I fell into a good forclosure deal. now what?

Foreclosures, Short Sales, Tax Foreclosures
1

A friend going through bankruptcy mentioned that me the bank is going to forclose on his townhouse. By the end of the night, I had looked at the house, called his agent (just before he was going to put it on the MLS), and now have scheduled time to meet with his agent put it under contract…and I have no idea what i’m doing.

At the end of a cuddlesac of a fully occupied single-family home development, sits 4 townhouses. All 4 new townhouses sold for $110,000 2 years ago. He currently owes $102,000 on his house. He and the agent set the list price for his house at $75K becuase the townhouse next to him went through forclosure last year and sold for $75K at the auction. The agent expects the bank to take our offer, or perhaps counter offer for $80…which will make it easy to flip.
Comparable new townhouses in the area are selling for $110K. Even the cheapest condos are selling for $95K.

I figured that I could place the townhouse under contract, then easily assign it to someone. However, the agent just told me that the bank doesn’t like it when he signs contracts with “assignability” clauses and has been instructed by the bank to re-list it if the buyer is given the option to assign it.

So, what do I do now. I have a few people tentatively interested in purchasing it for $90-$100, but I wanted to get it under contract first…now I’m stuck. please help.

Confused Newbie.

2

Giddy,
If I had this opportunity, I would first compare this
townhouse to the new ones selling for $110k.
( Have they not gone up any in 2 years ? ) (( I would also wonder why two of four townhouse on the cul-de-sac have gone into foreclosure )) If the newer townhouses are smaller or somehow slightly less desirable, I would buy this townhouse at the lowest price acceptable to the bank with the highest mortgage possible, rent it to the friend at a below-market rate for 3-6 months (so he recognizes he gets a tangible benefit from the sale), help him move elsewhere (either with $$ or a pickup or both), and rent the thing for enough to cover the mortgage & expenses for at least 12 months, then lease-option it, sell it, or rent it long-term. Flipping is good under many circumstances, but I prefer to buy and hold at least a year when possible. If holding can be managed, the tax advantage makes it worthwhile to hold for a year, even if property does not increase in value substantially. (Most property does increase in value)
Good luck,
Ray
ps: Where is this townhouse ?

3

Thanks Ray,

Value has gone up by about 5% since they bought it 2 years ago. The four townhouses are built together and virtually identical…in a bedroom community of Salt Lake City

4

I think you have a BAD deal there. You should let me handle it. I’ll straighten it out for you. ;D