Question for all those with more experience than I when it comes to purchasing a property that is going into foreclosure. I have my eye on a sfr that is due to go to sheriff sale in the next three weeks. According to the local sheriffs office the balance owed is 178K. The comps in the area are 375K to 550K for the same property. I would do a title search and buy title insurance to make sure that ther eare no other incumberances on the deed so I can get a clear title. Is it as simple as negotiating a price with the owner and getting the property under contract with earnest money down to stay the foreclosure proceedings? The upside to this is very high as it is beach property.
Beware when you buy at the steps. You become responsible for all liens on the property which may not show up until the last minute. Also, if the property has that much equity then the mortgage company will more than likely bid on it and win. Sometimes that the best way to buy. The bank takes the liability of all other encumberances then you can buy direct from them…in some cases for less than they paid for the property.
Thanks for the reply. What I want to do is negotiate a sale of the property with the current owner before it gets to the auction. I would offer the owner $$$ amount above what they currently owe so they don’t walk away empty handed. I am interested in staying the foreclosure proceedings and just wanted to know if this is the appropriate way to do it. As of right now the bank does not own the property and it is still in the owners control.
you have to find out all associated fees with reinstating the loan and also if you can assume the loan, you must also find all outstanding liens on the house and talk to each lien holder to see if they will either release the lien or take a lower payoff on the lien amount.
to do the above you have to talk to the current owner and get them to sign some release papers so that you can get the mortgage information. Always make sure you have all the correct numbers on the fees to reinstate the loan and assume it.
Unless you get the loan reinstated and pay all the fees, back interest, payment, and legal fees, I dont think you can stop the foreclosure.
There are a few ways you can buy directly from the owner. Most seem to be reluctant to let property go for barely over what they owe on it so being creative is the best approach.
If you could buy the property subject to (current mortgage stays in place) then that would save significant dollars in closing costs and if they have a decent mortgage it could save considerable dollars over the long term in interest. If this is the case then make them an offer to buy it by catching the payments up and keeping the mortgage in place. If you plan on keeping the property you’ll need to work out a payment to them for their portion of the equity over time. If you are reselling the house then your contract could stipulate that you each get your equity share at the sale of the property.
If you do it this way make sure you put the property into a land trust and the contract between the two of you into a personal property trust so you are both protected.
As an example if you agreed with the seller to buy subject to your equity split could be 60/40 or better if you can negotiate it. Then in 6 months the house sells for $400K, you pay off the $175K and you take $135K and they get $90K. You can also hold a second mortgage for the buyer and make income on the loan after paying off the $175K.
Another way to make your money and have the seller keep the house is buy having them sell you the property via owner financing then they could sell the note to a note buyer. Your credit would be checked but nothing would go on your credit report. Then you couls sell the property back to them in exchange for a lum sum payment when the note buyer buys the note. Normally a note buyer will charge 5% - 12% for the buying the note. What a deal when you look at what closing costs normally runs and that this debt is not on anyone’s credit report.
If you need help with the transaction let me know.
Okay. Thanks for the input. You have given me alot to think about.
My thought was to offer the owner say 50K over what thery owe as that should catch up the fees and give them enough to pay off the mortgage and still walk with some money in their pocket. Is this doable? I understand that alot of homeowners do not want to let go of the property but if not they will lose the property altogether. Case in point: I was looking at another beach property that went to foreclosure last month. Owners had an outstanding balance of 185K and the house went at auction for 390K. Comps in the area were going for high 600K!!! Tried to locate owner prior to sheriff sale but had no luck. Somebody grabbed a nice deal there. :o
To answer your original question…No, having the property under contract will not guarantee the lender will stop the sale. There are a ton of factors that the lender will consider…How long has the property been in foreclosure? How much time before the sale date? Is the buyer paying cash or financing? Better be cash that late in the game, and you will need to provide proof of funds. These are just a few.
There is no law(local,state, or federal) that states how or what a lender can bid at auction. Lenders do not bid higher than their “cost” in the propertry because they do not want the property back. Lenders goals are to get rid of their REO inventory, not add to it. You will see lenders bidding as 3rd parties on properties, when they are the 2nd lien holders and they are trying to recoop their loses. I think almost every time I’ve seen this happen, someone within that company made a bad decision. Another result of a bad BPO.