2nd Mortgage Default

Comments(3)

• 
  BAMZ26th November, 2003

  Hi dwierman,
  
  For a 2nd to foreclose, they feel somewhat comfortable in their position to recoup a fair share of their dollars. I havent had an experience with a 2nd (that was foreclosing) that was willing to deal that fast and that steep as you said. However, since they put themselves out there, it wouldn't hurt to stregthen your propsal with any other comps or information that would help you and counter them at a lower amount that would make the transaction work for you.
  
  In order to get a better feeling for your situation, go ahead and share with us the number on this property. We may be able to help you further this way!
  
  Best of Success!
  
  BAMZ
  
  [ Edited by BAMZ on Date 11/26/2003 ]

• 
  dwierman26th November, 2003

  Hi and thanks for the reply.
  The house is valued at 180,000K
  THe first which is up to date is 130,000.
  The seller who financed the house held a 60,000 dollar second at 10%. with a balloon after 3 years. The payments have been current on the 2nd even though the balloon is past due and the loan was to be finished.
  The problem is that the owner died and the heirs want their money.
  So they are willing to take 45,000 now.
  I am thinking if I can get the owner of the note to reinstate for another xx number of years, that I can then sell the note for ?? 50,000 and make money this way, even though I wont get the house.
  Any further suggestions would be appreciated.

• 
  jeff1200227th November, 2003

  I agree with you, This is not a great deal. even with the second discounted to 45K, the property is still priced at 97%+ of retail. Without the discount, the property is encumbered over 105% of value. Point this out to the greedy heirs, and tell them if they are willing to listen to reason, you'd be willing to make them a fair offer. Look at the property and use anything that you can to lower the price.
  180K sale price through a realtor would cost $10,800 in commissions plus a share of the closing costs. This would net less than 170K. The cost of the foreclosure will reduce the return further, and the house is unlikely to bring full price at a foreclosure sale. Any repairs that may be necessary will also lower the value of the property. Etc. All of these things are reasons to lower the price.
  Dust off your negotiating skills, and go for it.
  If they really want to be rid of this, they'll deal.
  My target for them would be less than 25K for their note. Probably closer to 20K. (Just Because). Then you could restructure the deal with the mortgagee, and give them a few more years on the note. If they are able to make the payments on a 60k note that you've paid 20K for, you'll be getting a pretty good rate of return. (60K at 10% interest only would be $6000 per year in interest. If you use that based on your 20K purchase price your rate of return will be 30% every year until they refinance, and then a 300% lump sum return when they do. Kicks the stuffing out of the stock market doesn't it?)
  
  I'd like to say that it's been my experience that probate and estate situations have the very real possibility of bringing out the worst in people, and quite often do, especially when the heirs think that there's free money to be had. After a while, reality has a chance to come into play, but not always. If they are not willing to deal now, check back with them in a little while. They may be more willing to talk after they've gotten some negative feedback from the real world.
  
  If they don't change their mind and decide to foreclose, They'll end up with the property with a 145k loan on it, and realize maybe a 20K profit if it sells for full price within a few months. All they'll have accomplished is moving the buyer out, ruining his credit, and they'll have delayed getting their 20K by six months or more.
  
  If they are not interested,don't lose any sleep over this one.
  
  Good luck,
  Jeff
  [ Edited by jeff12002 on Date 11/27/2003 ]