Subject To. Need Professional Help!
Hello All,
I came across a pre-foreclosure that I need help with. This is my first deal and I am trying to figure it out as i go. Seller needs to sell house asap. 2 months late on mortgage and property is already in forebearance. The deal looks doable but I am nervous about putting any money out while the seller wants to stay in there for 2 months after the house is deeded over to me. I would make up back payments and get the deed. Is this normal to stay in the house? will i have a problem getting tenants out if they can't move within 60 days?
Here is the particulars
280,000 arv
120,000 liens and mortgage
90,000 owner wants on the back end when property is sold. does not need right away.
5,000 behind on payments of forebearance. 2 months x2500
5,000 2 additional mortgage payments. wants to stay in the property for 2 months after deal is put together to find apartment and get 20 yrs worth of house ready to move. forebearance is up after 2 months and payment is back down to $1500.
9,000 wants upfront when ready to move out for downpayment on apartment and other moving expenses.
It is a VERY bad idea to let the owners stay there. It is EXTREMELY difficult getting the previous owners out. Trade cash for keys when they move out!
You also don't mention what you plan to do with the property (exit strategy) and also what sort of repairs are needed. If you are looking to simply resell the deal using a realtor, then I think the deal is marginal. If you have a more creative, longer term strategy, this seems decent. What are the terms of the 90k note that the seller is willing to accept?
My exit strategy would be to sell the house for 280k. the area is highly desirable and should have to problem selling as fsbo. this would be my first deal and not aware of using a note. How would this work? I was planning to cash them out when i sold the house.
the deal would go:
I would make up back payments (5k) and let them stay for 60 days. the 2 months payments they are living there (another 5k) would come out of there 90k when the house is sold and then when they move out they would get walking money of around 9 k which would also come out of there 90k.
Are you certain of the values? Have you looked into any leins, judgements, the interest rates on the loans, fixed or adjustable, property condition, and comps on the house?
I am of the opinion that although we need to be compassionate to the foreclosure homeowner, he or she has gotten themselves into a corner and we are in the position to help them out. Back out any repairs, costs, attorney fees, reinstatement fees, etc from what the homeowner is asking. Then offer 75% of that number, depending on your exit stragety.
Hold and rent, hold and LO, resell FSBO or my your realtor, wholesale or retail?
Too many holes in your scenario to feel comfortable with the situation.
Just my humble opinion,
Debi
I need as many humble opinions as i can get. That is exactly why i posted here.
I am certain of value from comps and the liens are what the seller told me but the mortgage payment has been the same for years before the forebearance. so i do not believe it is an arm. i seen the house and will take about 20k. here is what it looks like so far.
280,000 arv
120,000 liens/mortgage
90,000 proceeds paid to her when house is sold or refinanced
5,000 2 month back payments brought current (comes out of her final proceeds)
5,000 2 months payments while she stays in house for 60 days (out of her proceeds)
9,000 walking money once she vacates the house (out of her proceeds)
20,000 repairs
Quick look
280,000 arv
-120,000 liens
-90,000 proceeds
-20,000 repairs
=50,000
JKID,
Sounds like a promising deal, but the Seller is getting quite a bit out of a deal that they are about to lose in the long run. I would attack this like a business deal between the two of you. You plan on bailing them out of a problem, and giving them cash up front to get on with their life. I would think they would be extremely grateful for this. I know all of the deals I've done, they have been grateful, but I have never paid such a high equity. Why not address it like a business deal and work out a net-share of the profits. Perhaps you can arrange to work a 70-30k split on the net after expenses are removed. This way it is like a partnership arrangement and you can even keep them on the trust as 70% beneficiary, or you can simply put a 15-20% beneficiary and a $20,000 Trustee fee for your fee.
If you are making $20k net and shelling out over $30k, I don't think it is a great return on your investment.
Good luck
Rich StS