Deal Fell Through Because Seller Was Short Cash, Now What?

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This is my first post to the forums.

A deal in which I was to buy a two flat recently fell apart because the SELLER was unable to come up with sufficient funds to close the transaction. Apparently, they had done a cash-out refinance to the point where they owed more than the market value of the property. I was not willing to close the gap by increasing my offer. This all happened very last minute. The seller seems to be destitute and on the verge of bankruptcy.

The property is now vacant and essentially abandoned. The seller lives in Florida while the property is in Chicago. The utilities are cut off and the premises are not being up kept.

I have done some research and identified the primary mortgage holder on the property as well as two holders of second (and third) mortgages. The primary mortgage is for approx $100k less than my offer price. Adding the other two mortgages totals about 110% of my offer.

The property is not yet in foreclosure or preforclosure.

So, I am wondering what my options are as far as continuing to pursue this property. I am thinking maybe I can approach the primary lender explain the situation and try to get them to talk to the seller and somehow close the deal. I see two hurdles to this though: (1) the first mortgage is well under the market value of the property, so they might not be inclined to rush things even if it means foreclosure is in the future (2) they are a large bank in another state and I don’t have a clue as to who to talk to. A visit to their website is not helpful so I imagine I would just end up tal,king to someone who doesn’t know anything.

Any sugguestions on what I should do next, assuming I want to pursue a close on this property?

Thanks.

Mike

Comments(2)

  • tinman175525th October, 2004

    Based on the information there is nothing you can do. If the mtg's become behind you could attempt a shortsale. If the owner is paying the mortgages and doesn't want to come up with the cash, all you can do is wait or set this deal aside (keep checking every so often) and find another deal.

    Lori
    [addsig]

  • rajwarrior25th October, 2004

    I wouldn't agree that there is nothing that you can do. However, trying to talk to the first lienholder is a complete waste of time at this point.

    First, I believe that this property is probably a preforeclosure. Why? because it is very rare that the owner would move to another state and not have someone keeping up the property if they were still paying the bills. And even if the first is current, there is a good chance of the 2nd, and especially the 3rd, mortgages being in some stage of default.

    Those are the loans that you need to be working on. But instead of trying to short them, try to buy them at a BIG discount. 2nd and 3rd's are bought at big discounts anyway. A non-performing 2nd/3rd should be bought at pennies on the dollar. If you numbers are correct, chances are that these lenders might be willing to sell these loans at discount.

    If you are a lienholder, then you stand a much better chance of aquiring the property at foreclosure. Why? because if your note is non-performing, you can foreclose yourself.

    However, I wouldn't recommend this unless you know what you are doing, or know someone that can guide you through the process.

    Roger

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