Have One On The Hook... Would You Take A Look?
77K owed on first
Principal & interest payments $583 per month (loan not structured with escrows for tax and insurance)
tax $600 a year and insurance $333
Seller 4 months behind and recieved first default notice from "fairbanks capitol" a subprime lan service company. The seller thinks the loan is with them, but I don't, I did a little research and I think they just service them. They employ about 2500 and are supposed to be crooks.
Home worth $105,000 to $110,000 and could use a $2500 facelift. I have not had a city inspection yet,but this will be ordered in the morning. I don't want any suprises.
My RE lawyer does not think I can make enough money on the deal, but I think he is wrong.
Seller needs about $1000 up front to walk away and they would also like a few thousand on the back end when sold.
I was thinking about going with a contract for deed and fix and sell. Keep everything quiet.
Or contract for deed and call the bank to try to discount the mortgage if I bring in new financing. Lawyer thinks I would never get that off.
I was also thinking about "subject to", but have neever done it and would be alittle confused about how to put it together with the four months that are behind and everything. I mean I think with subject to you are trying to stay quiet, but someone would need to call and clean these back payments up so things don't go into default.
Any feedback would be great, my sellers will do just about anything I tell them.
i think the first thing to think about is, is your attorney a real estate lawyer? if so, ask for more constructive criticism and not all negatives. you should determine if there's enough money in it for you. if he doesn't specialize in real estate law, i say run what you want to do past one that IS. can't let people talk you away from a deal.
next thing is i'd get the deed and just not record it yet - so it's up to you if you want to pursue it, you're good to go. of course, i would try to get it with no deposit money first. then, like you said, try to short the bank (sounds tough tho, since they may have a bit of equity). either way, if you can find the money to proceed, by all means, go after it!
good luck!
Your attorney is probably correct. You are not likely to get a discount with the equity you describe. Your numbers don't look bad to me. Why does your attorney think you won't make enough money? I guess that one cost issue is how you plan to sell. If you are going to turn it quickly a sub2 or contract for deed seem reasonable. John Locke's material on sub2 transactions seem to be the TCI choice.
Thank you for looking at this...
I would love to try the "subject to", it just sounds cool. I've done so much reading on it and my sellers would do it. I already asked them.
I am a little chicken on doing it, because four months behind = $2332 I need to have caught up plus the so-called "U-haul mony" another $1000. So, I would have$3332 in it of my own money, not to mention my payments that will start to keep current and what if I could not keep it from going into forclosure and they dump it at the courthouse or DOS clause me. How much time would I have to combat this horid scenario. Don't get me wrong, I really want to try this... I have the itch!!!
Tell me more. I would love to keep this as risk free for me as possible. What are the major problems that I need to keep in mind? This option stuff is a little new to me, I am a buy and hold guy that is a landlord / rehabber doing all section 8. But, I need to get in the game a little further here. This is a prime opportunity (sellers so motivated), but I don't want to screw it up.
Entry
Subject to or contract for deed not recorded......cast your vote!!!!
Exit
Sell through agent, FSBO or lease option / rent to own........cast your vote!!!
I'm listening...............
thanks again
Wow! New information.... this puppy is going to the steps in two weeks. The seller is faxing me all the info and some new info is being aquired.
new info #1IRS personal tax lien attached to the home for about 6K
new info #2 !st mortgage pay off turned out better than seller thought. The real # is 67K for pay off + off course the IRS leins of 6K
Major new info #3 is of course this puppy hitting the steps in two weeks
Guys common, what the heck do I do?????????? I gotta do something and I have my attorney ready to draw up what I tell him. Sellers are ready to do anything. This should be a slam, but I'm having major brain farts in all the excitment. Can you throw out some suggestions TCI, I need your help!!!
I don't see how this can go to the steps in two weeks if the owner actually only recieved one notice. You don't have enough time to short it and I doubt you can work out a sub2 in that short period of time. If it indeed goes to the steps in 2 (Verify this with the county), the best option would be to have them file BR which will hold off the sale for a bit.
Of course the other option is to walk away....
[addsig]
gtrzndrums,
Since you asked me to take a look at this deal, no problem in doing so.
It seems at this time you can bring the loan current, I am sure there are some attorneys fees involved at this point which could be heavy that you may not have take into consideration.
In a subject to deal you would get the deed, however you would not do this until you have a letter from the LSC that you can bring the loan current if the money is sent in.
Your seller would have to write the letter at this point, now let's say that you can bring the loan current and you have done your due diligence. What do you plan on doing with the property once you have it? This has a great bearing on whether is is a good deal or not. Let me know.
John $Cash$ Locke
Cash -
I would run an ad for "rent to own". I would go for 3% down non refundable down payment and have them sign a lease for $750 rent with $50-75 of that going towards down payment.
I might also run a FSBO ad at the same time to see if I could squeak out of it nice and quick.... might even run "seller will take small seconds or help closing or "wish list allowance"
Truly John... I don't know what to do.
gtrzndrums,
There is not much since trying to run you through the paperwork you will need to do a Subject To deal and explain how it all fits together to close the deal at this juncture in your proposed deal.
First you will have an outlay of cash, so rent to own is going to put you in the hole starting out in the deal. You will have renters basically in the property.
I would rather see you sell this property with a Contract for Sale, this way you can re-coup your initial cash outlay up front.
You will find that by getting a good down payment the buyers who really feel they are getting the American Dream are more likely to take pride in their property and make improvements to the property.
Add a 2% interest pack above the current interest rate for a nice monthly cash flow. You can also check what the appreciation rate is on the property and add this to the selling price.
I base my deals where the buyer re-finances within a two year period. The appreciation added would be the percentage increase during this time period.
I would forget about giving the seller anything but U-Haul money to move out. This is another method that must be learned on how to do this.
You want the seller completely out of the deal before you come out of your pocket with any serious money, like out of the house with a signed deed before you pay any back payments or other fee's involved.
I have given you some ideas, but as far as telling you everything required this post would be far to long to do that.
You are going to find along your career path that several different methods of investing pop up, it is the wise investor who makes the investment in his creative real estate investing knowledge to be able to a deal when it show up.
Maybe there is a Subject To investor in your area that would be willing to walk you through this deal, of course for a small percentage of the deal. Just make sure they are really an investor, not someone who watched the real estate investing commercials on TV and now they are one.
John $Cash$ Locke
John,
I would like to thank you for your input on this deal. You have given me great pointers and tips in the past and present, it's guys like you that keep us coming back to this site. I'm glad to know your still active here @ TCI.
Thanks,
GTRZNDRUMS