Could This Be A Deal?
Okay have to say this, this site has been an awesome resource. Hoping I could get some advice and maybe some outside counsel.
Here is the situation from a deal I would like to see go through.
Seller called on one of my bandit signs. Home 4/3 3 car, 3528sf, comps run anywhere from 440-500 in neighborhood. Has a full kitchen downstairs, wired for surround sound and a lot of nice features.
Motivation: Husband and Wife are separated and working through a divorce. Although both are still living there. They have a daughter who will finish high school in two years then they intend to move back to Chicago. Wife has recently claimed bankruptcy (7) and should be discharged next month I believe. Husband is drawing on 401K and retirement accounts to make up on high payment.
Situation: They high payment on this home and have asked me to come in and buy it and lease back until daughter graduates.
Mortgages:
1st – 232K with GMAC @ 7.5 with payment 1670
2nd – 170K with Wells Fargo @ 9.25 with payment 1437
3rd – 37k with HFC @ 21% with payment of 660
Total PITI is $4,219.00
1st is husbands, 2nd is wifes, and 3rd is both. They used the third to go and adopt a Russian kid in Aug 02.
What have we talked about? This is where I do need some outside advice. The husband is older and is pretty understanding of the options. On the face of it there does seem to be a deal. The home is in some disarray, plus this range market has slowed considerably in my region. What we have talked is a strategy to possibly short the property and have me come in and purchase. I’ll be honest it does make me somewhat uneasy but he is actually already starting to not pay the taxes and put the process of being difficult with the property as far as the lenders. I’ll actually stop there because I would appreciate some honest advice.
This is a property I think I would like to live in so if I could work out a deal that got me in at a good price and was manageable as far as risk I would like to move forward. Although that would be 2 years from now and a lot can happen in two years. Honestly that is probably part of my motivation in continuing spending time on this deal thus far. That being said I will gladly walk if it is something that has to many variables to manage. Thank you in advance to anybody who might post a response.
There is no equity, so the only possibility would be to try a short sale. No chance with the first mortgagee. Slim with the second mortgagee. You hope will be with the third.
Too bad about the former homeowners wanting to stay for 2 years. The market could deteriorate (and it will), they could damage the property, or they could stop paying you rent and keep it tied up in BNK court for 2 years. Why allow their problem to become yours?
I would try to do the short if and only if they agreed to vacate. They can rent somewhere else.
I agree with SHortSalePro:
It is always tricky to take a deed or short for a seller, and then let them stay in teh house. Very risky. Also, your going to have a helluva time shorting those loans, especially the first, becuase they'll have a lot of equity to work with.
I'd only touch it if they were willing to move out.
That was the plan to short sale at least the 3rd and possibly the 2nd.
Thanks to both of you, I will take your guys advice. I will meet with the sellers again and explain the only way this is a win for me is if they move out and we short the property with a good discount.