Need Help With A Pre-foreclosure
Hi Everyone,
I contacted my first motivated seller! I was nervous and excited when they called so I forgot to ask a few questions. But here's their situation:
They owe $17,000 in back taxes. They bought the house in 1994 for approx. $340,000. They're paying $3172/month for their mortgage. The mortgage company was willing to take $5,000 from them to let them keep their house but I don't think they have the money and if they do, they still won't be able to keep up with the payments. She said she had the house appraised, but I forgot to ask what the appraisal was.
I was going to call back, but I know I'm probably missing out on more information from her so I was hoping that someone could give me some help on this. So that I can ask her all the questions at once.
Also, how do you structure offers for pre-foreclosures? Can you do lease options? Or probably not since they'd need some money to get into a new house?
Thanks!
Jenn
Great Job jags!
Get the owners to sign a "Loan authorization form" and fax it to the laywer/title company/trustee (depending upon which state you live) and request a "reinstatement amount". This will give you the EXACT amount in back payments, late fees and foreclosure fees needed to STOP the foreclosure sale.
In many states, you cannot do a Lease Option back to the owners. Give them money for a U-Haul, money for a couple months rent and money for a security deposit.
Do your own research, what are the liens against the property? (this can be found at the courthouse). What is the house worth (call the For Sale signs in the neighborhood).
Hope This Helps!
Mrs. Meltzer
Thanks Mrs. Meltzer!
I definitely would never do a lease option back to the owner.
I'll be sending the authorization letter to the seller tomorrow and I'm going to try to get out of work early so that I can go to the courthouse.
I called a realtor today and she said that the house should be worth about $450k - $480 (probably closer to the lower end). If the seller said that they don't have any equity in the house, would the best option be to try and do a short sale?
I'll probably need a little help running the numbers to see if this would be a good deal. I'll post them as soon as I get them.
thanks again!
Jenn
I forgot..
do I need to have the seller sign a contract or anything before I start doing all this research??
Thanks!
Jenn
Depends on what state you are in as to some legal issues, forms, etc.
Jags,
Depending upon which state you're in, there may or may not be enough time for a shortsale before the Foreclosure sale.
Also, a $450,000 will take some time to sell! There aren't a whole bunch of people out there that can qualify for a $450,000 loan. Unless, the lowest price homes in your town go for $450,000 like the Crazy California RE Market.
Hope This Helps!
Mrs. Meltzer
Banks normally won't do short-sales when there is already alot of profit in the house already..
Nice to met you Jenn,
If I may ask...how did you find this situation? I'm always curious as to how people find "motivated" or "anxious" sellers. I'm a newbie and I'm interested in learning how these types of deals are identified.
Feel free to private message me if you'd prefer.
Thanks in advance...
Jenn,
I think you might need the owner to sign a contract with you before you do any more research.
What happens if another birddog or investor approaches them with a better option? You would have done all this work for nothing.
Getting them to sign wont hurt I would say.
Maybe you guys can help me out.
comps are $430-$450
1st mort.(this is the one foreclosing) $347
2nd mort $4
$17 in back taxes
The 1st mortgage was willing to take $5000 from them to prevent foreclosing. The owners don't want to do it b/c the payments will go up and they still wouldn't be able to afford it.
The seller said that their lawyer said the house won't be foreclosed on for about a year. Their 1st mortgage is with Washington Mutual. I was told that they don't like to make deals, is this true?
What are some possible options I can use for this deal? Do you think I could try and do a short sale? Or is taking over the mortgage and back taxes the only solution?
so confused, I greatly appreciate your help!
Hi Jags,
Congrats on finding a possible deal. First thing is what is your critera for buying a house? Mine is 70% LTV. In this case 70% would be 315K max offer.
My other thought is why would the attorney tell them they still have a year? That's a red flag to me! If they are working with an attorney they are probably considering bankruptecy. If so this could give you some leverage with the bank for a short sale to get the price down. Also if you need a form with standard questions that you should know the answers to before making an offer send me an email with your fax number and I'll be happy to send it to you. Good Luck! Keep us posted on your progress! -Sarah
I would be interested in the list of questions you ask when you talk to someone in foreclosure...
Regarding the lease option, I have done one w/ the owner and it has worked out quite well. Most of the time, I purchase the house, rehab and or rent it out or resell. The person had a family member become ill and finally pass away. She continued to work at her 80,000 a year job, while sending her money oversees to her family. So, in other words she had the money to pay the bill now, though the payment plan the mortgage co came up with was too high. A lease option worked out quite well for her. When she buys the property from me in 1.5 years, she will be able to buy it at a discount from the current market rates. I am making money every month that she pays and when she buys it, I'll make 20k. Not a bad deal.
I try to find out what the people want, and then work from there...
Good luck and congrats on working on your first deal. So many people think about doing it, though never do...
Thanks webuyproperties. I figured if the owner wasn't able to make the payments before, they wouldn't have been able to make it after you purchased the property, but I guess you're right, you have to see what their situation is.
As for the attorney, it sounds like that have a close relationship with him and I think they've been going to him ever since they were served the NOD trying to find out what to do. Is that common for the owners to keep running to their lawyers for everything?
I decided to partner up with another investor as this was my first deal and a little light on the knowledge.
You could pay their 5K to bring their mortgage current and then take their property subject-to. Tell them you are going to try to find a buyer, but there are no garuntees. Once the loan is paid current, you've probably got another 3 months or so before you have to make another payment.