Rate This Deal Please!!!
I’m thinking about trying to get a preforeclosure. FMV is $205k. The house is in great shape. I’d have to spend $4,000 on some new carpeting. Everything else is beautiful. The judgment is for $151k. I’d like to retail this out. I’m new to this, so bear with me. I’m thinking - pay the owner to quit claim $5k. Pay off the bank for the fees, interest, taxes, ect. - $20 k Let his note carry me until I can sell it. What am I not seeing? I’ve already done a search. There aren’t any liens. Is this possible to do? It seems to easy. What am I missing here? :-?
Why does anyone with equity let it go into foreclosure? When you figure out that mystery, let me know. The note is for 131k. The total judgement is for 150k. There's 19-20k in interest, taxes, fees, ext. to settle up on with the lender. If he doesn't take 5k, he'll have absolutely nothing. I'll get him out of foreclosure, so he won't have that on his record and give him money to get an appartment at least. There's always the possibility that he'll still file for BK. The sheriff's sale is 8/5. Not a whole lot of time left for him to get himself out of this mess. His redemption period ends 7/29. I'm talking to an attorney tomorrow about a quit claim deal or other options. I'm new to this and was wondering if there's someone out there that can tell me what my best/easiest options would be. I'm new, so would like to keep it as simple as possible. Although, I have a good RE attorney that can handle more comlex deals.[ Edited by maggyldy on Date 06/22/2004 ]
based on the numbers you gave it sounds good..now go talk to the owner and see if he'll take 5k...
If it goes to sheriff's sale, you have to come up with the total amount - 150k cash - within 24 hours. That's the way they work. I'm thinking I would definitely need to talk to the lender before I can approach him with a quit claim deal before the sale. What are the possibilities that I could get a discount from the lender? Don't they like to settle up on these before the sale? And what's involved with riding it out on his loan while I put it on the market?
Take the advice of lp1 and get in front of that homeowner right away. Find out what the dollar amount is to bring the loan current. Next, explain the positives to the homeowner of doing it your way and the negatives that exist if he allows the property to get foreclosed and use your best negotiating skills to get him to accept your $5K offer or get him as close to the $5K as you can.
If you get the homeowner to see it your way then take the property Sub2. You've already said you want to sell it and not hold it. How fast do like properties sell in your area?
In a Sub2 you are not asking the bank, you're telling them what you're going to do. They'll like the fact that the loan is being brought current and it is no longer a delinquency on their books. If they call the note (which probably won't happen) you'll have it sold before they could get the property sold at auction. Good Luck.
Dave
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I’ve already done my research and found out that there aren’t any liens, the total judgment is for 150k. It would cost 19k to bring the loan current and pay all the fees, taxes, etc. The loan balance is 131k. FMV is 205k. Can you tell me what all the negatives are for his to let this property go into foreclosure? 1)Obviously, he has a horrible credit history and won’t be able to buy another home for a very long time. 2)He won’t have any money at all to move on. 5k is better than 0k. ….What else? I need all the arguments I can get when I talk to him. My thing is….If this is so easy, why don’t people do it this way all the time? Also, how much time do I give him to move out? Do I try to charge him a small rent? These properties sell fairly quickly in this area. I choose a subdivision where there are 6 different models repeated 500 times each. That way it was easy for me to do the comps and I would have a real good idea of how long I would have to hold on to it. Thanks Dave! I just needed someone to tell me that I’m thinking in the right direction. I just seems to easy……like there’s a catch somewhere. I need a list of negatives for the seller not to let this go to sheriff’s sale. I have no negotiating skills. I’m just going to do my best. [ Edited by maggyldy on Date 06/22/2004 ]
You mention redemption. In what state is this property?
If the Homeowner's financial problem has been resolved, he might be able to Chapter 13, and for an extra $350 per month, have the loan reinstated.
How did you learn of this property? Is it listed for sale?
