SS Possible On First Pre-foreclosure Deal?/HELP
09/07/04
My husband and I are looking at our first possible purchase of a pre-foreclosure and plan on speaking to the bank on behalf of the owner. How do I get the form needed for authorization to do this. We are meeting with the owner tonite and plan on having the owner speak to the bank first and say we are authorized to negotiate so we can get more info on a possible deal. I have the following info. They stopped making payments in March 04 and the bank won’t accept less than 72,000 dollars??(which sounds high) for them to become current. Payments are 1700.00 per month and they are going to foreclosure this Friday for 199,000.00. Houses go for 250,000 to 275,000.00. Any way to make this deal work on a short sale? I would like to flip the house for a quick profit if possible. What do I say to the bank? They need time to get out of the house, but are willing. Any suggestions on how to take over payments from the seller and how would you structure this deal with the bank and seller. They already had a bankruptcy 7 years ago which was dismissed according to the daughter. I don’t believe they want to declare bankruptcy again. Any creative help would be appreciated. :-?
Thanks, Dana
1. The 'Letter of Authorization' can be as simple as a couple of sentences scrawled on a napkin with crayon.... don't get hung up on forms. The Homeowner would have to send in a short, signed note that allows the mortgagee to speak with you. Included would be their name, address, loan number and phone number.... and your name, address, and phone number.
2. Why can't the homeowners sell at market value?
3. Why is it in the bank's best financial interest to permit a preforeclosure short sale?
I dont know if the bank will short sale - probably not. They could have sold at market value, but his wife has ms and he is working 10 hour days to my knowledge and simply kept hoping for the best. How can I get this property from them before Friday as its going to foreclosure then. I want to offer them consideration for the house and money to move out. What is a reasonable offer. I believe market is actually 275,000.
I won't pretend to be the expert SSPro is, but from your questions, Friday seems like too close a date for you to learn everything there is to know about the short sale process and get this house. From his earlier posts, it seems to be a somewhat lengthy process. I don't know if initiating a short sale proposal with the bank would get them to stop the foreclosure proceedings or not.
The only way I could see stopping foreclosure this Friday would be the homeowner declaring bankruptcy (which you said they don't want to do) or you re-instating the loan for $72K by Thursday. If you get permission to talk to the bank, make sure you know the exact reinstatement figure. You could do a P&S agreement with the seller for the reinstatement amount (plus any moving money you want to give them) and take the mortgage subject to the existing financing. Of course, this means you'd have to come up with the $72K to reinstate.
I just heard of a subject to technique whereby you get the seller to sign a quit claim deed to you along with a power of attorney, then you sell the property and close with your buyer, you signing all the docs (with the POA)--the deed never gets recorded, so your buyer shouldn't have any title seasoning issues (the deed on record would be in the seller's name). The disbursement check would be made out to the original seller, which you would then endorse and cash, again using your power of attorney.
Not legal advice, consult professional counsel, etc., etc.
Andy
There seems to be sufficient equity in the property. Buying a property at 72% of FMV is certainly acceptable and the 1st mortgage holder likely will not short.
At this point you'll need to be a cash king to play. You will need to either reinstate the loan or pay off the loan by friday (as you indicated this is the sale date).
If you can't do this then you should stop now or wholesale this deal to another investor who has the cash. Partnering with someone is another option.
However the means, you must get this paid off.
Declaring bankruptcy will stall the sale about a month but is probably not a good option.
If you can get the cash, you'll need to do your title work and other due dilegence. There may be other mortgages and liens out there.
GOOD LUCK
What you need to do is simply have the owner contact the bank, and ask the bank, if they are willing to do a short sale. Generally if the bank agrees, they will send the short package that you have to fill out and send back to them.
Also if they are willing to negotiate, and they are the foreclosing lender they will most likely postpone the sale.
I appreciate the feedback. We actually met with the owners Wed nite and felt the house easily needs 30K to repair. I would partner with a local expert who knows the drill, but feel the septic and well are too iffy. I have a realtor friend who did a mortgage/title quick check and it seems this deal is a bad one. They have borrowed 35k in 4 years and then stopped paying. I dont believe we could net 20k. The actual market for this house in its condition is lower than expected too. 240k tops. I hope to be able to find investors in bird dogging if I find something good as I currently plan to use my own equity for deals and hear all about doing it for no cash out of pocket. Anyone interested let me know I am looking for someone interested in 12-15% return on a first lien mortgage for about 12-18mths tops or helping me to structure the best deal and working out a good gain to them. Best to all you go getters and here's to me making my first million too.
8-) Dana