Explaining Cost Of Foreclosure To A Seller
I have a seller in foreclosure (just notified by the bank). With their first mortgage, back payments, back taxes, they owe about $245K, est repairs $5K, ARV $320K.
What are the back of the envelope calcs that I can use to show them how much of their received equity will be eaten up if the bank takes over instead of selling to me at a (signif) below market price? I will of course be including mention of the damage a foreclosure will do to their credit that they can avoid by going with me. Thx all in advance.
Molotov
Hi molotov,
If they bank forecloses, they will lose all of their equity, there shouldnt be much selling necessary on that issue.
If they are considering selling before auction (without you), you must bring down down the perceived value of the property as is to them, as well as emphasize the atrocious attorney fees from the bank, the tax prorations, their closing costs, etc.
BAMZ
Remember to add in their mortgage payments that are in arrears with all late fees that the bank has charged to them.
Also if they list it with a realtor there is no telling how long it will take them to sell the house if ever.
BAMZ ... thx! The little light bulb just went on: bank takes over property AND its equity (if any) as the benficiary on the note.
Basically - "You mortgagor, did not pay. Right here in the fine print it says we have the right to foreclose and take back the collateral on the note you signed"
Ah hah! THanks again
make sure to remind them the cost of paying the realtor's commission. also the sharp discount at which they will have to sell to dispose of the property quickly.