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I’m in Illinois. Owners have 7 months from the time they are served the summons. He was served 12/29 and the sale is 8/5. They aren’t wasting any time. If he can’t handle the loan at this amount, how’s he going to handle it at $350.00 more? I found this property listed in the sheriff’s sales. Foreclosure was final 4/7. Can someone explain what a sub 2 is? I need to understand what I’m asking of this seller before I go in and talk to him. Does this mean that the offer is ‘subject to’ the contingency that I sell the place in 90 days, or something similar? As part of the agreement, I pay the bank off to reinstate the loan? Isn’t that risky for him to sell to me not knowing if I’m going to be good for this? How do I show him that I can carry this loan? Also, can I get a discount from the lender, or is the amount listed in the foreclosure non-negotiable?
Have you even talked with the seller yet?
Seems like your spinning your wheels without even knowing igf the homeowner will work with you.
I need to be able to answer his questions before I can approach him. I've talked to the wife and had a tour of the house. Does anyone have answers to my questions?
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On 2004-06-22 15:39, maggyldy wrote:
I’m in Illinois. Owners have 7 months from the time they are served the summons. He was served 12/29 and the sale is 8/5. They aren’t wasting any time. If he can’t handle the loan at this amount, how’s he going to handle it at $350.00 more? I found this property listed in the sheriff’s sales. Foreclosure was final 4/7. Can someone explain what a sub 2 is? I need to understand what I’m asking of this seller before I go in and talk to him. Does this mean that the offer is ‘subject to’ the contingency that I sell the place in 90 days, or something similar? As part of the agreement, I pay the bank off to reinstate the loan? Isn’t that risky for him to sell to me not knowing if I’m going to be good for this? How do I show him that I can carry this loan? Also, can I get a discount from the lender, or is the amount listed in the foreclosure non-negotiable?
wow, you asked a lot of questions that didn't get answered but I'll answer these so you can GET IN FRONT OF THE SELLER.... don't wait any longer.
Can someone explain what a sub 2 is?
-Explaining Sub-2 requires pages and pages. Down and dirty, you are taking possesion of the house subject to the existing financing. The existing financing remains in place however control of the house transfers to you.
Does this mean that the offer is ‘subject to’ the contingency that I sell the place in 90 days, or something similar?
-No. Subject to only refers to the existing financing.
As part of the agreement, I pay the bank off to reinstate the loan?
-Yes, the agreement is, I'll pay you 5K now, reinstate your loan and make all of your payments on time every month. Until the day comes where I cash out your loan. Until that day comes, your name will be on the mortgage but I will be responsible for making the payments. This will stop the foreclosure, save your credit and give you money to help you move into another place. Or you could just let the bank foreclose and walk away with nothing except bad credit. You could file bankruptcy but in 7 they will liquidate the house to pay the rest of your creditors, in 13 they will work out a payment plan but if you can't make the payments now, you won't be able to make them then either so the bank will just foreclose anyway.
Isn’t that risky for him to sell to me not knowing if I’m going to be good for this?
-Yes, but what are his other options? Let's say you don't make a single payment and the bank forecloses... whats the difference between that happening and what would happen if he didn't sell to you? The bank will foreclose either way. Both ways he has a forelcosure and missed payments on his credit report. Atleast with your solution he has 5k in his pocket to go along with his bad credit.
How do I show him that I can carry this loan?
- You don't, you flash 5k (or whatever he determines will get him to take your deal) in his face and say "take it or leave it."
Also, can I get a discount from the lender, or is the amount listed in the foreclosure non-negotiable?
-It is negotiable but why would they negotiate? Unless the house is in need of serious repair, which you have said it doesn't, there is no reason for the lender to discount the loan.
One question still remains... why would they sell you 50K in equity for 5k? If they will, GREAT... go get the deed. If not, find out how much they WILL sell it to you for. If the homeowner was smart he would simply sell the house for 190, quick sale price, and walk way with his 40k. However, if they don't see or know about this solution and believe your offer to be their best offer they will take it.
But the longer you sit around here guessing the more time you are losing. Go talk to the seller, find out what they need/want. Present your offer to help meet their needs/wants. Make it a win/win solution for all parties and I garuntee you'll get the deal.
One more option to consider to confuse things a bit, a forebearance agreement. Depending on the reason for the default and the homeowner's financial situation, you maybe able to work out a forebearance agreement with the bank and then take the house SUB-2, that will save you from spending 20k out of pocket. GET THE DEED FIRST, though!
