Short Sale Information
I am new to the REI game and to this forum. I am currently working my first rehab property and just stumbled across a possible SS opportunity. I know nothing about SS except what I have read here today, so please excuse my ignorance.
The property is a SFH in excellant condition in a good area. The owner is going through a nasty divorce and simply can't afford to pay the 1st or 2nd mortgage. Currently, she is only behind on the 2nd. First, she tried to sale the home and was offered 145 which is close to FMV. The problem is she owes 157. Is there an opportunity here? What questions would I need to ask to gather more information?
If there is an opportunity here, I've probably already missed it. She recently approached me asking for help/advice but I turned her away out of ignorance. However, I desparately want to learn from this mistake.
Does anybody recommend a good book/website that can teach me the basics of SS?
Thank you for your help.
rld 
[ Edited by rajwarrior on Date 04/08/2004 ]
First things first: It doesn't matter how you can buy a property, it needs to make sense financially to make you money.
You do very well have an opportunity to make money here if you can gain the seller's trust again.
You have a couple of options here:
Since she is only behind on the 2nd currently, that is likely the only one that you can short. Depending on the numbers of the first mortgage you may be able to purchase the property sub2 the first mortgage and short sale and pay off the 2nd.
Alternatively, you can wait until both are in default and short both mortgages. Keep in mind that you have to be a cash player (or have access to it) when dealing with a short sale. The bank may say that you have 2 weeks to close. Can you?
If you don't have the cash for the entire purchase you may consider option 1 above or turning the deal over to another investor for a fee. Either way it makes a few dollars.
I don't know if this is over your head or not. Let us know and I'm sure someone will fill in the blanks for you.
GOOD LUCK
Like many houses today this one is overleveraged. In order to determine if this is a good deal we need a little more information. Find out how much is owed on the 1st and 2nd mortgages. Get the homeowner to give you a letter giving you permission to contact the lenders. Call the lenders and explain what is about to happen.
Thanks for the reply. Her trust isn't an issue, its availability. She's likely found another investor. But thats okay. I really want to learn how this works.
In option 1, you say sub2 the first mortgage. What exactly is sub2? Assuming the loan?
How exactly do you approach the lender(s) in such a situation (after you have written permission from the owner, of course)?
Thanks,
rld
Subject To is buying a house and leaving the current loan in the Seller's name. (in the simplest way I can say it)
There is a whole forum on this website dedicated to Subj To.
Short Sales are a Cash Purchase whereas Subject To can often be no money (or little money, or none of your own money) deals.
Hope this helps.
I finally got some more information about the home I mentioned above. The home is worth apx 145. There are two loans against the property. The first is for 136, the second 22. Both loans are held by the same lending institution.
What would be a good approach for the lender? What would be a "good" profitable deal on this property? Has anybody dealt with a similar situation?
Thank you for your help.
rld
My thinking is that though you could probably acquire it via some sort of short/discount, what then?
The best candidates for short sale, IMHO, are properties whose value can be markedly increased with some TLC.
If the property is in excellent condition... it doesn't leave much room for improvement, does it?
[addsig]
I follow. Thank you for your help.