APOLOGIES FOR THE LENGTH, BUT WANTED TO INCLUDE ALL RELEVANT DETAILS.
Hi, I posted earlier about deficiency judgments - a separate issue and thanks for the feedback there Judd!
I’m now looking for some advice about how to move forward. I am considering making an offer on a pre-foreclosure property for it to be my family home (ie. not just an investment). It’s going to have to be a short sale, though, I don’t think it’s worth what is owed. They bought it for $500,000 2 years ago, and have 2 mortgages on it - $400 and $100. Property market has weakened since then - prices starting to fall a bit, but not collapse. The house seems to be structurally sound (10 yrs old), but needs complete repaint, all carpets replaced, and a few other minor works. Hopefully, I am right - getting it inspected tomorrow to confirm.
The primary lender is foreclosing. They sent the owners a letter saying the property would be auctioned last Wednesday (I only found out a couple of days beforehand), but then sent another saying they had til 9/13 to make the payments. I couldn’t find any evidence of the auction, so it seems the bank unilaterally decided to give them a bit more time (it makes no difference to them though). The owners are represented by a realtor who is a bit of a shady character - wanted me to pay him for information about the auction (info he never had). The house has been on the market 3 months (1st 598, then 548) and he’s done practically nothing to market it. But they say we have to deal with him.
My questions are:
Given that we are novices, and given the shady realtor, is it worth hiring an agent experienced in this kind of thing to hold our hands? We could really do without the expense (presumably we’ll still have to hire an attorney anyway), but if it’s essential, it’s essential. If it’s not…
We were originally thinking of a slightly higher offer, but now we’re thinking that if we offer $410,000 to the primary lender they will buy in (the deposit on the auction that never was was $41,000 @10%, so presumably there are arrears/fees in addition to principal). Then we would hope that a nominal offer (couple of $k) to the 2nd lender will swing the deal. At the same time, though, a BPO could yield a significantly higher value (depending on how (in)sensitive the B is to the cosmetic condition and the direction of the market right now). I’ve read that the BPO is crucial in whether the lenders decide to go to auction, but in this case, with the secondary lender losing out rather than the primary, is it still the case?
Should we do a title search before making the offer, or can we make it contingent on satisfactory title?
Say we reach an agreement with the banks on a short sale - then what happens with the owners? What if they don’t want to leave the house? Would we have to evict them (a situation I would REALLY want to avoid)? What if they decide to trash the place? I don’t think these scenarios are likely, they’re good people, but difficult circumstances make people unpredictable.
Feedback SERIOUSLY appreciated!