First Capital Trust Deeds secured the hard money cash-out financing for a frequent Northern California foreclosure auction buyer to replenish their cash reserves after a recent auction purchase.
We’ve written about this in the past on this site but have another example to show how a foreclosure auction buyer used fast hard money cash-out financing to replenish their bank account to do it all over again within one week’s time.
This is a relatively simple process whereby an investor pays cash at foreclosure auction in the morning, emails me a copy of the trustee’s sale receipt in the afternoon, FCTD gets a title commitment the following day, and the hard money lender drafts up loan documents on the third day.
Why is this special?
Because most title companies won’t issue a commitment of title until the foreclosure auction investor has received a trustee’s deed in the mail, which usually takes 2-3 weeks. The title company we use is one of the only ones we’ve found that will issue a title policy commitment before having the trustee’s deed in hand or recorded, which is valuable for our clients who buy at auction and do a higher than normal volume.
One of the challenges for foreclosure auction buyers who utilize hard money financing to leverage their return on investment (ROI) is the time that it takes from buying the property at auction to receiving cash-out funds on the refinance loan. Under most circumstances, this takes about 21-25 calendar days.
What takes so long, you might ask?
Upon buying the property, a real estate investor will receive a trustee’s sale receipt on the day of the auction sale. After about two weeks, a trustee’s deed arrives in the mail and needs to be recorded by the buyer. After it’s recorded, a title company can issue a preliminary title commitment for the buyer and then a hard money lender can issue loan docs to be signed at about the three week mark. Then give a few days for loan funding, recording, and disbursing and you have 21-25 calendar days from winning the auction bid to closing a hard money “cash re-capture” loan.
Fast access to cash is crucial. The title company (and hard money lender) we use for these foreclosure auction cash re-capture loans is one of our biggest competitive advantages when working with house flippers in California.
Hard Money Cash-Out Financing Terms:
- $119,000 Loan Amount (73% of Auction Purchase Price)
- 12-Month Term
- No Prepayment Penalty
- 8 Calendar days from auction purchase to disbursing cash-out loan funds.