I have a motivated seller who is in the preliminary stages of forclosure. She wants to sell. I have no money and I am not sure what to do. She owes $297,000 and the house was appraised for $460,000.
Someone suggested a wrap around mortgage. I am not sure what that is and what to do.
Please advise. How do I take over this property.
Thanks for those who reply
Howdy AngieNY:
What are your plans for the property? How much work does it need? When you say was appraised at $460,000, how long ago and is it still worth that amount today and how long will it take to sell at that price? What are the comps in the area and how long were they on the market? Once you know these details and you have decided that you can make some money considering all the closing costs and holding cost and resell costs if you plan on reselling then you can decide how to buy the house. If the seller has to have cash and will not let you assume the loan (option 1) or do a subject to deal (option 2) or do a wrap ( option 3) or some other creative financing then you may have to get a new loan from a hard money lender on your bank or mortgage company. The latter taking longer but costing a lot less. You will need to add these costs to the project costs as well.
A wrap is where you give the seller a deed of trust or mortgage where you agree to pay them payments and they in turn agree to make payments to their mortgage company. Along the same lines is subject to wher you just agree to make the payments in the name of the seller directly to the mortgage company but do not let them know that you have bought the property and pay them off when you have a new buyer for cash. Very few mortgages these days are actually assumable where you let the mortgage company know you are the buyer and they agree to let you take over the loan and make payments directly to them in your name. You will more than likely have to qualify for the loan if possible.
This is really an expensive deal too. You will need to be able to pay the $3000 plus payments until you can sell the place plus come up with a down payment to the seller of some amount and pay the back payments to the mortgage company plus fix any repairs. I am just guessing $40 to $50 grand could be needed. Quite a big risk for a first deal. Make sure of the comps and your costs before risking such big bucks. Maybe get a mentor to help double check your figures.
Hope this helps some.
I am not planning on holding on to the house. I want to sell or assign the contract. The house was appraised in July 2004.
Thanks