First Deal Can I Make It Work?
Seller has 20 d to respond to LP
1st Mortg foreclosing [Wamu] pymt of $1225 m behind 6m =$9350
Owes $170K
2nd mortg pymt of$760 [HFC] behind 2 m w/late charges =$2500
Owes $70K
House listed at $399K
House currently listed w agent ,one contract fell through, offer was $360K agreement will expire in 3 wks has been listed almost 6 m
Plans to file BR after the sale of house to take away credit card balances etc
He is open to my paying the back pymts taking subj 2 and cashing him out with some equity down the road. We discussed T/B an he was ok with that as that is similar to how he purchased the house
I have til Mon to come up with an offer . He has not finalized his plan with an investor who will
1 pay off both his mortgages
2 let him live in the house free for 6 m 3 IF he sells the house by then the owner will pay the investor 5% of the total sale
4 IF he does not sell, the investor will expect that the owner pay him the accrued amount of rent[ $2000.per mo.]
or $12K then AND continue to pay $2K per mo.with the investor acting as the bank
The bottom line if the owner defaults then I guess the investor will have the house
So can I compete against this investor?
If I would attempt this sale I was thinking
of trying to short sale the 2nd , the first probably wouldn't short because of the equity
I have the authorization to release info signed . I think he would like to deal with me but like he says I got to do one thing at a time to buy time so he's ready for the first decent chance to get the house sold and try to keep some equity I just need to figure how I can work it
I am concerned that when he files BKR that the sale could be determined to be fraudulent and I would be out lots of money. What would be the case if the investor bought it as far as the BKR goes?
In Florida there is no ceiling on how much equity the owner can keep . The owner tells me that IF his mortgage is current at the time he files BKR then he can keep the house
Any advise here?
Thanks to all
[ Edited by LynLinz on Date 01/23/2004 ][ Edited by LynLinz on Date 01/23/2004 ]
I'll do my best to relay what I believe to be factual information.
I'll start this off and let you know I'm not a bankruptcy attorney in your state, but I'm pretty sure that the only way to keep a property with a mortgage is to pay it off. In other words, declaring bankruptcy does NOT let you keep the property.
Also I believe you have every reason to be concerned if you acquire the property and the seller goes on to declare bankruptcy.
I think that your best option here is to get it locked up under contract and plan to short the 2nd for about $.10 on the dollar and then try to short the first.
Now here's your chance to make even more money for yourself. Assuming that your seller would go for this, offer to pay off his credit card debt. Now you go an negotiate that debt down with the credit card company. Telling them his house is going into foreclosure and he's considering declaring bankruptcy. If he declares bk they get zip. All of a sudden 10 cents on the dollar looks great to them and you've just created a ton of equity for yourself.
That's just my $.02.
-Ryan J. Schnabel
Thanks I need all the insight I can get
I have 2 days to figure it out. The guy wants an answer as to what I can do for him before he goes with the other investor
Good idea about the credit card payoffs they total $100K I'll approach him with that idea also
Thanks
Lyn,
Frankly, this is simply too much liability and risk to try to get into for a first deal. As you hinted at, there are simply too many areas where someone could make a mistake that could cost you both financial and legal troubles down the road.
You're likely not going to get a shortsale approved. By your figures, there is about $100K of equity in the deal. The 2nd should feel pretty secure in their position. If you want to call on his CC debtors for practice and experience fine. But with $100K debt, there are probably a few. Before you can agree to payoff any, you'll have to convince ALL to accept less than the balance owed. Even at that, you'll likely have to pay $25-50K to payoff this debt. Do you have it?
As far as doing a subto deal with a looming BK coming? In a word, risky. IF the seller files BK, you shouldn't worry about a fraudalent sell, IF you've done everything legal and ethical. There was a recent post here concerning this very topic. However, in a BK the lender will find out about the sell, and would likely choose to activate the DOS clause at that time, under the circumstances. Would you be able to refi the property quickly?
As far as the other investors method, he is opening up a whole world of possible legal troubles for himself, especially with the seller admitting to possibly filing BK. IF you've read anything here on TCI, you understand most investors' opinion on leaving the seller in house.
Roger
Hope I can help with a couple of points.
First, there are many situations in Bankruptcy where the individual can keep their property-- in fact chapter 13 is filed for that very purpose. Second, even if you buy the property in a legal/ethical manner, it can still be a fraudulent transfer. I won't get into this because you mentioned the property was in Florida- Florida is a 100% homestead exemption. So if the seller lives in this property he keeps 100% of the equity and the other non-secured creditors do not have access.
Hope that helped a little.
Ragwarriar,
Yes I read all the posts thats why I knew I should be concerned
The owner will leave the house no problem there
Damn I would like to work this[ Edited by LynLinz on Date 01/24/2004 ]
JasonD,
So what you are saying is that the owner MUST stay in the house to be able to KEEP the house which means that his pymts must be current
OK
His plans are to let this investor in to pay off the mortgages 1 and 2 (pymts will then cont to be current)
live in the house for 6 m to see if it sells
although by then the investor will own it [he is the bank]
If not the owner has to come up with at least $12K which he won't have so then
the Investor gets the house Right?
I'm also trying to figure out WHAT THE INVESTOR SEES so I can relate to owners stand
The owner IS going to file BR right after the sale of the house
So where does that leave ANYONE who buys that house, even IF sold through a realtor who has the listing for 3 more wks?
If there is another plan the owner WILL leave the house no problem if the investor takes it he has chance to stay rent free for 6 m if no sale then rent in arrears is due and probably another big mess
[ Edited by LynLinz on Date 01/24/2004 ]
OK another question :
If owner sells before foreclosure either to investor or retail buyer or me or anyone, Can THAT sale be deemed fraudulent if he files BK after the sale?
Or is it only fraudulent IF the buyer knows of his intent?
He plans to put any equity monies into an annuity and THEN file Bankrupcy Chpt.7
He says that money at least will be protected from creditors
For any serious considerations on this deal, that it but one of the many questions that you'd have to get professional legal advise on.
In that situation, you are getting into serious grey areas on whether the sale could be deemed fraudalent. If he is going to actively try to hide any funds from other creditors, it would worry me.
Roger
Raj,Thanks
I wish I had an attorney partner
I will try to reach attorney on Mon
L
I'll try again.
Florida is a 100% Homestead State- what I mean by this is, assume you are in Flordia and own a 100,000 home. You owe 50,000 to the bank on a mortgage, the other 50,000 is your equity. Now also assume you owe an unsecured creditor, say a credit card company, 45,000. That 50,000 of equity is untouchable by the unsecured creditor-in Florida.
The point is in order to be a "fraudulent transfer"- the creditors that stand in line to get money would have to be in a position that they would have received more money, then they did, had the transfer not taken place. So, here, even if the transfer did take place the creditors are not getting less because in Florida they are not entitled to any of it anyway.
This is as short and quick as I can explain it without going on and on and on to cover all the exceptions.
JasonD
That was good. it is precisely what I wanted to know.
Now I'm way smarter tthan 5 days ago
Many thanks to TCI.
I'm still working on this deal but now I have found that I must approach it differently
Thanks to all