Hi, I have been contacted by a seller who’s home will be sold Nov. 2. His mortgage is $387k, total judgement is about $418. Home is listed at $525k, but he paid $412 June 2005.
He is very flexible and wants to work something out, but since this is the first one for me, I don’t know what my options here are.
I can’t afford to get a new loan or even pay off the back payments & expenses. Is it too late for a short sale?
I don’t think it is ever too late for a short sale. I think that a reasonable offer will postpone the auction.
However, this does not seem to be a good candidate for short sale. Assuming that it is priced to sell @ $525K, then there is a decent chunk of equity. “Subject-to” might be a good approach.
Hi, I thought about subject to, but how do I pay off the difference? Will putting this home under contract postpone or stop the sale which I search for a way to finance the back payments?
Can sometimes get a postponement from the Sheriff. Possibly can file bankruptcy and continue to market til house is sold. Also, ask bank who is foreclosing will they voluntarily postpone Sheriff’s Sale?
I am not sure how to ask Sheriff to postpone the sale, but probably worth a try. Bankrupcy filing is the worst option here and I would not suggest it.
Here’s what you can do. First of all - drop the price to whatever you/owner/his broker thinks it needs to drop to SELL and do it today. There is a lot of room between 420K and 525K. Get it under agreement - this, in my opinion, will cancel November 2 auction date as any bank will rather wait to get his loans paid in full with all interest. Generally speaking - this is probably the best option for homeowner from a financial point of view.
Second option - refinance. Not sure if some bank will be willing to do that for a property in foreclosure and an auction coming up, but something to think about.
For subject-to, you will need to bring the loans current. Not really sure how else it will work.
Perhaps someone expereinced in this deal will shed some light as to the details?
You are missing some cruicial info in your post for us to help. What is the ARV? Any necessary repairs? What area is this? This owner doesn’t seem too motivated if he ownes $418k and he is asking $525k, especially since he bought it for $412k a year ago. Did he get a good deal on it when he bought it, or has the market appreciated that much in your area, or both? Or neither?
A $500k house would sit for a long while in my area, but your area it may be different, depending on median home prices, and such. This fact can help (or not) you with negotiating with the bank.
Hi, thanks for all the replies.
I believe his asking price is way too high. I haven’t been out to see the house yet, but from talking with the owner, it seems to be in very good condition, but may need updating.
The market here, in Northern ILL, far NW suburban Chicago, has gone up a bit since last year, but not that much. The homes surrounding his sell in the $400k-$600 range, quite a spread. His home was built in 1978, there are new ones within a mile selling in the upper range.
With the auction 2 weeks away, I don’t think I’m able to help him, especially since this would be my first preforeclosure deal.
Chris,
If you are not planning to do any kind of deal, you should:
The bottom line: the owner is either going to lose the house and most likely all equity or can probably walk out with a very decent amount to start fresh. BONUS: no foreclosure on the history.
I suggest you be a responsible investor (whether it is your first or one hundred and first deal) and help the owner even if there is no monetary compensation. Perhaps you’d be interested in giving this lead to someone on this or other forums, who will seriously consider it and is able to put something together in such short period of time.
Best of luck!
Hi,
I have contacted the seller, thanked him for the opportunity but I wasn’t able to help him. He did have other investors look at his home previously. I also referred him to a “short sale specialist” in my local club.
Thanks for all your responses!