid" from this value. : What remains is "Transactional Equity". The cost of repairs, insurance, etc. must come from this. I figure there should always be at least 15K of transactional equity in any purchase. (7.5K for repairs, 7.5K of profit.. or at least, "safety margin".) : As a backup check, the bank's bid should be around 75% or less, of the estimated retail sales price. If something appears to be a deal, I look for some comps in the neighborhood, to support that sales price. : (And of course, a final trip to the courthouse is a necessity, if I decide to persue any of these!!) : --------------------------------------------------- : Some conclusions after seeing how the numbers play out... : You can't see deals without doing the whole process. I had been under the impression that my area was ripe for the pickings, compared to CA. But even here, I'd say only about 25% of the properties up for bid will make sense as investments. (Fortunately, few other investors are attending my sales.) : My assumptions may be slightly conservative. Perhaps less can be spent on realtors. Maybe the bank will ask less than anticipated. The main thing is to just weed through the list, hunting for "potential." : My first purchase will probably be one in a relatively "good" or convenient area, since I do plan to live in it while repairing. But Ward's right-- deals happen everywhere. There doesn't seem to be any relationship between how "good" a neighborhood is, and how much profit can be made in the purchase. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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