Foreclosure Bailout Scenario
Foreclosure Bailout Scenario
Greetings,
I'm working on a deal in Brooklyn, New York where the homeowner owes $400,000 on the 1st mortgage and $400,000 on a 2nd mortgage. Property Shark values the home at $500,000 but my experience says more like a $600,000 value.
So he owes $800,000 on a home worth $600,000. He has not made a payment on either loan in a couple of years and the first bank is attempting to foreclose on him for over a year now. The client has been working the bankruptcy court but his time is running out on this.
I work in Foreclosure Loss Mitigation finding deals and turning them over to bailout companies. I am very good at getting deals. Their process is well known - to save a home, they sell it to an equity partner or investor who holds it for 1 year and then sells it back to the homeowner.
These bailout companies in my area charge 6% to 10% of the amount funded, the straw investor gets $10,000 at closing plus a chance to keep the home if the homeowner defaults or is unable to re-purchase the home after one year, the homeowner pays all closing costs and one year of mortgage payments are set aside to protect the investor.
All this comes out of equity at the closing, where the mortgage in default is paid off and the above fees and escrows are then taken out.
To continue with my scenario, I pretty much have in place a short sale from the 1st bank for $320,000. I'm offering the 2nd mortgage company $75,000 on $260,000 in principle. The second loan is with a service company. This part also looks good.
Here is my problem, in order make this deal fly, we need to get the equity out. The problem is the preliminary Hud-1 that goes to the bank to justify the short sale should show a selling price of around $400,000 plus closing costs. But the actual selling price must be over $500,000 to pay the above fees and escrows. I need a solution to this problem.
Also the 1st bank said in their short sale package that they want to see in the sales contract a stipulation that acceptance of the short sale is conditional on their approval. Does anyone know how involved the short sale bank needs to be in the actual transaction or closing?
Not that I want to do anything illegal, but a preliminary Hud-1 is - preliminary. And a sales contract can change before closing. Will they ask for closing documents which may have changed since their original short sale approval and if they see something they don't like - then seek a deficiency judgment? Or will they just take the payoff and go on their way?
Finally the homeowner has a 24 year old son with the same last name and excellent credit. It would be ideal to sell the house to him, though this may be asking too much. Any gunslingers out there who can help with this problem? Thanks
I have a solution how can I reach you?
I have a solution how can I reach you?