Good preforeclosure; how do I construct the deal?

Comments(6)

• 
  tntmoz7th April, 2003

  Have you looked into a shortsale yet?
  
  Ty

• 
  wgheisler7th April, 2003

  I thought about a short sale but there is 50K equity in the property even after repairs. I don't think I could justify it.
  
  Additionally, the RE market is really hot in Central MA. I don't have a worry in the world when it comes to reselling, but I've attended auctions locally and the prices for all but the most run-down properties are amazingly high.
  
  Admittedly, at this stage in my career, I am also looking for the path of least resistance! I do see working on short sales in the near future however.

• 
  bparker8th April, 2003

  Is the Mortgage of 135 K assumable? Because if not than the bank can demand payment in full if there is a change in title?
  
  If it's a non assumable loan, you can put property in a land trust, in which a 3rd party like an LLC as trustee, and seller as benefeciary, in which seller quietly assign beneficial interest over to you without banks knowledge.
  
  Of course, seller would send bank letter informing them that their attorney advised them to but property in a land trust for tax purposes, something of that nature.

• 
  wgheisler8th April, 2003

  Thanks bparker,
  
  I had not considered a land trust before. Creating one according to your description sounds workable: Form an LLC with my partner, put the property into a land trust with the LLC as trustee, and the sellers as beneficiary.
  
  In reality, the sellers will be content with the generous 5K we are giving them for moving money.
  
  How would I specify this in the agreement?
  
  Thanks,
  wgheisler

• 
  JohnLocke8th April, 2003

  Bill,
  
  $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
  In response to my “I buy houses” classified ad in the local paper, I have an opportunity for a preforeclosure that looks really good. Here are the approximate figures:
  
  Reinstatement costs: 15K
  Rehab costs: 20K
  Moving money: 5K
  Mortgage balance: 135K
  ARV: 229K (lowball minimum)
  
  I have an partner lined-up who will foot all associated costs until the eventual sale to our buyers.
  
  It looks like we’ll make 55K or more on an investment of 40K at most. That’s great, but while I wait for the bank’s attorney to get me the precise figures for a reinstatement as of a date I specified three weeks from now, I need to pull the logistics together and make this a cohesive deal.
  
  All the homeowner wants is moving money. My anticipated approach is to do a land contract “subject to”, get the homeowner to deed me the house, then maintain the existing mortgage payments for two to three months or so until we do the work and we sell the house.
  
  Is this the best approach? I want to minimize risk, of course. Will an attorney give his blessing to a “subject to” deal?
  $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
  
  First you will need to get a re-instatement letter from the bank, stating that they will accept the back payments and re-instate the loan. Do not send them any money without authorization in writing from the lender.
  
  You can then take this property over Subject To the existing loan. This will give you the time to re-hab the property and get it on the market for sale.
  
  There is enough equity the way you described the property to pursue this deal. Tie the property up with an Offer and Acceptance Agreement, then due your due diligence (re-instatement letter), etc.
  
  John $Cash$ Locke

• 
  wgheisler8th April, 2003

  John Locke,
  
  Thanks for the "cut to the chase" approach. It is easy, when working in unfamiliar territory, to imagine things as more complicated than they need to be!
  
  Regards,
  wgheisler