Is There A Deal Here?
3 br, 1.5 ba SFR in a nice area, property values have been going up (like everywhere in CA) but not skyrocketing. It is in good shape (17yrs old) but will need a roof within 3 years. Woman is 2 months behind in her mortgage(s), would like to stay in the house (if possible) but wants to save her credit and not go into foreclosure (higher priority). Numbers look like this:
ARV - $245K
1st mort bal - $133K
2nd mort bal - $60K
Back taxes - $2K
Monthly pmt (1st and 2nd) - $1530
City lien - $16.5K
The last item is the kicker (and maybe deal killer). The city donated the land that the property is built on (way back when) to support low-income housing development. The deal was that if the property were sold anytime sooner than 20 years from the grant, the city would get a prorated portion of the profits. That currently computes to $16.5K. I don’t yet know the formula, if it is negotiable or where the lien sits in the pecking order. I don’t even know if it attached to the property or the person (working on all the above).
Whaddya all think?
Molotov
If you can't lose the city lien, short sale the 60K second.
OK, short the 2nd, good idea. I am inexperienced in the process going forward. What does this look like as far as the contract with the seller? Do I approach the 2nd lien holder initially (with seller's permission) to see if a deal can be had and THEN do a purchase contract?
Thanks for the help!
If I read this right then in 3 years the city lien is gone.
I would be looking for a way to get the property and somehow hide the transfer for the next three years. May be a way, maybe not.
You could take it on an a 3 year LO with everything signed and in escrow. Get a performance mortgage signed and recorded to protect your interest.
Pay everythig yourself. Don't put it through the hands of the owner.
I would go with Shorting the Second mortgage. If the ARV is close, there is enough room to sell quickly at a discount, pay off the lien and still have a nice profit. Assuming of course that the Seller doesn't want tons of equity herself.
If you go this route, you better start looking for a buyer because you will need to settle the first at the same time. You have some time, because if it's only two months in arrears, it probably hasn't gone to the delinquency department of either institution yet; and the holder of the Second won't consider a short until they have been notified by the First that forecloser has been filed.
[addsig]
OK, I have a little bit more info ... apparently the city lien subordinated (via some title company foul up) after the last refinance this owner went through. Therefore, the $16.5K lien is now third in line after the 1st and 2nd bank mortgages.
Should I still go after a short sale on the 2nd and do I try and tie up the seller in a contract now and wait for the third NOD to hit (Dec1)?
Sorry in advance for this post turning into a short sale forum question.. another skill that will be honed with experience
Molotov
Try to short both the city lein and the 2nd. If the city lein is due to violations, tell them you will make sure the violations are fixed if the will lower the lein amount.