makings of another soap opera - advice?

I am working on my first real estate purchase and I think I have run into some great material for a new (dis) reality TV show. I intend to rehab and live in this home, and continue with real estate investments once I get situated.

The house is on a very nice pocket of a decent neighborhood in the DFW area in Texas. Average home prices in the neighborhood are fairly broad, where most of the neighborhood is average in the 120K range and the southern end is in the 150K to 180K range. A similar house across the street recently sold for 179K. Based on my research and calculations, this house should sell in the current market for 150 to 160K, with 20 to 30K in renovations.

The house is not listed and currently vacant.(except for a significant amount of trash inside and out) All of the utilities have been shut off. (Her previous boyfriend had illegally turned them on) The owner is currently living with her ex brother in-law across town (we won’t question that situation) and hasn’t made a payment since June or July. Her loan balance at that time was about 112K and she filed Chapter 13 about two years ago. The loan debt is probably closer to 119K now. The house is not listed as her primary residence, (no homestead exemption on the tax site) however, she does not own any other real estate. Her bankruptcy is in the payoff stage, or post conformation in legalese, so she is in danger of forclosure.

I negotiated a offer with her last month for 123K but she went nuts and refused to close when she found out that she wouldn’t get any of the profit due to her bankruptcy. If I’m able to get my earnest money back, I will have lost somewhere in the range of $500 from that contract due to the option fee (which she quickly cashed) and appraisal. I chose to write the title company and prove that she defaulted on the contract to get my earnest money back instead of enforcing specific performance because “they” (her and her ex-brother in law) stole the pool pump by cutting it off the pipes with a hack saw after the contract was signed and some other minor damages like a broken window have happened since. (They openly admitted to stealing the pool pump saying that it didn’t work anyway, which I had already verified that it did. “He” has a pool at his house, so I assume he intends to use it for that.) They may have done something to the A/C condenser the same day they stole the pool pump because the cover had been removed. The compressor is still there but I now have to assume it is non-functional.

The owner is sadly ignorant and believes that she is not in danger of losing her house because of her bankruptcy. She is looking to put $5K in her pocket from the sale and will not accept the fact that the house is in need of such repair. She is also fairly spiteful of the neighbors since they reported her to the City’s code violation department.

My questions are:
-What would you do?
-Is it possble to negotiate a short sale with the mortgage company previous to the property entering the foreclosure process?
-What for of agreement will I need from the owner in order to negotiate with the mortgage company?
-How long do mortgage companies usually wait before foreclosing?
-How would you convince her that she is in a bad situation and the best thing for her to do would be to sell to me?

Any advice will be greatly appreciated!


Run.   I bought a house from a walking dungheap like you're dealing with.  It was much more trouble than it was worth.  I suggest you wait until dungheap is served with foreclosure.   

Good luck


From what i have been reading, It’s illegal for the owner to make money out of it? I readed that you can try offer her the cost of moving and a month or 2 for her to moving into a apartment?

Please correct me if i’m work


                        Black and White

In a short sale. The owner must be on board with the short sale. The owner must sign papers giving the mortgage co. the OK to give you any information about the property. So you need to have your contract and release form from the owner first.
In a short sale the mortgage co. is letting you buy the property for less than what is owed them. Under no circumstances will the mortgage co. allow the owner that is selling the house to receive any money at all.
Now if the bank gives you the go-ahead on the deal. You need to make sure that they move out.

                             Grey Area

Now if you pay them to clean up the house when they move out. That’s OK. {Even if it just happens to be the same amount as their new rent} And if a couple of your buddies help them move. {the buddies with a truck moving co.} :wink:

It is all about negotiating. You cannot let then stay.
I have heard to many horror stories. That is why you are reading right now. Not to make the same - money costing, time wasting - mistakes others have.



I’m interested to hear what happens. “I intend to rehab and live in this home” My accountant was just talking to me about this yesterday, as I was laying out my REI plan and getting his advice. He said that one way to avoid taxes is to live in the home for 2 years. Then there’s no cap gains on your appreciation. I think this sounds like a great plan for a single person, but I would not subject my fam to constant rehabs…


If you want to buy the house and raise your kids there, buy the house. There is no money in it

house should sell in the current market for 150 to 160K, with 20 to 30K in renovations.
negotiated a offer with her last month for 123K

That means that you buy it for $123k put $30k in it. You have $150k in it. You can sell it for $150k. I would just buy one on the next street over for $150k and forgo the drama.

I thank everyone for the advice thus far.

