Potential Deal...have A Couple Questions...advice Anyone?
I have a homowner a couple months away from the auction. He's going to go let it go into foreclosure b/c he's moving his life to Mexico and doesn't plan on coming back (why, I dare ask).
House value, 230k.
1st mtg 150k
2nd mtg 25k.
He wants 10k cash out of it if he can get it.
My options: 1) Pay off both liens, save hiim from foreclosure. Traditional way.
2) Is it unheard of to (with owners written permission) contact 2nd lien holder, apprise them that the house is going to foreclosure, if they don't already know that they'll probably lose everything if he does. Then offer $5k for their interest in the lien...something's better than nothing. Then offer the owner 160k for his first lien...he gets his 10k, my price is 165 and change, my profit is a lot bigger.
My main question on this...is that ever done? Buying the second lien from whichever bank holds it at a big discount. Could greatly increase my profit and margin of safety.
Brad
Dallas
I would go about it this way.
Find out what the reinstatment figure for the property is. (missed payment amount x number of months + attorneys fee= reinstatment)
Bring the mortgage payment up to current, and have the owner quit claim deed the property to you (now putting you as the owner) Keep his financing in place, and take over his mortgage payments.
iff he wants 10k tell him you'll give him 5k at the closing, and 5k more once the house is sold (allowing you to keep more money in your pocket, unless you can swing that 10k with no worries, then go ahead)
What your thinking of doing, is typically called in our world, a short sale, or a fall short sale. Bascially asking the bank to have their investment "fall short" of their projected profit. This is a few good tool to use, if the situation is right. But in this situation, seeing how the property has a substantial amount of equity in it, means that they would rather see it go to auction, because they would get their pricipal back atleast, making this somthing they may not take on this property
Quote:
On 2004-10-07 18:00, bradcostanzo wrote:
My main question on this...is that ever done? Buying the second lien from whichever bank holds it at a big discount. Could greatly increase my profit and margin of safety.
Brad
Dallas
Yes, it is done, and you are thinking in the right direction. I would get an authorization to release from the owner and contact 2nd. You have definitely nothing to loose, and something to gain.
I know someone who did a slight twist on what you are suggesting. He bought the second at a big discount the day before the sale and then went to the sale and bid the price up to cover the second. Someone else outbid him and he made an overnight profit on the note. He knew he was going to either make a profit on the note or wind up with a discounted house.[ Edited by edmeyer on Date 10/08/2004 ]
I like that last idea. Not bad at all. I guess the only issue is to see how much the second lien holder would sell me their lien for. Don't know if simply informing them that the owner fully intends to let the house go to auction, in which case they could be s.o.l. if the price doesn't cover the second lien.
Another quick question:
If the house is sold at auction for more than the first lien, but with only enough extra to cover, say, 1/2 the second lien...does the second lien get any of that cash?
Quote:
On 2004-10-08 11:11, bradcostanzo wrote:
I like that last idea. Not bad at all. I guess the only issue is to see how much the second lien holder would sell me their lien for. Don't know if simply informing them that the owner fully intends to let the house go to auction, in which case they could be s.o.l. if the price doesn't cover the second lien.
Another quick question:
If the house is sold at auction for more than the first lien, but with only enough extra to cover, say, 1/2 the second lien...does the second lien get any of that cash?
You need to contact the 2nd, and offer them to buy the loan, if they agree, then you present your offer.
If the house is sold for more then the first, but only enough to cover a portion of the 2nd, then whatever that portion is, will go to 2nd. The trick for you is to buy it the price that is lower that that "portion".
For example, in your case, the 2nd is 25K, if the house sells for 165K, you need to have purchased 2nd for no more then 10k, you would like to make at least 5K.
This looks like easy money, because you don't have to do much after you purchased the loan, but, there is quite a bit of risk, if you are off on your estimates, or people at the action, are not bidding it up, you loose your money.