A Friend In Need...
I just got off the phone with a friend that is in the following situation.
She has a huge log home (5800 sf) in a very exclusive area near Nashville.
She needs to get out of the mortgage, due to divorce, however she is current.
1st - 150,000
2nd - 110,000
needs 10,000 in maintenance.
Home appraised in 2000 at 325,000.
Probably moving up really fast in value. Any ideas for this lady??
Subject 2, plus seller carryback a 3rd mortgage. It might be wise as an investor (not friend) to wait a little longer until she is having a financial hardship and cannot hardly make her payments. You might be able to get better terms this way. However, if you can get a good deal now, go for it.
I read somewhere that a fast nickle is better than a slow dime. Thats the truth!
How is the husband involved in this house? Does he want a piece of it?
BAMZ
[addsig]
I failed to mention she has had a 240,000 offer is is seriously considering accepting it, regardless of being upside down.
By the way, my little handle thingy over there says I'm a sophomore investor, but I'm as wet behind the ears as a newborn baby boy. In other words, if there is a way, someone could walk me thru this, it sure would be appreciated. I mean...a friend is one thing, but if there is a way to make some fast cash from this, and still have her happy...hey, I'm human!!
If she is considering an offer of $240,000 which won't even pay off the mortgages, offer her $260,000 by taking the property subject to the existing mortgages and sucessfully taking care of her problem!
Oh yeah..her husband is NOT in the picture at all. It was her side of the family's home.
Okay...now for the "what if's?"
Personally I would be in no position whatever to "hold" this property for any length of time. What if I had trouble finding a lessee? A couple months of that mortgage payment would be hard to withstand.
Would I be able to flip this property with a subject to deal? Or should that be my exit strategy from the start. And if so, is this an attractive deal or an awful lot of risk for the money? I'd certainly be willing to take the nickel and leave the dimes for the next guy.
If the property is worth 320 or up to 350k then someone should be willing to step into your shoes. You buy at 260, sell for 300. Viola, 40k in your pocket, buyer got a good deal, friend is out of her situation, Win/Win/Win.
Hi Paulabe713,
If you want to be creative, lets do it! As the post above mentioned, make her an offer of $260,000 Subject 2 and that you will take over her payments.
However, to make this happen, she will need to make the next two months worth of payments! If she can do this, you have a deal! I would immediately place and ad in the paper to sell the house on contract!
OWNER WILL FINANCE!
HUGE LOG HOME
EXCLUSIVE AREA
$20,000 below appraisal
$310,000
555-5555
Try to get a down payment of $15,000 - $30,000 and carry the rest on contract. This will give you the opportunity to make about $50,000. You will get the down payment up front and then the balance when they sell or refinance the house.
Even though it is an expensive home, you should be able to find a contract buyer for this in 2 months time. Even if you had to borrow the money to make an extra payment or two before you could get it done, it would be well worth the PROFIT!
The other option is to have her make the next 1-2 payments, and then if you have to totally skip a payment or two to the lender, by the time it is an issue, you will have the money to pay those back payments, as well as a large and handsome profit!
Best of Success!
BAMZ
[addsig]
Thanks guys.
I'm gonna go see this house tomorrow, and talk with her some more.
Correct me if I'm wrong here. Subject to existing financing would mean I would not have to have a down payment, right? Basically, just taking over her two mortgages.
Have patience with me. I'm learning. Boy, if this happens, it would be one helluva lesson, huh?
Hi paulabe713,
Absolutely! In this case subject-to = no Downpayment, you simply take over her payments. There are a few things paperwork-wise that may be a little tricky if you are new at this, but you can either:
1) Learn Quickly
2) Bring in a partner for the Tennesse area to share in the profits to get the deal done right (I'm sure there are so tennesse local right here on this board)
3) Buy John $Cash$ Locke book, "Subject-To That's What I Do", and if you have specific questions, he is always willing to asnwer questions!
Go view the house and let us know what you think!
BAMZ
Being as this would be my first deal, I would gladly bring someone in to share in the profits to get it done exactly right. I'll just consider that tuition.
I'll see you here tomorrow PM.
And thanks for all the encouragement!!
you can auction the darn thing if you can advertise it right. send out a letter or post card to some doctors and stuff and put the description like up above. you know those busy doc's are always looking for a mountain getaway! if not them, then someone is. Sounds like a terrific deal. OH!!! and you do have to put money down!!!! $10... for legal consideration.
hopes this helps and i'm also the same as you, got no properties to show for my postings... hehehe
[addsig]
Okay, here's the verdict. The house is in great shape, but it's in a gated neighborhood with all brick homes surrounding it. Frankly, it looks like a fish out of water, if you know what I mean. It's been listed on the market since January at 290,000 and the one offer of 240,000 is the only offer in all that time. My wife's boss, a real estate and tax attorney (and CPA) , handles this lady's business. He says the house won't sell at that price because it's log, and the realtor apparently feels the same way. Sounds a little scary to me.
Based on that information, that is exactly what I would present to the bank. You may need to switch gears and Short sale this property. This option does require quick funds, but again, bring in a money partner and split the profits.
From what I see, there is still an opportunity to make some money on this one, but based on your last post, a Short Sale may be the best way to move forward.
BAMZ
BAMZ,
I gotta tell ya. This deal now just don't look like one I want to begin my REI career with. If anyone is interested, e-mail me and I will happily turn over the specifics to you, but only if you think you can really help this gal.
Paul
Hi Paul,
If it were an Illinois foreclosure, I would feel comfortable saving this property and ridding your friend from this situation. Since it is out of state, I would suggest this to you.
If you really want to help your friend, but you dont want to get involved financially, call up her realtor and explain to her how to do a short sale. I would expect that the 2nd mortgage would be open to a fairly large discount, which in turn could lower the list price and help the home sell real fast!
There are realtors in my area that jump on homeowners in preforeclosure and tie up a listing, (even though the property is upside down), and the agent negotiates the short sale / discount with the banks. The only thing in it for the realtor is the commission, and that is totally fine with them. Make this the mission of your friends realtor!
You may even learn the ins-and outs of short sales by working with the realtor on this one. Then you could go out and do the next one by yourself . . . how does that sound?
Best of Success!
BAMZ
_________________
"Never Buy Anything . . . Unless Someone HAS TO sell!" (Donald Trump)[ Edited by BAMZ on Date 11/06/2003 ]
Hi BAMZ,
I've contacted another investor about this property and he tells me he would definitely be interested in doing some kind of deal with me and the owner. I would have loved to do it by myself, but the uncertainty of how long I would have to hold it just scared the heck out of me.
I'm gonna "go to school" on this one, and if by some stroke of luck it ever happens again, I'll be much more prepared to take the lead role.
Thanks to all of you who gave me advice here.
Hi Paul,
If you feel uncomfortable with this one, it is a wise decision to watch andother investor work through it. Hopefully, you have negotiated some kind of referral fee that they will pay you.
There are sitiuations like this one every day in every usa USA. Once you feel comfortable on how to tackle the next one, go ahead and start marketing to every perforeclosure in your city! If you continue to educate yourself and you are persistant, you will break through into a whole new level!
Best of Success!
BAMZ
[addsig]
Yes BAMZ,
I have definitely worked out a deal on this one. And I look forward to the next one.
I've already had another one fall in my lap on a much smaller scale, but it's just a matter of networking. My rural mail carrier has agreed to help me out . I asked him about the Postal Inspectors hassling us about it, he said...ain't gonna happen. I talked to him about it Thursday, and this is Saturday...3 leads so far.
One promising, one a strong possible, and one...too soon to tell.