Subject to questions
Tomorrow I have a meeting with a home owner in foreclosure. The mortgage on the house is currently around $80K. The home owner is a woman with two children who can not meet the payments anymore. She has obviously refied at a high interest rate because her current house payments are around $900 on the $80K. The owner would like to stay in the house until June, the time of the availability of her rental she will be moving to. My thoughts on this were to allow her to stay and pay the mortgage while thru June. However, I can't imagine there would be any cash flow from her payments since I believe that she can barely afford the current $900 a month payment on her mortgage.
The house would probably appraise for around $105K + and I am not sure of the condition of the property yet, other than it is a nice home in a very marketable area.
My thoughts, and anyone please correct me and or advise me as to this transaction, are to do a subject to her current loan, taking care of any problems to remove it from the foreclosure.
The owner has also asked about any equity she may have and is wondering if she will lose all of it. My response was that I would need to see all the information and the property first.
My thoughts on this were to ask what she may need for her equity, and once agreed upon a figure, to give her an equivalent percentage of the profit gained at closing (I would bring in a new buyer). Is there a good way to figure a cut of the profit for the seller or is there a better way to give them the equity?
What paper work will I need to proceed with this transaction assuming I should also set up a trust? And information I recently read lead me to believe there is a closing when you do a subject to. Is this correct?
Thank you, Janis
I wouldnt go near the house if the interest percentage made the house payment in those numbers. You have to consider both the buy and the sell side. Sure you could buy it, but then how tough is it going to be to sell it when that time comes? if your credit was ok I would consider getting a better rate, then approaching it. It also could be a 15 yr mortgage or have some other elements included (say like HOA or a 2nd too).
The most important part of making a deal is making sure the BUY is right.
GL
Looking at it from an Investors point of view, the margins seem a little slim in the event had to jettison the property. The $80,000 is probably the principal and by the time you add in arreages with attorney fees, HOA fees, etc.. and possible repairs the margins really begin to narrow. Add to this that if she stayed in and you had to evict, you lose rental income. Lastly figure your marketing and sales cost.
There may something there if you're real familar with the market and the extent of repairs. I've gotten into similar situations where I barely got out and all I had to show for it was stress.
Be sure you know all of the numbers for the downside and Good Luck.
<IMG SRC="images/forum/smilies/icon_rolleyes.gif"> [ Edited by Lee on Date 04/07/2003 ]
Thank you all for your replies. It seems that the real deal is oh so hard to find. Every property I have found thus far has some problem that prevents the opportunity.
Better to find out now.
Janis