House Not Behind Yet
Heres a sticky situation
I work with an older gentleman who is married but is divorcing his wife. She has psycological problems and is in a mental hospital for now. He is the only one working and cant make the payments anymore. They filed bankruptcy 5 months ago to get rid of medical bills but the house was not included.
They have a 1st and a 2nd. They just missed the first payment on the second and will miss the first payment on the first in a week. He said they will not make another payment because there is no more money. He planned on letting it go to foreclosure until he talked to me.
The house is worth about $75,000. The 1st is $44,000 and the second is $38,000. Can I do anything yet since the 1st wont be behind for a while? I told him we will have to wait for now but I am not sure. He talked to a couple realtors that told him he cant list it because there is not enought room for their commission. I would like to help him out especially with such a big second.
Is there anything I can do now or do I have to wait a while?
Why wait? What would you be waiting for? Better for him if he gets out sooner than later. I just sold a house with a couple in the same situation. They were only a month behind but planned on making no more payments (it was also a divorce). This guy would be better off to do the deal with you now before his credit is in worse shape. If you wait, he will owe more in back interest, late fees, back taxes etc. Act now! What are you proposing to him? Sub to? Or something else?
Well I was thinking of a short sale maybe but I dont know if that will work without a foreclosure being filed yet. Sub2 wont work. Very hight interest and payments and its upside down.
Maybe make the deal with the second mortgage holder for the short since they are already behind with that one. See if the 2nd mortgage holder would take less rather than have to deal with it in foreclosure later. Pay the first mortgage off in full. If you are going to attempt this at all you will need to show that you have the funds to do it in place. Show the bank that you have the means to do this. The 2nd mortgage holder may be more willing to do a short because it is the second mortgage holder who will be shorted first anyway. (the first mortgage Co. will get theirs first).
For a first deal this one may be too much for you to handle on your own. Also, unless you can get the bank to take a lot less you may not come out too well. A lot of work for not too much money in the end. He may ow back taxes too. This may cost more than you think.
Bill,
Banks can be slow, but if you present them with this scenerio now, they might be happy to give you a short. It's worth a try now because you would be saving them alot in the long run.
Kelly (WI) Wausau
PS Hey, nice seeing more Wisconsinites!
This seems like a very good possibility of shorting the 2nd and taking the first sub2. Explain to the seller how this will help his credit as compared to the foreclosure. You may have to wait a few months before they will deal. Just wait and see. You should sign a purchase agreement indicating that you will buy the property with the seller receiving zero proceeds. Put a closing date as "on or before January 1, 2004" or such and record what is required for a memorandum at the recorders office to cloud the title in case another investor gets involved.
Work hard and this could potentially be profitable for you. Especially if you are new to this because you will have a VERY long time to put things together.
Quote:
On 2004-04-07 20:18, myfrogger wrote:
You should sign a purchase agreement indicating that you will buy the property with the seller receiving zero proceeds. Put a closing date as "on or before January 1, 2004" or such and record what is required for a memorandum at the recorders office to cloud the title in case another investor gets involved.
Frogger,
Is this legal? I can't say I ever heard of this being done before.
Terry
Hey Kelly
I used to live in Wausau. Whats the market like there now?
I guess I will at least talk to the 2nd and see what they say. Thanks
Bill
It might be a good time to start negotiating with the 2nd mortgage holder. Try to buy the 2nd for under $10,000.00 since they stand to lose everything when the 1st mortgage forecloses. After acquiring the 2nd mortgage you can then start negotiating a short sale with the 1st mortgage holder.
Do I just tell the second they are no longer paying? Will that give the second any motivation to foreclose first? How would that afftect me if that happened?
Does anyone have a phone # for US Bank loss mitigation?
Bill,
U S Bank Home Mortgage
Loss mit # 800-365-5858 ext 7595
Foreclosures same but ext 7258
Since the homeowners file will not be in either of these Dept. yet you will have to do some talking to get it thru their heads.
Go ahead and try to short both, but have low comps, be there to sway the BPO, and make sure you have a long repair list. Unfortunately, even the 2nd may think there is alot of equity for them not to lose too much, but they may suprise you depending on the condition of the property and "internal bank stuff".
Good luck,
Kelly(WI)
I hope those #'s are still good.[ Edited by knucs on Date 04/07/2004 ]
Well the house is in real nice shape. The only issue is that is does not have a basement which you know is very off for Wiscsonin.
If the first forecloses, it doesnt matter what equity there is because the second will be gone right?
The second mortgage holder can bid at the sheriffs sale to take over the house and sell it. It depends on whether the 2nd mortgage co. thinks it is worth it to them to take it over. If they don't don't bid at the sale they loose their portion.
Living in Sheboygan also, as you do, and being an agent here I know that houses without basements around here are very tough to resell unless the price is a bargain. Be very careful to make sure that your comps on this reflect the fact that there is no basement. Most houses without a basement here have to be discounted about 10K less than a similar size and style house. Everyone in this area really wants basements and garages as you know. Keep that in mind.[ Edited by Sandbahr on Date 04/08/2004 ]
Bill,
If the house is in nice shape, Mr. joe "wants to buy a home" might show up at the sheiriff sale and bid more than investors would. The 1st gets paid their money and the the 2nd steps in line for theirs.
Kelly(WI)
Instead of offering a short sale, why don't you offer to "buy" the note from the second mortgage company. In my experience, lenders seem to be more open to this (I believe this looks better on their books since selling a note is pretty common).
Once you have the details worked out with the 2nd, approach the first mortgage holder and tell them you control the 2nd mortgage. Tell them you are interested in purchasing the first and make them a discounted offer.
The numbers can work out the same as if you did a short sale, maybe even better, but the difference to the lenders is that they sold the note at a discount (again a very common practice) as opposed to taking a loss on a short sale.
The first is much more likely to take you seriously when you have the 2nd which will also help with your negotiations.
(good point about the taxes, be certain to do your research, title search, etc. - always, of course)
Good Luck.
Melissa
Bill,
This is prime short sale territory and I don't disagree with Melisa but I'd go to the first and attempt to buy their note at a discount first, rather than the second.
Explain the situation with the buyer, and that they are looking at a foreclosure soon. Attempt to get them to sell you the note at a discount, even if its not a very big one.
Next step, get the seller to give you a quit-claim. Give him small dollars in exchange. Don't take the quit claim and the note inthe same names.
Now the balance of power has shifted. You have effectively sandwiched the second. You can file forclosure as the first and give a deed in lieu as the title holder. Now the second mortgage holder has the option of buying you off or taking a discount. Since they are not going to get paid 100 cents on the dollar under any circumstances they are almost certain to discount.
Melissa,
Now thats the way to go. It all hinges on how that second was created. Is it from an institutional lender? Thats hard to discount. Was it taken back on prior sale of house? Now that is easy to discount all the way to about 10 cents on the Dollar. Was it a personal borrowing? Also easy to discount.
With this note discounted and in your possession you can attend the foreclosure sale and not bid and pick up any overage above the demand of the first. Also if you qualify at the sale (90 day personal loan from a bank, relative, lover, bank robber.) you can then bid up until you reach the face amount of your second, then stop. Please stop.
Go for it. Lucius 8-) 8-)
Yes the second is thru a bank.
Lucius
What if I am trying to help the seller avoid foreclosure? I wouldnt really want this going all the way to sale.
Is there anything else I can do with a large 2nd thru a bank?
Could you explain this scenario a little more in detail.....of "buying note" rather than short sale?
What are the pros and cons?
How would you do it in a trust?
And if you were going to have a simultaneous closing how would that affect title?