Advice On Preforeclosure
I have a possible deal and need advice. I was contacted by a person that just received notice that the mortgage company is foreclosing on the house. The house is currently vacant and listed with a realtor at 85k. Here are the details:
FMV: 85k
Mortgage/penalties: 48k
5k in arrears
10k owed in taxes
owes 9k to relative for original downpayment
owes 7k to finance company (personal note)
I was looking at getting the deed via subject2, pay-off 5k in arrears and 10k in property taxes. Should I offer any cash/future cash also? Can I do the subject2 and not pay the realtor because it is currently listed?
I was going to rent the place and refinance the mortage as soon as possible. Then possiblly sell the house in the next year or two. Any advice?
This is no deal - run run run
C-
I'm not sure why you are saying this is no deal and to run. I can pay approximately 15k cash to bring everything current and have 25-30k in equity.
I can pay 10k (back taxes) and 5k (bring mortgage current) via sub2. I can rent the place out for a year ($150/month +cashflow) and then sell it for at least 20k profit. Doesn't sound too bad to me.
This deal is pretty skinny. You have $80k in liens on a property whose FMV is $85k.
Not a great deal. Is your area appreciating rapidly? What happens if it depreciates? Does it need any work whatsoever? None of that is factored in. With closing costs, and paying off $24k (if relative has lien on house, you are responsible), you will $30k equity - perhaps you could assume payment of $7k note, but I am not sure how that works with subject to, and besides rent would have to be above and beyond mortgage plus note. I think people are saying run because you have to pay so much money just to create decent equity. That is a LOT of money out of pocket, $24k.
For a first preforeclosure, this one is tough. Check out your PM inbox for an idea. Best, Dave
Dave,
Thanks for the reply.
The 7k loan and the 9k loan are not liens on the house. The 7k is a loan from a finance company that is a personal loan and not attached to the house. The 9k loan was just a verbal agreement between the owner and a relative. The total official lien amount currently on the house is 58k.
The area is not appreciating very fast (it's slow). An identical house sold last year within 30 days for 90k. I don't believe the house needs much for occupancy/resale.
The deal sounds better with the other loans not attached to the home. I think you are in a tight spot to offer a large sum of cash for contractual consideration. One other thing that I noticed is the property is vacant and going into foreclosure. Why? Did the person simply abandon the place, is there a major mold or similar issue, or is the rental market as slow as the housing market? If it is the former, you are okay, but if it is either of the later, you could be stuck with a bad situation.
[addsig]
If you really want to try to work this deal, ask if the relative will they take $4,500, which is 1/2 of the original $9,000 for the down payment. Then ask the finance company to take $3,500, which is 1/2 of the original $7,000 and then get a signed release for the homeowner’s benefit. (This will make the homeowner feel a little more warm and fuzzy and it will show them you have an interest in their problems and you want to help.) I would go with a lot less, but you have to let the homeowner know they are in foreclosure and the numbers are all wrong, but you want to help. If you can’t get a concession and/or negotiate a better deal/price you should try to look for another deal. You also have to remember that the there’s a Real Estate Broker in this picture and they will they want to get paid commission on the sale. Otherwise I would have recommend trying to do a short sale with the bank, but I find Real Estate Brokers sometimes don't understand how they will get paid and they tell the homeowner they will soon have another deal and time runs out! Get out a piece of paper and a calculator and do some quick math. It doesn’t add up to me if the area's not appreciating! Good Luck!
Sounds like a great potential deal! Because of the appreciation, I might opt to sell it outright with a realtor. Including a 6% commission, your profit outright would be approx $17k.
Well, she contacted me and wants me to only to talk to her realtor and not to her. I'll keep on eye on it but I'm on to the next deal. Not motivated enough at this point.