Newbie Purchase Agreement & Financing
An uncle of mine is in foreclosure. I have arranged pre-financing personally to bid up to his first mortgage which is 90k plus a little extra. I will have 45 days to close after purchase & sale agreement at auction. The bank has said to bid at auction because they are the only ones that can give me a deed without additional liens, etc.(No tax liens on property just judgments from creditors). I am taking a risk that the bidding will exceed mortgage because value is 120k (city assessment) to160k (realistic area selling prices after rehab) range. I have good reason to believe it will go for much less due to time of year (cold in our area) and fact that house needs a little rehab (no furnace, some inside paint & sheetrock but nothing bad).
My problem is this:
I have limited cash available after purchase to do needed rehab of 10-20k to bring best selling price. My bank has agreed to a loan of 95k if purchase price is 100k. My credit is so-so at 650.
My questions is this:
I have a corporation (Family are principal shareholders) that could bid on the property and get the purchase and sale agreement. Is it then possible for the corporation to give me personally a purchase and sale agreement to buy the property from them and/or the bank? In essence, the corp does the initial P & S but does not finance instead sells the property to me personally for the higher appraised value thereby giving me the needed cash for rehab.
Greetings ourhouseme,
I would be inclined to try to work a deal with your uncle before it goes to auction. There are a lot of other questions that would need to be answered. How much in default is he? Amount of judgements and other liens? Appraised value before rehab? Etc., etc.
I don’t understand the bank saying, "they are the only ones that can give you a deed without additional liens." They can waive back payments, penalties, etc., but they have nothing to do with judgements from other creditors. Those can go away in foreclosure -- which is why those lien holders are often very willing to negotiate a settlement before it does.
But I would run the numbers to see where you are. And depending on the situation, there could be a variety of ways to do it without the risk of being outbid at auction.
Good luck!