Subject To...a Little Thin?
Hey gang..close to doing 1st subject to deal. Here are the particulars:
House is in a really , really great area. Area has no problems at all and really growing. House is worth 105k or so, balance owed is 97, payments in arrears are approx 3k. No repairs needed, maybe slight touch up. PITI is just over 800/mo. 8.5% interest. We will try to negotiate a forebearance first, but are not counting on it. House also has unfinished basement, which my partner and I will finish ourselves. Exit strategy is to do a lease purchase. Is the fact that the numbers are a bit thin make this a bad deal? I know the area well and this one is really pretty decent.
Also, while on the phone with the loss mit dept, is it a bad idea to discuss potentially a forebearance and then possibly a short sale if they say no way to the forebearance or modification?
Thanks in advance!
Brian
Only you can answer if this is a bad deal or not?
What is your investing criteria?
No one else can answer it. Time for you and your partner to start thinking about what you are trying to accomplish.
Now, for the basement.
Will finishing the basement put more money in your pocket.
Can you sell for more with a finished basement?
If not then why are you doing it?
If you negotiate a short sale the lender will require you to close where they will net cash to pay off their loan.
You may try to negotiatate something but certainly not a short sale if your plan is to take the property sub2.
Better yet...just catch up the payments and don't even talk to the bank. They certainly won't like the possibility of the property being sold without getting paid off.
Thanks guys for the replies. MY frogger, do you still recommend we avoid talking with the lender if we were thinking of trying to get them to do a forebearance or modification? I was trying to think of a way to get the payments in arrears down as much as possible. I understand that we will probably recoup that money if we do a lease purchase, but was trying to minimize our up front out of pocket expense. If you still think we should pay the $3200 (which will be $4000 by the time this all goes down) and not speak with the lender, then we will go that route.
On another note, I just found out that the house sits on 1.5 ac, while most of the other houses on the street sit on about .25-50 ac. of land. It is not a neighborhood, just a deads end street off a busy road. Could we sell the house on say, .50 ac. by subdividing and build another small property on the remaining acre? I have some good connections in the building industry (I am an on-site agent and know several builders thats will build on your land) and would probably get a great deal building a house, maybe even for cost plus a flat fee.
Thanks in advance.
Brian
suntzu18,
Glad to meet you.
At this point in the deal you are trying to help the folks that own this property and make it a win/win for everyone.
So I would think as a "Financial Advisor" with their persmission you would contact the lender and do a forebearance on the back payments.
Do not mix apples and oranges. In other words see if the lender will work terms on the back payments, do not mention a short sale at this time.
Do not start off with a negative attitude "you aren't counting on it", "count on it" and get the payments put on the back end of the loan or negotiated so much a month until they are caught up.
Once the back payment situation is resolved take off your Financial Advisor hat and put on your Creative Real Estate Investor hat and take the deal Subject To.
John $Cash$ Locke
[ Edited by JohnLocke on Date 05/22/2004 ]
I ll tell you how my last worked out..Got a property 9700.00 in total arreaars.. talked with the bank on the behalf of my sellers seeking a resolution to the impending and growing problem.. Worked out a forebearance for 7700.00 and tacked on the monthly an extra 150.00, and took deed sub-2. i then had the sellers call on the 27000.00 dollar 2nd , at which point it was stated that there is to be no more payments made (this was the sellers statement not mine)..I then contacted the second requesting a short based on the pre-forebearance numbers and that the first will be filing a NOD so could i get a short..the second said no (which is what i wanted) and suggested a discount on the note..they said yes and took a 15000.00 dollar discount with a hardship letter and a hud-1..created 15000.00 plus the existing 20 grand left on the table with very little out of pocket..our original idea on the hud-1 to the second was to put the closing of the 12000.00 60 days out, which the second agreed to..i had some good bites right off and was looking to sell retail before the second note matured..didnt happen but would have been real nice for about 4000.00 out of pocket..I have found that if you work backwards with a house that has several liens it works best with negotiations..hope this helps..good luck..
Regards-Pat
Hey SunTzu (good book by the way) how did you find that deal? I am a newbie, can you help me out? Just want to know how you found that deal and how did you go at it?
Fantastically clear advice, Mr Locke.
Quote from suntzu18: "...understand that we will probably recoup that money if we do a lease purchase..."
suntzu18 and friends,
how does lease-purchase change the eventual bottom line loss from paying off liens and back-payments owed?
Alan