Had an idea! will it work? need help finding out!
Hey board,
Got a buyer, 2 liens on the house
1st $128k, 2nd $33k. If the buyer cannot qualify for the full amount of the asking price $164,5k , is it possible for them to obtain a loan to pay off the 2nd, bring up the arrears on the 1st and I'll Sub-To or L/O to them for 3% of the selling price.
= $33,000 (2nd) + $14,000 (arrears) + $3,840 (my 3% fee) ?
Total = $50,840
Sub To or L/O will be $200 over the existing mortgage for either my monthly spread or if it's a L/O it'll be $100 towards the option and $100 in my pocket......
Any thoughts?
Clif 
Clif,
This post is a little confusing.
Do you have a buyer that's wanting a specific house? Don't understand a buyer, 2 liens on the house
Whose's asking $164.5K for the house? By your figures, the property already has $175K in liens + your 3%
Are you trying to get a buyer to come up with $50K+? If this is correct, think about it. If the buyer had $50K, that would be a 20-30% down on a $200-250K house. Why would they buy yours.
If you can clarify the post, maybe we can get a better look at the deal.
Roger
Hey Roger,
OK, here it is:
I have a house under contract.
It has 2 liens, 1st $128k, the 2nd $33k.
Total = $161k Total payoff amount, (although I am trying to get a short on the 2nd cause the house is in foreclosure and is up for auction in Aug).
My Q is:
If my buyers cannot obtain financing for the entire purchase price of $161k...but really want this house. Is this scenario feasable?
The possibility of my buyers obtaining financing to pay off the 2nd, bring the arrears current and pay my fee of 3% on the remaining payoff of $128k?(or the 1st)
Total = $50,840
$33k (2nd) + $14k "(arrears) + $3,849 (my fee or down pymt.)
Then I'll L/O or Sub-To the prop. to them.
Can this work?
Clif
Clif,
I'm not sure how this works, but this is my creative thinking on this deal. Why not buy the note from the 2nd leinholder at a discounted price. Lenders/financial institutions sell notes to other lenders all the time. For example, if a lender held a note for $100,000 at 8% for 30 years and decides they want to sell the note for quick cash, then a note buyer comes along and buys up the note for less than $100,000. The note buyer then gets to collect the payments, from the borrowers, that the original lender would've collected.
Ask the 2nd if they'd be willing to sell their note on that property for say $10K. The total payoff would still be the same, but you now hold the $33K 2nd note. So if the buyer's cannot obtain financing to payoff the 2nd, you, then you can work out a deal in which they could pay you off. It's just an option that I was thinking about, but I do not know how the whole process works.
Tanya
Clif,
You still have the same problem. A house that is overfinanced. What is the FMV anyway?
I thought that you wanted to invest Subject to? This is a short sale candidate, but definitely not a subject to. Again, by your figures, payoff of the house is $175K (w/arrears).
Think as the buyer on this scenerio. If they had $51K to put down on a property, they wouldn't coming to you. They could borrow from just about any bank. That's a 20% down on a $250K property. 30% on a $165K. Almost any lender would take that.
Roger
Thanks Rog and Tanya,
Tanya, you've got the right idea but I'm wondering if the buyers can be financed to get the note, they may not be able to get financed for the $128...that's the point here
Roger!
They may not be able to get financed on the $128! so, my creative thought was maybe they can get financing for the 2nd. and Rog, as far as me investing in Sub-To, that is just what I'm doing only I have to finish what I started...this is my last foreclosure, only would do one as a back up.
Thanks, Clif
Roger,
They don't have the $50k, my point here is maybe they can borrow it to pay off the 2nd (If I can't get a discount on the note, that's what I meant when I said "(although I am trying to get a short on the 2nd cause the house is in foreclosure and is up for auction in Aug). ", and the payoff is just that (it includeds the arrears). Total payoff amount is $161k.
Thanks, Clif , oh by the way, I sent a request/proposal for a 60% discount on the 2nd and am awaiting a response.
Clif
One more thing for Tanya,
I'm not prepared to buy the note, even at a discount...Thing is if the buyers can't buy "(for whatever reasons), and the prop. goes to auction, my $10k is going, going, gone. (although, I do have someone else waiting for the prop.)
