What Would You Do With This Deal?
OK- I am brand new, and don't even have the contracts I need yet, but I have a friend that is 60 days away from the trustee sale on their house. It has appraised at 230K- been on the market for several months with no takers at 220K. She says they have 205K owed on their first and only mortgage.
I am not sure what they owe the bank in back payments and penalties, but lets assume 4K.
What is the best way for both the seller and myself to get a win-win on this deal? I am thinking it is a bit too thin for a subject-to, but not sure?? Their current interest rate is 10%!! Is a short sale the best way to go? Would a bank think this is too profitable to accept a short sale?
I was thinking a subject-to with none of my own money, and then a lease option to someone else with @3% down... for a purchase price of @ 235K, but their current PITI must be astronomical at 10%- not much room for profit on the montly lease...
Ideas?
Jeez....... fordecan
Doesn't sound like a shortsale situation. L/O sounds better, what is the rate of return for the area. Sounds like a good deal for L/O. I would approach that property with a L/O and cover myself with a subject to clause. Dont get caught in a spot where you are committed to anything. Good luck Let me know how it goes...
Quote:
On 2003-12-29 15:22, fordecan wrote:
OK- I am brand new, and don't even have the contracts I need yet, but I have a friend that is 60 days away from the trustee sale on their house. It has appraised at 230K- been on the market for several months with no takers at 220K. She says they have 205K owed on their first and only mortgage.
I am not sure what they owe the bank in back payments and penalties, but lets assume 4K.
What is the best way for both the seller and myself to get a win-win on this deal? I am thinking it is a bit too thin for a subject-to, but not sure?? Their current interest rate is 10%!! Is a short sale the best way to go? Would a bank think this is too profitable to accept a short sale?
I was thinking a subject-to with none of my own money, and then a lease option to someone else with @3% down... for a purchase price of @ 235K, but their current PITI must be astronomical at 10%- not much room for profit on the montly lease...
Ideas?
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Based on the approx balance due...205k @10%=1800/month plus taxes (ada county-ouch!)and insurance = 2,100 month.
Trustee sale....# months x 2,100 + penalties... Give me a call chris, you got my number!
There is no way for the seller and you to both win. The only way for you to get any padding is a short sale, and in that scenario the seller loses, kinda.
If you can't short it, walk away. You said yourself that its been on the market for several months at 220k with no takers, meaning its not worth 230k, and most likely will not sell at a l/o at 235.
Knowing when to walk away is priceless.
Thanks for everyone's input- Dave, I'll call you tomorrow.
I have just been reading Finkel and Conti and they bascially state that you should always sign up a deal and then do your due diligence - which means using an out clause just as pejames indicates... Anyone else use this philosophy?
I will reply to this thread next time I talk to the sellers........ wish me luck!
Excuse me if I may be wrong about the type of process, but from what I have seen in the few foreclosures I have seen is that there is generally about $15K-$20k in penalties and fees charged by a lender dealing with a foreclosure. "If" this is the case then they might have any equity left when you get the mortgage payoff letter.
Best of luck, I hope this helps - this foreclosure stuff is "brand new" to me.
Respectfully,
Phil
See my profile for contact information
one more thing to add....
The bank may want to "re-qualify" the borrower if payments are made up. I do not know how common this is, but I have read here on TCI that this has happened. I would call the bank and make sure I knew exactly what would be needed if the loan was brought current.