Just my 4 cents.
Mike(NC)
Thanks Mike!!! I just needed some of these questions answered so I can go in with confidence. Only one more question--- what is a forebearance? I've never heard of that. Tomorrow morning I'm meeting with my attorney on another matter and I'm going to hit her up on this issue. I want to ring his doorbell with contract in hand. By the way, how can I get my hands on the standard contract that they use in this area if I'm not a RE agent. If he's not planning on going 13 or 7, I'm his only solution and I hope that he's come to that realization. What's the usual amount of time that you guys allow them to live in the home before they are out on the street? This is the hard part. I know I have to get a stomach for this. I can't imagine being put out like that. Thanks so much for all your knowledge, but mostly for sharing it. I've learned so much in such a short period of time because of this website. I'll keep you informed. Tomorrow, I'm knocking on their door again. I'll let you know how it goes.
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On 2004-06-22 10:58, maggyldy wrote:
Why does anyone with equity let it go into foreclosure? When you figure out that mystery, let me know. The note is for 131k. The total judgement is for 150k. There's 19-20k in interest, taxes, fees, ext. to settle up on with the lender. If he doesn't take 5k, he'll have absolutely nothing. I'll get him out of foreclosure, so he won't have that on his record and give him money to get an appartment at least.
Before you go too far with this, you had better discuss your plan with the lender. Most mortgages are now "Due On Sale." If that is the case, a quit claim deed will not keep the mortgage holder from immediately filing foreclosure on you and expecting you to pay the note in full. Correct me if I'm wrong. It sounds as though you are hoping to make this purchase with $5K cash and you then expect to simply start making the payments.
I have a friend who did exactly what I believe you are trying to do. He got the previous owner to quit claim the property to him. He got a very good deal on the house. He was planning to live there. He has spent all of his available resources fixing the place up. Then the bank hit him with a foreclosure. With a Lis Pendens recorded against him, he has been unable to refinance the property and will either lose it on the courthouse steps or hopefully sell it to me.
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On 2004-06-22 15:39, maggyldy wrote:
Isn’t that risky for him to sell to me not knowing if I’m going to be good for this? How do I show him that I can carry this loan? Also, can I get a discount from the lender, or is the amount listed in the foreclosure non-negotiable?
For your sake, lest hope that this owner doesn't have two brain cells to rub together. If he does, he will still require a formal closing and you will need to bring the loan current at that time. If he doesn't do that, he risks you looking at it as though you paid him for an option and not paying another dime. Ultimately he would still ending up with a foreclosure on his record.
If these houses sell so quickly in this area, he would do better to list and ask for a fast closing. His other option would be to let it go to the courthouse steps. Odds are still pretty good that he would also get at least $5K that way.
I am going to bring the loan current if I can make this deal. I plan on selling right away, so he's not going to have a chance to foreclose on me. These houses go quick, so I'm not worried about holding it that long. And the house is in perfect shape- ready to go almost immediately. I know that I'm not his only solution, but I need to go in with that attitude. Some people just don't get it, and I'm hoping that he's one of those people. It wouldn't be the first house that went to sheriff's sale with equity, and it won't be the last. Chances are that if this deal goes through, he's getting way more than 5k anyway. That is if he has any brains at all.
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On 2004-06-23 01:17, GeneralSnafu wrote:
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His other option would be to let it go to the courthouse steps. Odds are still pretty good that he would also get at least $5K that way.
How is that possible? You mean if the house sells for more than what's left on the loan?
My attorney says it's too risky to pay him for a quit claim deed because if he files for 7 or 13, his name would still be on the title. I didn't know that he would get money after a sheriff's sale. First I've heard of that. He barely has time to sell retail. That would have to be a very quick sale and closing. But, I don't know that much about this. I was thinking that there wasn't enough time. And, as for the BK, he has the 151k total judement now + the second lien, which is probably back up to about 30k. He bought the house with 2 loans, which is the only thing that makes this house attractive right now. I could almost completely wipe out that second lien, while he can't. He's still unemployed, but has a few call backs. I'll just watch this one and see what happens. How much time do you thing that I need to close this deal if I get a call from him at the last minute?