Remember, the auction is coming up in Aug.
Thanks, Clif
P.S. I'm just trying to think creatively to get these people this house, they want it very badly....if they can't get it, I do have another buyer waiting in the wings who can buy it but I feel I must apply my (fiduciary responsibilities) as I always do...to the first (primary) couple...then move on...I don't spend any more than a few days, if they can't then I move on...but I have to try!
Sidebar: The second couple asked if (for a few extra $, could I move them to the top of my list and bypass the couple I'm currently working with.....to me that's unethical..and I told them so..."(they understood and is waiting, I told them if the first couple could not obtain valid financing "(a letter of credit or something) then the house is theirs.) It's how I do biz...your rep spreads fast in this biz ya know.
Clif [ Edited by pbodys on Date 05/31/2003 ]
Clif,
Man you have a mess in your hands that I don't want to think about. Doing your best to get these couples in the home, that's pretty nice of you. I figured if you bought the note and it was definite that the buyer's were going to get it, then you would've made your money back either through cash flow or a payoff.
I have one question, why can't they qualify? Is it because of bad credit? I would hope it's their credit and not because they can't afford the payments. Well, good luck on this one. If I come up with any other ideas, I'll let you know. Oh BTW, what is the FMV? I don't remember reading it, but if it's there I'm sorry for missing it...
Tanya
Clif, big guy, I gotta agree with Tanya here, this is a messed up dilemma you've got. Do you have this under a purchase contract, option, or what? This alone may determine what course of action may be best.
How were you planning on exiting on the property? L/O, CFD, or just assigning?
Why do you think that your buyer won't qualify?
Good luck man, and keep the info coming. Maybe we'll get it worked out.
Roger
Hey Tanya and Rog.
Not really as bad as you think, worse case scenario, the buyers won't be able to obtain financing due to their credit and I'll move on to the buyers waiting with pre-approved financing. I just thought that if the first couple cannot obtain financing on the entire amount owed, ($161k),
that perhaps there was a way that they could get financing somehow on the 2nd lien and I'll just lease it to them based on the existing (1st) mortgage. That would enable them to get the house with lesser financing up front.
The house would still be in the owners name, I'd do a L/O with the new buyers and they'd owe (whatever) lender for the loan on the 2nd. The current FMV is $150k (damaged), the Comps. for the area are $190k+.
It's all just a thought, John says think creatively not conventionally, so that's what I'm doing...practicing
Now, after what I've just told you, don't you agree?
Clif
Clif,
I think the problem you have is your buyer's, how would they get a loan for a property they won't have title to? You said the defaulting owner's will keep title?
Hey chisl1,
Nice to meet you,
The owners don't need a title/property to purchase the 2nd lien, anyone can. The title to the prop. is on the 1st. (primary mortgage) in which case I'd simply L/O the prop. to the new buyers after the 2nd was paid and the arrears brought current.
If the buyers can (borrow) the amount needed to pay off the 2nd, the arrears and my fee/dwn pymt. totaling about $59k, then they can get into prop. they want to live in rather than trying to get financing for the 1st and 2nd mortgages.
Clif
Hey Rog,
Yes, I have the prop. under a purchase contract with an as-is condition...my exit has already been established since some friends of the owners kids broke into the place and smashed some windows and poked holes in some of the walls, which makes it (NOT as is)or was!)...I have before and after pix. and have shown the owners, plus the neighbors know because they ran them off the prop.
Always cover your $$$
Clif [ Edited by pbodys on Date 05/31/2003 ]
30-love
Unless the buyers on the top of your list can get $50k without securing the loan to the house, you're done with them... Do your best to salvage your relationship with them for the next deal and sell to the second string couple.
next...
I agree with clear2close. If you have another buyer with the funds to close, go to it. He who has the money gets the property.
This sounds like a prime candidate for a short sale on both loans. Might want to track down a short sale investor and assign/birddog it to them. Remember if you do, you get 2 checks, one for the property, one for the buyer.
Otherwise, I'd try to exit as gracefully as possible. At the least, inform the sellers that you're having some difficulty getting a buyer/funding, etc. and that they should be actively looking for alternatives as well.
Good luck, big guy, and hang in there
Roger