Have a Heart -- Protect the Seller

I keep reading that you should never let the seller stay. It’s their HOME! How about doing everything we can to help them if they have an income but were buried by circumstances, such as medical expenses? I don’t normally handle foreclosures at all, but received a referral as a vocational rehab counselor to help in a young woman’s transition from the edge of death back to work, and became aware of her desperate housing and financial situation.

So, I just completed a deal with her where I let her (the Seller) remain in the property. Year old appraisal was a lowball at $410K, prop values have increased 26% the past year. Single mom artist seller (3 teens) in a beautiful 2-acre ranch with a separate guest quarters (total sq. ft 2760), owes $383K, and agrees on a Value of $385K. She has a 1st of $308K with pmts of $2017; a 2nd of $75K, with pmts of $690. Total pmts including PITI: $2718. She is almost $11K behind on her 1st and 2nd mtg payments.

She has an outstanding judgment of $11,800, is behind $1400 on her car, and behind on 4 credit cards totaling less than $6K. Her personal and business checking accounts are overdrawn. None has yet reported her late on her credit rpt and she has a FICO of 530. Sound hopeless enough?

She had her own successful business selling her own artistic creations with endorsements from the world’s #1 crystal manufacturer. She was making over $7K per mo. prior to a 40ft. fall on a mountain where she landed on her face. This occurred less than 2 years ago and she has undergone several surgeries and is an inspiration to all.

Her business was on the way to being a million dollar operation, but her interest is not money. She was near an orphanage in Tibet that she plans to support with her work when she suffered the fall down the side of a mountain. A tree broke her fall and kept her from plunging another 450 ft.

Medical bills have buried her but she is determined to get back to work. She just needs a helping hand. I couldn’t let her lose her dream house. So, I just analyzed the situation. What does she need? $20K+ six months payments. How can I do that safely and protect her rights and my investment?

I paid for a land trust in her name. She is retaining a 70% int and assigning 30% to me, of which I will retain 10% and assign 20% to a co-investor. She is triple net leasing the home from the Trust.

In exchange, I brought her back mtg pmts current (negotiate down to $7600);
Paid the delinquency on her car: $1500
Paid off her judgment: neg. down to: $8000)
Paid her utilities, phone, and her negative balance checking acct:
Placed $16.3K in escrow to pay her first 6 mos. lease
pmts, guaranteeing she cannot default.
TOTAL: $36k

In 6 mos. she will have a perfect 6 mo payment record and her credit score should jump to around 630, She will refi (I will co-sign or sell that right to an investor with good credit) and we will get a new loan paying off the existing 1st and 2nd, and repaying the initial contribution of the beneficiaries. I will remain a 10% owner of the trust to make sure everything goes well. I have an investor ready to infuse her business with $25K.

I put up $12K, plus $950 for half the cost of her trust. I get paid back $15K in 6 months, guaranteed, since we are making the payments. My investor doubles that. All we have to do is refi. I still retain 10% int in the trust, which I agree to waive for just $10K. Saves her a bunch and guarantees that I doubled my money with no risk.

That’s it. You have just seen how to safely invest with a heart, make a real positive impact in someone’s life, and have fun doing it. There is always a win-win situation. Just create it and build good karma.

Da Wiz

Wiz,

 That is very admirable. I too agree that it is much more rewarding to help the HO as opposed to saying "sucks to be you, but i'll take your house". People say that word of mouth is the best advertisement, so what better way to advertise then to have someone you've helped tell someone else to call you for help. Self-generating leads are incredible and a definite moral booster for both the "helper" and the "helpee" (I don't think thats a word  ???). I do have a couple questions though.

-I thought the trust was just a document that you developed by yourself? You said you paid half ($950). To who?

-Also, you stated that you cleared up all her prior debts to get her in good standing. Was this something that you paid “out of pocket” or was this somehow worked with funds from the deal?

-Lastly, this may be a bit off topic but do you ever assist HO’s with loan modifications if they are delinquient?

Again, its nice to see people taking a genuine interest in helping others WHILE creating a win-win relationship. For what its worth (which may not be much, but still) I commend you for your actions. :bigok:

THoward,

Thanks for the kind words. I have all the docs and can easily do them myself but it’s a lot of work and I prefer to have NARS (No. Amer. Realty Services, Inc.) do them as each document is reviewed by their accounting and legal departments, and all I have to do is sign them.

Prior debts were paid out of the $36K.

Da Wiz

This doesn’t happen all that often so I thought I would share it: I received a letter from someone on the forum that makes my experience in real estate very worthwhile.

Doc,

I’m impressed with what you did. You followed most of what Bill suggested to protect yourself in case it turns sour. I feel that one of the rewards of success is being able to help those in need.

I pay 10% of everything I earn in tithing to payback what I have been blessed with, but I think the biggest benefit I get is it helps me keep in perspective that “money isn’t everything”. In the end we will not be judged by how much money we made!

I applaud what you are doing and I pray you are right that this lady will again be sucessful and thank you for what you did. That alone is worth much more than money. And even if it doesn’t work out, because your heart is in the right place, you will be rewarded somewhere else (and it probably won’t be in money). I for one am proud to be associated with people like you. God bless! – DH

Da Wiz

wow -keep us updated on this.