Hi
here’s the deal.
Pretty house, worth $245 all day long
seller wants $5k to walk
forclosure/divorce pending
owes $195 on 1st,
$15k in back payments, fees, etc. for not paying mortgage for almost 1 year
Should I try to short sale the extra payments,fees, etc. or maybe Lease option the house.
Great neighborhood, nice house,
HELP, I have a nice rapport with seller.
Linda
Good Evening Linda,
It appears you’ve found a good one. The answer to your question about what you should do, is based on the answers to the following;
Who is the mortgage holder on the loan? Some banks / lenders are much more open to short sales than others.
How much time before the home is foreclosed on? I don’t know many lenders that would let it go for a year.
How long has the mortgage been in place?
Does the home need any work, including updating?
What is the ADOM, (average days on market) for a home in that price range in that neighborhood?
What is the average rent in that neighborhood for that type of home?
How does this home compare to other homes in the area, is the nicest on the block, or ?
What is the appreciation is the area?
If the owner hasn’t made payments for almost a year, and the total due is only $15k, that makes the monthly payments somewhere around $1k, that puts the interest rate at around 5%.
Are you willing to make up the back payments and sign an lease option agreement with the seller?
What is the city and state this property is in?
To offer you a fair answer, please let me know the answers to the questions listed. This has all the makings of a good deal, and with nice homes in nice areas there is usually a way to make a profitable deal.
Go Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC
Who is the mortgage holder on the loan? Some banks / lenders are much more open to short sales than others.
Answer: Wells Fargo bank, VA loan for 5 years.
How much time before the home is foreclosed on? I don’t know many lenders that would let it go for a year.
Answer: she is about to get a notice in the next 30 days for a sale date
How long has the mortgage been in place?
Answer: 5 years
Does the home need any work, including updating?
answer: No, only new linoleum in kitchen floor, otherwise steam clean carpet, thats it
What is the ADOM, (average days on market) for a home in that price range in that neighborhood?
Not sure about that, its a desirable subdivision in a nice family type neighborhood, mid range in price–a by owner down the street had 6 people scheduled for a showing on Saturday,
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What is the average rent in that neighborhood for that type of home?
answer: not sure on rent, hers with taxes would be around $$1600 /mo
How does this home compare to other homes in the area, is the nicest on the block, or ?
What is the appreciation is the area?
answer: one of the nicest, nice landscaping, good curb appeal, fenced in yard, etc.
If the owner hasn’t made payments for almost a year, and the total due is only $15k, that makes the monthly payments somewhere around $1k, that puts the interest rate at around 5%.
answer: notice of forclosure filed on in April of 2006–behind since October of 2005
Are you willing to make up the back payments and sign an lease option agreement with the seller?–
however, Im not sure where to go to get the money for that.
answer: yes, if wells fargo won’t take off some of the fees, etc. she would do a lease option and move out for moving money.
What is the city and state this property is in?
answer: house is in Frankfort IL
My question is: do mortgage companies ever short sale the back payments and their fees etc? Im not asking for much off the loan balance. She owes $195 and house is worth $240k. I was going to ask that the $15-20k be removed.
Thank you so much for answering my post. I appreciate it. Linda
To offer you a fair answer, please let me know the answers to the questions listed. This has all the makings of a good deal, and with nice homes in nice areas there is usually a way to make a profitable deal.
Go Get’em!
Ray Rochefort, mgr. mem.
Good Morning Linda,
With only minor work needing completed and being in a nice neighborhood, you are well ahead of the game.
If the Notice was sent out in April, you have very little time to act. Wells Fargo generally moves quickly in these situations.
If you don’t have the $15k to make up here payments, I would think the next best option would be;
Ask the owner to sign a Permission to Release Information and Limited Power of Attorney. (Notorized is usually best) With these two documents, Wells Fargo should talk to you about the details of her loan and exactly where they are in the foreclosure process. I would consider asking them how much of the current back payments they would move to the back of the loan. BEING A V.A. LOAN IS IMPORTANT, MOST OF THE LENDERS I’VE WORKED WITH DON’T LIKE TO HAVE THOSE TYPE OF LOANS GO INTO FORECLOSURE.
If…the process is already in the hands of the asset manager or foreclosure attornies, you may want to ask them what the minimum amount is to bring the loan current and on what date does the property go to sell.
A property with $45k in equity should not be lost, and with that amount of equity, you may want to consider minimizing your upfront costs by sharing some of that profit with the current owner. I usually stay around 30%, which is paid when the home sales.
Good luck with this Linda.
Go Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC
A property with $45k in equity should not be lost, and with that amount of equity, you may want to consider minimizing your upfront costs by sharing some of that profit with the current owner. I usually stay around 30%, which is paid when the home sales.
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I’m not sure what you mean by minimizing my cash by sharing with the homeowner. I already have a signed release and Wells Fargo sent me their package for a short sale. I was going to have her fill it out, etc. to try to get the $15k removed (which is back payments, etc.) Im not sure if it will work.
If the short sale doesn’t work, how do I get rid of the property? I don’t have $15k etc to make up her payments. I hate to let it go because I don’t have the cash, and Im not confident they will take a short sale because of the equity.
HELP
who do I sell the house to and how?
LInda
Hey Linda,
Unless I misunderstand, you plan on offering to purchase this property on a short sale with Wells Fargo? The lenders I’ve worked with require new financing to complete a short sale, is that something you prepared to do?
From my experience, a big plus in any short sale offer, is the amount of days it will take you to close. If you are offering new financing, you may want to have that in place before sending the short sale paperwork in, offering Wells Fargo the contact information to your lender so they can verify what you’re telling them.
On the other hand, if you want them to move the back payments to the back of the loan and you will begin making payments now, that is more of a re-negotiation than a short sale. The lenders I have worked with will sometimes do this, however they generally won’t dump a lot of their fee’s, especially Wells Fargo.
Do you have a local real estate investment club or a good relationship with a local real estate agent or broker? If so, you may want to offer this deal to them. Or…if Wells Fargo agrees to discount at all or move the payments to the back of the loan, you could offer this home on the market as a lease-option. Just some ideas.
Go Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC
Could I negotiate with Wells Fargo or short sale, and then wholesale/flip it to another investor? I don’t plan on funding the deal myself
You could try. But from my experience, Wells Fargo won’t do much negotiating on a “maybe”. If they aren’t convinced you are paying the amount negotiated in the short sale, they won’t negotiate.
As my buddy Jesse tells me from his college rugby days, “You can’t win if you don’t have any skin in the game.” The greater the risk, the greater the reward. Forgive me if this comes across rude, I certainly don’t want it to…at some point you are going to have to jump in and commit to a strategy. There are so many deals out there, investors like myself won’t pay a great deal unless the purchase price is in the 70% of BPO range, that would mean the investors I work with would pay around $168,000.00 for a property with a verified value of $240,000.00.
I see a lot of investors wanting to find a deal and then sell it at a large profit without having any skin in the game.
Of course, consult you attorney, accountant, real estate agent and pastor before taking my advice, but from what I know of your deal, this is what I would do;
Get on the phone with Wells Fargo and ask them if they will move the late payments to the back of the loan. Letting them know you will start making payments right away. Be prepared to fax or email a list of the things your going to do to the house, new vinyl, clean, etc. Then let them know what the average days on market are in this area (not that they don’t already know this, but it lets them know you know you business).
If they agree to do this, then move forward, talk with the neighbors about the house, place an ad in the paper and even talk with some local real estate agents, there appears to be enough money in the deal to pay out some commission and still come out ahead.
There is still a profit in this deal for you, and from the time it appears you have in this deal, you deserve it.
Go Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC