Options In Foreclosure
finally after 5 months of searching i have found the place where i can get to the foreclosures when it is still in its beginning stages...so my question is has anyone used an option on a pending foreclosure to wholesale it? my thoughts are to get it under a 30 day option for a small amount and find a buyer in those 30 days but you sellers who are in forclosure risk racking up more debt. is this too risky!?
Good evening Kim,
is this a paid list? or is it through a contact in your network?
thanks
Frank
its through due diligence!
that is exactly what i mean but since they are at the begining stages i will have more than 30 days although i will only give myself 30 days. in pa it takes almost 9 months for the house to got to sherriff sale from the time that the complaint is officially filed. i figure get it under an option for a nominal amount (50$), then try to find a buyer. if i cant then all i lost was $50. or take it a step farther and try to do a sub2 deal.
at that point i ahould have established a rapport with the seller anyhow
Your proposed option consideration seems a bit light. If after the smoke clears if someone wants to attack the option, they may have an argument that $50 is not a adequate consideration to purchase a property worth tens or hundreds of thousands.
Are you looking to sell the option when you find a buyer or are you going to try a double closing?
Try and find a willing seller that has adequate equity such as this. Might be harder than you think. I am a Realtor and I just list/sell or list/shortsale/sell properties in foreclosure. Hard to find one that will not require a short sale.
kimesha,
I would probably offer between $500 and $1000. From your previous post it sounds like the stage where you are getting your leads are what in CA is a filing of a Notice Of Default. This is early in the foreclosure process. If it takes about 9 months from the time you get your leads until the time of sale, you might try a longer option period than 30 days. I think it would be difficult to find someone and close within this period of time. You will have a hard time selling an option with a short time until expiration.
Regards,
Ed
It may sound a little off, but actually in most states $10 is sufficient consideration for an Option.
[addsig]
LOK,
When you say that $10 is sufficient, are there places in statutes or case law that support this? From a contractual perspective I would have some concern that if the seller felt taken advantage of because he/she was in foreclosure, that a $10 option consideration would be an obvious target to an attorney. The attorney would argue that $10 is not consideration for the right to purchase a property for $50K below market. From a practical perspective, how often are you likely to be hauled into court? Perhaps not too often.
I think LOK is right, because you can write contract to actualil buy the property as" Dollar ONE and other considerations". So even one dollar binder is still a binder. I think especially if you add words "and other considerations" , it should be a valid contract.
ashwin,
If other considerations are specified that gives more value, then the consideration is worth more than the dollar amount. Option consideration does not have to be money, it could be labor. My post addressed the situation that the total value of consideration may fall under attack. kimesha was proposing a fixed dollar amount and nothing more for consideration.
kimesha,
Your consideration is irrevocable. You do not give consideration only if you can find a buyer. Your consideration needs to be at risk. You give this for the right to purchase the property under the terms set forth in the option agreement. If your option agreement states that you will give $500 option consideration, your seller should be able to take your check and cash it today. If your option consideration looks like vapor, then surely an attorney could claim there is no consideration.
You might be able to offer less than $500 for option consideration since the chance of it being challenged is not likely, but you are dealing with people who are in financial distress and there is a chance that you will be labeled the villain if someone claims that they were taken advantage of by the big bad real estate operator (you).
I agree with Edmyer, in addition even if you issue and the seller accepts a promisory note , in case you can not find the buyer, you are legally (and morally) obligated to the buyer for the amount of promisory note. But I do not understand what do you mean by the check "floating around" ? also I think the specifics of the considerations are not detailed for the simple reasons that,
1.lot of time it can not be fully specifiedbe casue there could be a wide array of considerations.
2. it can be interpreted and challanged about the scope or legality, by any body from seller, attornies or landers before even the deal has taken place.
2. Buyer wants to keep it to himself, since the potential buyer can not be expected to disclose details of his opportunity for a profit.[ Edited by ashwin on Date 05/25/2005 ]
Kimesha
Is that 9 month time period for Philadelphia County only? Because that is not the rule in other counties in PA, that just might be the exception or just for Philadelphia County. I have tracked other houses in foreclosure and 4 months is more likely the length of time. However, I have never looked at Philadelphia County.
i read it on a foreclosure website that breaks down the foreclosure process for each state. when i went to pa that is the process that they gave me. besides when i go on the judgement website, from the date that the act 6 is filed (which is the complaint) it always sets the deadline at 9 months from the complaint date. maybe i am wrong but that is what i have been reading