Pre Foreclosure Deal
Hey Gang
Got a lead on a pre foreclosure in Brooklyn New York for them NY, NJ investors. Property is being foreclosure by 1st has a 2nd as well. Here are the numbers
1st
SFR/ Rented with tenants not making payments
FMV- $220,000
OWES- $166,000
PITI- 1,498 AT 6.45%
The $ 166,000 would be the payoff amount. If we wanted to bring the mortgage current we would need $23,000. Which is pretty hefty for a tenant buyer to place on a lease option.
2ND
OWES- $23,000
PAYMENT $250 PER MTH AT 6.67%
IN ON THE PROPERTY WITH BOTH LOANS $189,000
I know the numbers are tight, but I feel we can play with this. Any suggestions on what strategy to use.
I would think I can most definitely try a short sale here. Owner says 2nd had mention to her they would consider that.
I also figured maybe I can just put a option to purchase on it and market the property as owner financing and sell it to the retail buyer , but time might be a factor with the owner just filing for bankruptcy.
She wanted to slow the foreclosure process to see if she could get anything done to get rid of the home. I also feel I can go sub 2, but not sure if that is the way to go.
So anyone with any ideas on best getting this deal done. I would appreciate any advice or suggestions.
I have a meeting with the family that is renting the home tomorrow to look over the property.
The owner lives South Carolina she left New York about 13 months ago.
Best Regards,
eliteprops
Anyone
No one had any advice or strategies...
Here are a few (but not all) options.
1st and 2nd mortgage is $189,000. That is 85% loan to value.
The first mortgage won't discount the note since it's already started the foreclosure process and it going to get either it's money or the home.
At 85%, I'd walk away from this deal. There's no profit.
OK, Here's another scenario
The second mortgage will FOR SURE discount it's note (probably by 50%) but it depends on the mortgage company.
If you want to make a quick buck, you can purchase the 2nd at a discount and then pay up the $23,000 on the first and then you can foreclose on the property and hope someone bids. Then you will make the difference between the discounted price and the price of the note. The drawback of this is you'll need lots of cash.
If someone bids at the sale, you get the difference between what you paid for the note and the current amount of the note.
If no one bids at the sale, you just purchased a home for 75% of the Appraised Value PLUS whatever you paid for the second mortgage.
Ok, so let's go to another scenario.
You can outright own the property. You can make the back payments, do a subject to on the first, get the second discounted and have her sign over the home to you. If you get the second discounted down to $0 you're still at a 75% LTV. There's not much room in there for profit since you'll have to spend money doing cosmetic repairs to make the home pretty for sale, you'll need to make all of the back payments on the first, you'll need holding costs (paying the first mortgage) until you actually sell the home or you do Lease Option.
OK Let's do another scenario
You can lease option the property from the owner and try to sell the property yourself. Is the property is 100% perfect condition? Only then will you be able to get 100% of what it is worth. If it isn't in perfect condition (most homes need paint, carpet, etc.) then you will have to find the money to do all of the rehabbing of the property. AND if she isn't currently making her payments, she obviously needs money. She might just take your check and not pay the mortgage and the home will be foreclosed on anyway. So, all of your money spent on making the house pretty will go down the drain. Also, once she goes into bankruptcy, she will have to petition the courts in order to sell the house. Buyers might be scared away by that.
OK, Let's do another Scenario
If you don't want to put up any money, you can birddog the property to another investor. The problem with this is 75% Appraised Retail Value is the lowest you can get with this property and most investors want 65% APR minus repairs.
Final Scenario
Find someone who purchases second Mortgages (put an ad in the newspaper or something). Make a deal with the 2nd mortgage company. Your profit will be the difference between what you pay for the mortgage and what you sell the mortgage for.
Hope This Helps (or at least gives you more ideas),
Mrs. Meltzer
Mrs Meltzer
Thank you for your advice and strategies excellent. I was thinking that the second would short sale , but not the first because its about to go to auction and they'll get the house and be able to recoup there money.
I will look at the other scenerios thank you very much for your response.
Best Regards,
ELITE