I have a home owner who is 1 month behind in pmt on the 1st mortgage. Here are the details:
ARV $134k
1st loan bal $75k pmt $813 with citi
2nd loan bal $12500 pmt $130 chase
The needs $25k in repairs which includes $12k in foundation repairs.
The homeowner’s wife is really sick and they want to move to CT from TX and needs $10k for moving and other expenses. They know they wont be able to sell it at retail with the foundation issues. They are willing to do a short sale if they could put some money in their pocket.
Would short sale be the best way to go? How would any of you would structure this deal?
In a short sale the selling (defaulting) party can not legally benifit financially from the short sale of the house.
Since the property is worth $134k as FMV you have to reduce the 2nd and probable can do this by talking directly with that lender and telling them that your seller just missed the first payment for one month and because his wife is sick will probable end up walking and leaving the house to them (2nd TD).
Tell them your interested in the property but since it needs $40K worth of work your interested in buying it if the 2nd will except say $5k walk away and let you take it over. (Your exagerating the amount of repairs and cost’s to convey to the 2nd they have an albitross on there hands and your going to rescue them)
Then you need to reduce the cost’s of rehab down tighter to between $15k and $20k to tighten your cost’s, this should have your cost of the property down to around $95k to $100k, then you can probable estimate you could offer them $7500 and still flip it and walk away with $17k for your efforts.
The first is not going to move when the house is worth $135k and there only in it $75k, so there is no sense even talking to them, but the second can probable be convinced to walk away and settle for $5k or less in order to not have the property plopped in there hands and end up walking away with nothing if the 1st ends up foreclosing.
Gold should I get the property under contract 1st before talking to the 2nd lien holder or should I get the 2nd taken care of and then get the contract written up.