purchasing a home before they foreclosue

Foreclosures, Short Sales, Tax Foreclosures
1

Here’s the situation
Just getting started and working on my first investement
I got a guy (Kevin) calling me about the Rent-to-own/Lease Option programs that I have advertised. Kevin is currently renting a house and he knows the owner of the house is going to enter the foreclosure process and Kevin would like to buy it through my rent to own program. After several phone calls with Kevin, he finally gave me the attorney’s name and number who is handling the case. I called the lawyer and found out that the owner is Kevin’s significant other (thought it was weird that he never mentioned that to me before). The lawyer said the current owner has filed chapter 7 and has no interest in the property. The lawyer also said that this situation has been going on for a while now (over a year). I asked “doesn’t it take a 3 to 4 months for foreclosure to happen”, he replied, “they have good lawyers”. He said something about the trustee wanted nothing with the property and the property will be auctioned to the public 45 to 60 days because no one else wants it (I didn’t understand that). I also found out that there are 2 mortgages on the property, one for 130k and another for 25k.
I then called Kevin back to see if I could get more details. Kevin said his girlfriend hasn’t made payments in at least a year (maybe 2 years) and in order to bring everything up to date the bank wants about 20k in cash and there payments will be back to $800 per month. Kevin’s girlfriend ex husband is still on the mortgage but has no problem signing a quit deed claim. Kevin also said he spoke to the bank of the second mortgage and they have already wrote that loan off. They told him they will take what ever they can get for it (ex, house sells for 133k, they will take anything over the 130k which would be the 3k). I asked how long they have until they get kicked out. Kevin said they have 45 days until the bank files a motion or when they official get served which neither has happened

My question is
How should I go about purchasing this house?
I’m in the process I trying to get the value of the house.
I want to avoid getting a loan in my name. I though I could come up with the 20k to bring everything up to date. Put the property in a land trust and eventually push them out of the trust leaving me and the beneficiary as owners. I would make the owner sign a contract/legal letter that they are given me the property, but would not record it. Now I would own the property (2 mortgages) and they would be leasing it from me. I would take a 10% down payment (would be applied to purchase price)and collect enough rent to cover both mortgages, the 20 k down payment, taxes, insurance, other expenses, rent credit and $100 to $200 a month for me. Because the 2nd mortgage has been written off, do I still have to pay it?

Anything wrong with this approach?
Is there another approach I should think about?
Should I stay away?
Thanks

2

you have a very, very complex situation on your hands.

The key point is the Ch7 BK. From what I know, that means the BK judge controls the disposition of all assets (including the house). In this case, the banks are secured creditors and thus will satisfy their accts by selling the asset. An excess amt from that selling will go into the pool of assets to be distributed to unsecured creditors (I’m sure there is a long list). I fhte BK judge grants relief to the banks then they can proceed with the foreclosure. As such any pre-foreclosure deals would have to be approved by the BK judge.

3

How do I find out where in the foreclosure process they are?
I plan on getting the owner to sign a Authorization to Release Loan Information letter to me so I can get the correct and direct info from the bank.

4

vfig.

This looks like a strong deal if you buy it! I have never seen a second mortgage fall off after it has been caught up! So with that being said if you took it over and caught it up you would own the property for $133,000.00 what is the property worth! It is less risky to obtain your own loan then to take this over sub-2 at that point you could get it for the 103k… The other issue I have is these people have not been paying there mortgage now for two years. What makes you think they will pay rent did Kevin just meet this lady will he pay it? Has there been some major change in there life that can now make them catch up and start paying?

On the other hand start the short sell and see what you can get it down to bottom line and maybe flip it to another investor! Make 5k and walk!

there are a ton of different ways to handle this I would just have a problem with the rent back for tentants staying in the house in this situation! I have done it before sometimes it works and sometimes it does not! Go buy five scratch Lotto tickets and see how your luck is there!!!

Robb