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Old 10-10-2011, 01:25 AM
 
Location: Meggett, SC
10,443 posts, read 8,588,947 times
Reputation: 5800

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I am looking at some land. This property is 25 acres, cleared, waterfront on a river/tidal creek. It's located in the Charleston area. It's a bank owned property. Now, here's the thing that I can't quite understand. It was a deed-in-lieu of foreclosure. The mortgaged amount was $1.1 million. They have listed the property for $300K. I went out there today and it's definitely a great piece of land in a great location. The ad says they will consider all offers.

Why would a bank be willing to lose $800K on this. Other properties like this in this area go for around $1 million. Have I stumbled upon the deal of a lifetime or is there some catch that I'm not seeing here?
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Old 10-10-2011, 06:04 AM
 
Location: Florida
18,338 posts, read 18,578,802 times
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A consideration is how much of the mortgage has been paid.
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Old 10-10-2011, 06:37 AM
 
Location: MID ATLANTIC
7,606 posts, read 17,658,297 times
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Quote:
Originally Posted by old_cold View Post
A consideration is how much of the mortgage has been paid.
The outstanding loan balance has no impact on current value. Bank that find themselves owners of real estate or land via foreclosure or deed in lieu, don't sit there and say, "the note was for 300K, let's sell it for 340K to cover our losses, value be damned." Believe me, they squeeze every dime out of every asset as the possibly can. One with 40% equity will make up for the one with negative equity. The first thing ordered these days on REO is a BPO.

As for the OP, there's 101 reasons why. The former owner probably called most of the property's flaws to the bank's attention while seeking a remedy. Those reasons could include zoning, perk results, protected waterways, future develpment (windmills).....I could go on for an hour on the potential problems. See if you can find the former owner......if s/he feels like the bank screwed them over, they will most likely point out the flawls to you.
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Old 10-10-2011, 06:37 AM
 
Location: The Triad (NC)
26,905 posts, read 58,020,547 times
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Quote:
Originally Posted by southbel View Post
...25 acres, cleared, waterfront on a river/tidal creek.
The mortgaged amount was $1.1 million. <--$44,000/ac
They have listed the property for $300K. <-- $12,000/ac

Why would a bank be willing to lose $800K on this.
Why? Dunno...
but you can bet "they have no choice but" is at the top of the list.
And that is probably related to "the place was never worth (over) $1,100,000"

Maybe it used to have some subdivision rights?
Maybe a flood plain makes all but the 1/2ac closest to the road unbuildable?

All sorts of things can come up.
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Old 10-10-2011, 06:48 AM
 
Location: Meggett, SC
10,443 posts, read 8,588,947 times
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Appreciate the replies. Have found out some additional information. The property is 24.5 acres high and .5 acres marsh. The previous owner was a developer that wanted to make it a small neighborhood and he has gone under. All of the site work (power, well, clearing) has been done and it's still zoned agricultural, which is fine because that's why we're looking for land. Maybe he had problems with zoning and the mortgaged amount was based upon it being a neighborhood eventually? Dunno.

The most interesting point is that the bank that originally financed this mortgage was bought out by TD Bank because it was going under for making bad mortgages. They bought the bank for $.04 on the dollar. Wonder if they're just trying to unload inventory?

I have been looking for property for some time and, in my experience, banks will sell something for about 20% under market value but this kind of markdown is ridiculous. The county has fair market value for this property at $900K but that's not always an accurate representation. I feel like there MUST be something wrong with it because this price is WAY too low.

Only thing I have found that sticks out is that the "town" is listed wrong on the listing. They've listed the town as one that's in a pretty undesirable area with depressed values. However, this property is not located in that town, it's in another that has really good home values. Who knows but I think I'll have my realtor investigate to see if he can figure out what's up with this property.
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Old 10-10-2011, 06:50 AM
 
Location: Meggett, SC
10,443 posts, read 8,588,947 times
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Quote:
Originally Posted by MrRational View Post
Why? Dunno...
but you can bet "they have no choice but" is at the top of the list.
And that is probably related to "the place was never worth (over) $1,100,000"

Maybe it used to have some subdivision rights?
Maybe a flood plain makes all but the 1/2ac closest to the road unbuildable?

All sorts of things can come up.
Oh it will be in a flood zone - everything in Charleston is in a flood zone but as long as it's not marsh, it's buildable. That's why we build so many raised houses here.
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Old 10-10-2011, 08:46 AM
 
28,385 posts, read 68,046,709 times
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It is not uncommon for developers to con some dolt loan officer into letting them borrow the total value of the subdivided lots. Of course that assumes there are actually buyers and marketing and resources ready to go to turn these lots into houses. If pretty much all the developers are now out of business the land, even if some improvements have been done, reverts to undeveloped value.

I would also check for lawsuits and back taxes that might survive a foreclosure -- federal violations of protected waterways may be the kind of thing that you need to undo if you were to buy this land even for a "nature preserve"...
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Old 10-10-2011, 08:50 AM
 
Location: Fort Mill, SC
87 posts, read 75,443 times
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Being a former loan officer, what jumped out at me is that you said it was listed in another town. That very well could have the bank thinking this property just isn't worth a million. If they just bought out the other bank, they probably haven't had time to send someone out to do an appraisal. If I were you, that's just what I would do. Hire your own appraiser, for YOU, not the bank. This should be for your eyes only. Move quick though, chances are, someone else has also noticed the great deal.
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Old 10-10-2011, 09:15 AM
 
Location: Meggett, SC
10,443 posts, read 8,588,947 times
Reputation: 5800
Quote:
Originally Posted by chet everett View Post
It is not uncommon for developers to con some dolt loan officer into letting them borrow the total value of the subdivided lots. Of course that assumes there are actually buyers and marketing and resources ready to go to turn these lots into houses. If pretty much all the developers are now out of business the land, even if some improvements have been done, reverts to undeveloped value.

I would also check for lawsuits and back taxes that might survive a foreclosure -- federal violations of protected waterways may be the kind of thing that you need to undo if you were to buy this land even for a "nature preserve"...
The only thing I have found thus far is the county taxes weren't paid for 2010. The developer was sued when he went belly up and left homeowners stranded in another neighborhood without everything completed so that is certainly something to be concerned about. This land was on his future development plans but he never made it that far.

Quote:
Originally Posted by Cryren8972 View Post
Being a former loan officer, what jumped out at me is that you said it was listed in another town. That very well could have the bank thinking this property just isn't worth a million. If they just bought out the other bank, they probably haven't had time to send someone out to do an appraisal. If I were you, that's just what I would do. Hire your own appraiser, for YOU, not the bank. This should be for your eyes only. Move quick though, chances are, someone else has also noticed the great deal.
That's the one thing that really stood out to me too and why I initially skipped it when I was looking at land. I was actually looking at comps on another piece of land when I found this one. As you know, in the South, even one town over makes all the difference in the world in value.

I'm just having such a hard time trusting this price. I think it's that old saying...you get what you pay for that's haunting me on this decision. Really, the land is exactly what we've been looking for but I am so worried it's too good to be true.
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Old 10-10-2011, 10:07 AM
 
Location: Morrisville
1,168 posts, read 2,082,244 times
Reputation: 1113
Sounds like a good deal. Make an offer contingent upon a through title search.
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