Ray- My first instinct was to run like Forest Gump, but I think there may be an opportunity here and I want to take it as far as possible, safely. If buying foreclosures and pre-foreclosures was easy there wouldn’t be any money in it, right? The trick is buying it right and not letting this $%@*& (voice over-“wonderful, God fearing woman”) extort any more money out of me.

Vincent- I too remain confused on the subject of motivation for the seller. Can the agreement to pay “moving” or “cleaning” costs be included in the contract or possibly a separate contract? In this particular case, she is already bankrupt and as far as she is concerned, her credit is shot. What motivation, other than money, would she respond to?

Indy- The neighbor called me yesterday and said that there was a constable at the house looking for the owner. I assume he was there to serve the Notice of Default but you never know with this lady. Is the NOD the first step in the foreclosure process? Does anyone have a sample agreement to release information? What number do you put in the sales contract? I was reading another thread on this site that suggested writing “payoff” and then having an addendum that specified negotiation with the bank? Does anyone have any sample language for the addendum?

Straightup- I found a bit of information on the IRS site about the tax benefits of selling your “main home”
link -
Look under “maximum exclusion”

Bluemoon- I won’t attempt to cover the fact that I let my fondness for the house get the best of me during negotiations of that contract… I certainly learned alot about real estate and negotiations during that ordeal. My biggest lesson was that if your current living condition is not on a variable timeline, (which is often the case if you are looking for your primary residence) this may not be the time to buy a house. I was near the end of my apartment lease and I let alot of potential profit go because of it. I am thankful the owner is nuts and wouldn’t close even though that is the best offer she will ever get on that thing. I am now in a much better living situation (thanks buddy) and will hopefully be able to negotiate a short sale with the bank.

Thanks again for reading my litanous rant.

hey im pretty knew to the whole concept of real estate investing. and i have a pretty dumb question which i hope wont make me look dumb. but…what is a short sale? my first thought was that it is something like a flip?
help me out here.

Check out They give a pretty good explination of short sales.

Iwould assume the books are well worth the money?

AllTheNamesWereTak - Look to your left under Investing Glossary.


I give my permission for the release of any and all information to Mr. Bigbucks Garhett regarding my property at ____________________________

Signed- All names on the loan must sign
phone #
S.S.# This is a must.


Does anyone make normal practice of putting “payoff” as the selling price? How does the bank react to it?

U can also look up short sale on investing glossary link on this website. I am new to investing and found it helping me understand the lingo; especially following language in this chat forum. it defines short sale as follows:
Short Sale - A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes

Your accountant gave you good advice, and it gets better if you are in a higher tax bracket. No need to subject the family to rehabs. Complete the rehab and then move.

Where are u from?

Great tip Steve. Sounds good!!



I’ve made contact with the seller again and explained the premise of short sales and offered her $1000 for moving and clean up costs. She is interested (which means she is going to try to get more money out of me) and I am working on writing the agreements.

Here’s what I think I need: (correct me if I’m wrong)

  1. letter to bank from seller allowing the release of any and all information

  2. agreement to pay seller moving costs. A side note on this one is that she wants me to leave the money with her attorney before she will sign the contract… I am including the attorney in this contract as a thrid party and stating that the money will only be released to her upon written notice from me of a successful sale.

  3. Sales contract - This one is troubling me. I have read about writing “payoff” in the sales price block and I have also heard to have the owner sign three contracts with different amounts so you don’t have to keep going back. The other topic I need help with is an addendum stating that the mortgage company will not take any recourse against the current owner or any future owner for the unpaid balance of the loan. I really need everyone’s help here. Any advice would be much appreciated.

My game plan is to get the first two agreements written and signed, call the mortgage company to be sure they are interested in a short sale and then write up the sales contract. Any ideas?

Sounds like you need a good realtor or a good lawyer… you could be on real shaky ground with this one.

Is the property in Arlington Texas, between Fort Worth & Dallas? right?

Ok, so I convinced her to sign the Auth to release, (thanks for the verbiage Indy) and I wrote up a contract stating that I would pay her only if I close on the house, she returns the pool pump and removes the excessive amount of trash from the house. The negotiations went well this time (she hasn’t freaked out yet) and I came out on top. I am paying them about $1700 but I will be saving alot by not having to buy a new pool pump and paying for a gigantic dumpster. (or a haz-mat suit for that matter) I have faxed the release form to the mortgage company and it will take 24 to 48 hours before they can talk to me about the loan. I have been dealing with the Bankruptcy department so far since they haven’t recieved the court doc releasing it from the bankruptcy so I am working on geting that from the owner today. (The owner is not the most organized person when it comes to producing paperwork) I am going to try to get it from the bankruptcy trustee during lunch today. At least the first step is out of the way and I’m making progress. 8)