Deal In Progress-question About Subject To
Hi all,
I have a pre-foreclosure, owner is happy to quit claim property to me and have me bring the loan current so there's no foreclosure on her credit.
My question: can I simply do the quit-claim via a title co, bring the loan current, and leave it at that?
Or, is there a need to create the "subject to" document being discussed here -- if so what would be the pros/cons of having this in place as well.
thanks all,
scott
Scott,
Have you ever done a Subject To before? Have you read about them? If you just quick claim and pay you could be opening a can of worms. First what is your plan for the house? Next have you done your homework? Any other liens? What is it worth? How much are the back payments? There is a lot of questions. Read some more before you jump.
Goodluck,
James
here is more clarification:
current mortgage 340k
back owing payments: 5000
back taxes: 5000
repairs: 10 (mostly cosmetic)
value with repairs done: 410
The current loan is interest only for 4 more years, then is adjustable 5.75%. The payment is 1650/m, I plan to rent it out at a small positive cash flow or break-even. A partner is helping with the 20k needed initially, I have funds set aside for reserves in case of other expenses as well.
My plan is to hold for the long-term appreciation and also I may possibly live there at times--its in a neighborhood I like.
My current plan:
1. Run a title search to make sure no unknown liens etc.
2. Have a friend come and view with me to do a basic home inspection. (I know the owner she has shared I think everything she knows with me as well).
3. Have a local real estate attourney draw up a grant deed, have her sign it, notarize it, file with county recorders office.
I'm hoping to complete this all within the next week or so. This person is about to file bankruptcy, so trying to get this deal completed asap.
Please let me know if I'm missing any critical steps!
thanks
How much is owed on the current mortg?
340k is owed on current mortgage, about 10k to bring everything current, another 5k-10k in deferred maintenance.
A few more questions for anyone who could help:
1. Whats have you found to be the best approach in transferring the insurance over to your name (same insurance or new) and out of previous owners name.
2. Any recomendations for real estate attourneys in Santa Cruz or vicinity.
thanks
Scott, you have told us some of the figures and you briefly said that you plan on holding the property with little or no cash flow. What I would like to know is what do you see yourself getting out of this deal and how long would it take? Unless the property is worth 400k or up I don't quite see what is attractive about this property as an investment. Just what you to succeed !!!
Mike
You also said that the seller is about to file for bankruptcy!
As far as I have read on the forum, this is tricky, I believe the sale could be reversed, and that has consequences.
There are people on this board who know way more about that than I do, just saw that nobody reacted to the fact that bankruptcy is about to be filed.
I would hate for you to make a big mistake on this first deal, and lose a lot of money. Just be careful, and see what more experienced board members have to say about that.
Ladybug
The value is 400-410, I think its also in an area with currently rising prices. True, little or no cash flow. However, potential of 50k immediate equity, and I like the area for a long-term hold. Also a lifestyle consideration--I like the idea of having a property in this neighborhood to potentially live in myself someday.
Mostly checking that I have the process correct, ie:
1. title search
2. sign, notarize, record grant deed
3. bring mortgage up to date -- or should I attempt a short-sale with the lender? I think its probably hard to show current value as less than mortgage, although lender would be out I'm guessing 10% in foreclosure expenses...
4. do repairs, rent it out
5. Within say 18 months do a cash-out refi and recover cash that went into deal (say 25k).
6. hold for long-term appreciation and the fact that I like it and may live in it someday.
Quote:
On 2004-01-22 21:49, MikeWood wrote:
Scott, you have told us some of the figures and you briefly said that you plan on holding the property with little or no cash flow. What I would like to know is what do you see yourself getting out of this deal and how long would it take? Unless the property is worth 400k or up I don't quite see what is attractive about this property as an investment. Just what you to succeed !!!
Mike
Up above he said the house would be worth 410K after the fix up.
Mike
The proper document to have them sign is a Warranty Deed, Not a Quit Claim Deed, Not a Grant Deed. There is specific language in a Warranty deed that does a better job of protecting you in the transaction.
A Quit Claim deed is intended to relinquish your claim to to the title. Generally to others that have an equitable interest in the property, "Like the lender, or an estranged spouse etc." not intended for someone to transfer their interest in property to someone else.
[ Edited by jeff12002 on Date 01/22/2004 ]
A short sale might be iffy, but it never hurts to ask (though I woudn't put lots of time into your proposal). The bank probably plans to recover its foreclosure expenses when they sell, and might already be salivating, given it's in an appreciating area and there's positive equity. From what I've seen lately, some bankers view foreclosures less as an expense/nuisance and more as a nifty little profit center, esp. when prodded on by hungry Realtors.
I heard banks are not allowed to make a profit on a foreclosure? Is that true?
As I understand, banks won't make a profit at sale
overage after paying additional lien holders, if any, goes to homeowner
If bank takes it back at sale
later they can resell for a profit