Buying A Note At A Discount
Here's the scenario...
I have to get the owner 10K out of the deal in order for it to be win/win. So I will not be doing a short sale. I already have the property under contract.
The property has a 1st and a 2nd.
My question is, can I buy note on the 2nd at a discount? My thinking is that instead of doing a short sale - I could initially buy the note (at a discount)instead of the property - (taking the position of the 2nd Mortgagee)
At that point I would acutally buy the property, paying off the 1st mortgage in full.
I was wondering if handling the transaction this way would eliminate the problem of the seller not being allowed to receive any proceeds from the sale. Since the sale of the property itself would not involve a discount.
You can certainly try to do that. The process would still be the same, you would have to present your compelling and fact driven Proposal to the mortgagee.... and be prepared to pay cash for the assignment of mortgage.
Somewhere around August 25 - September 15 the note will be transferred to the mortgage insurance company because of the default.
I assume that due to the insurance available the current mortgagee would not be interested in giving a discount?
Should I wait for the transfer to go through and deal with the insurance company? Or should I try to acquire the note before the transfer happens?
I would devise the compelling and factual proposal.. submit it, and hope it that it's considered. The next best thing is that it would be attached to and included in the file as it's transferred.
Try to learn the PMI file #, and the specific department that it will be transferred to.. if you can. They (PMI) will want to do their own due diligence to dtermine if your offer is in their best, financial interest.
The guy at the insurance company called me yesterday to tell us about the transfer (I'm not sure why he called us, since we only have a contract, not the title - maybe the owner referred him to us) He seemed very helpful, etc. Maybe I should wait to deal directly with the insurance co.
When you say to create the compelling proposal, should I be attacking this from the entire 1st & 2nd amounts due or just focus on the amount that affects the 2nd?
By the way, never having dealt with a 2nd before, what is compelling to them? The house is not in terrible shape. It needs cosmetic repairs, such as carpet & paint.
Maybe nothing. To my knowledge, you haven't provided any info about how this candidate was prequalified for a short sale.
The same criteria would apply to the junior lienholders..
What's the house worth, what is owed, what would the mortgagees expenses be to pursue the debt, blah,blah,blah etc..... leading to "Is it in their best financial interest to accept less that what is due."
[addsig]
We do not wish to do a short sale because the owner needs to get 10K out of the deal. There is not enough equity for him to get this & me not take a loss (I am buying his other property via short sale& stand to make a 50K profit) But I had to be willing to buy both properties in order to get the short sale property.
Since he can't get anything out of the 1st property (short sale), we want to make sure we give him the 10K on the 2nd one. We had just figured on taking a loss that would previously be made up for by the other deal. But of course I'm not satisfied with that - I would rather make a profit on both & I'm sure there must be a way to do that.
Maybe I should post my "note" question on the Note forum...
Long story short, no we did not prequalify the 2nd house because we did not plan to do a short sale - we still don't plan to. Just want to figure out a way to eliminate the loss or even make a profit.
but you are asking about buying the junior mortgage at a discount... while that technically isn't a short sale... it does (read my previous posts) entail much the same process to convince the mortgagee to accept less than they are due.
Are you suggesting that I present the same proposal I would for a short-sale?
With pictures, etc?
Do you think the insurance company will have the same type of expenses incurred by foreclosing on the property that a bank would - 10-15K?
Yes, if you want them to accept less than they are due.... whaddya think? They'll just roll over if you ask them nicely? You must convince them with a compelling, fact based argument.
As far as their costs to foreclose... I don't know. I'm sure they have re-insurance for their losses... so... ask them what it will cost for them to foreclose, take possession, hold, and liquidate....
I doubt they'll share that info with you but it will suggest that accepting a few thousand less than they are due might be worth considering.
Thanks SSP. I am willing to try whatever might possibly work.
I see your point. Wouldn't we all love for the institution to bow before the investor!
Of course then people could not take pride in an organized, motivating proposal.
So to work I go...