I have my 1st opportunity that looks promising. The house is going up for sale in 2 weeks. I dont know the owner but I have family members that do and they said they would probably be willing to listen to anything I had to say.
Now here’s where I need advise…What I’m considering is bringing their mortgage current and then have them sign a 2nd mtg. promisory note equal to the total amount of equity in the home.
Home value is about 165k. They owe 117k and I would have to shell out right at 10k to bring 1st mtg. current. I would have then sign a 2nd mtg w/ me for $48,000.00 and then we would work out a payment that they could make…w/in reason for both of us ofcourse. So I have 48k in equity thats just been assigned to me. If they dont pay, then I’ll forclose. If they dont pay the 1st, and it goes back into forclosure then I get the house at the sale…I think…
Does this sound like a good Idea?
thanks for any advise you can offer!
Is it your intent to forclose? Is it your intent to receive 48k for 10k of funding? Just curious.
Jeff
Skydive,
No, this doesn’t sound like a good plan to me. If you want the house and the equity, then bring the mortgage current after getting the deed subject 2. Before you do anything, you need to be sure that your state allows you to bring the mortgage current at this point in the process. In many states, you would have to pay off the mortgage to stop the foreclosure.
Even if you can bring the mortgage current, what makes you think that the owner can pay you when they can’t or won’t even pay on their mortgage? This is risky at best.
If you followed your plan and the 1st mortgage had to foreclose again, you would NOT get the house (unless you’re the high bidder at the auction). The house would be sold and the proceeds would pay the first mortgage along with all their fees, back taxes, etc before you get anything. Depending on the sale price of the house, you may get NOTHING (not even your $10K back)! People buying at foreclosure sales are looking for a bargain and these sales often don’t even bring what is owed on the 1st mortgage.
Good Luck,
Mike
thanks mike. Yea I guess I got a little ahead of myself. So basically, If I can bring it current then I should get the house sub 2, then lease it out…? OR just get it sub 2 and then rehab and either sell OR get it sub 2 and then wholesale?
I know a guy who does the 2nd mtg after he gets the mtg. brought current. If they dont make his payment then he forcloses. At this point either the 1st trust buys him out when they find out HE’s filed the NOD or the house goes to sale and the bidders are bidding on a 2nd trust. As long as the bidding goes higher then what he initially put into bringing it current (say 10k) then he wins. If it does not go that high then he gets the house anyway. He’s still only out of pocket the initial 10k or whatever it was. Sure there is still a 1st mtg. on title that needs to be paid off, but the home has at least 30% equity in it or the deal doesnt get done in the 1st place. THe end result is you get a house but 10k if you decide to wholesale OR you pay off 1st and you still have 30% equity for profit margin.
I think this is how he does it…Does this sound right to you?
thanks!