An out-of-state owner contacted me about a house she’s had listed with a realtor since 12/06. The listing expires 8/31/07. She’s been receiving letters from the bank because she’s missed payments - about $4k behind. She has not received a notice of trustee sale and is desperate to get rid of the property to avoid foreclosure. Apparently, she had a messy divorce and her ex-husband left her with the child and most of the debt. She currently has no income, so she had to move in with a parent.
Here are the numbers:
ARV - $240K
1st mort balance - $171K (6.5% adj)
2nd mort balance - $50K (6.75% adj)
Mort payment - $1800/mo (PITI) (property won’t rent for $1800)
Arrears - Approx $4K
Repairs - None needed according to seller, but I’ll figure on $10K
I was going to contact the realtor about working out a deal to release the seller from the listing agreement, but it seems like it would be fruitless at this point to do that - I wouldn’t be able to take it subject-to at the mortgage amount and make a profit. My plan instead was to tell the homeowner that I would be able to attempt a short on the second once the listing expires and she receives a notice of sale, then I would take over the first subject-to (she’s willing to allow the payments to be taken over).
What would you advise that I do in this situation?
Thanks.
P.S. She did mention that she was looking at filing bankruptcy, but she would like to avoid doing that because she had 750+ credit before this all happened.
Looks like your best option is trying a short sale. Her situation will help build your case. Also, having it listed on the market and not being able to sell it will also help.
If I were to write a contract for this deal, how would I write it up so that I don’t tip off the second that I’m taking over the first subject-to? I was worried about the second contacting the first and the subject-to being made known to the first.
You cant take the first subject 2 until you get of the second. Once you get rid of the first, you can bring the first current. Need to notifity the second that they will lose out unless they deal with you. THen negotiate the debt away
I don’t see much of a deal here. You might be able to negociate with the 2nd mortgage and get them to cut the mortgage in half. But the 1st probably won’t budge much. But even with that all you have is
$171,000 1st
$ 25,000 2nd (half what is owed)
$ 6,000 closing cost
$ 4,000 back pmts due
$206,000 Total + carring cost for you + any work needed (there always is some work needed) = NO DEAL
You can’t rent out a $206,000 house, and you can’t flip a house if you didn’t do any rehab work. Even if you seller finance and sell the note, you will lose money. There needs to be a motivated seller, and equity. This place has a motivated seller, but no equity.
That’s a pretty tight deal, but you might be able to swing it if you get the second negotiated low enough. I can help you with the short sale, pm me if you’re interested.