Seller Wants $25,000 & a New Place To Live

Foreclosures, Short Sales, Tax Foreclosures
1

Good Morning,

I have a seller that is (2) payments behind and really can’t afford the mortgage. Seller wants $25,000 out and she will allow me to assume the loan, and she will move. I am new to the investment side of real estate, but just keep running into these deals “WHICH IS GREAT” however, it leaves me with thoughts of how to negotiate this deal or which techinque would best suit the seller situation. Please give me your suggestions & thoughts. The homes in the seller area are going for $500-$600,000.00 :bigok

2

How much does she owe?

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You also need to look at the TERMs of her mortgage. Is it adjustable or fixed, what is the interest rate, etc.

4

Seller owes $335,000.00 and the terms of the loan is a 30 yr fixed. 11/1 seller will be 3 months behind!

5

It all depends on how you were planning on buying the house.

Tell the seller that you will lease option the house from them with the arrears as an option payment, and the lease payments to cover the monthly payments. When you find a buyer and sell the house to, you will exercise your option and he would get his/her $25k-back payments.

6

You say that homes in the seller area or going for $500-600K. What EXACTLY will THIS home sell for (what’s it’s ARV)?

Do you have $25K and can you make the current monthly payments?

What do you plan on doing with the prop if you do get it?

What is the current market conditions of your area (and particularly the area that this prop is in)…up, down, flat?

There are a number of ways to pursue this deal depending on what you can, or can’t, do and your intentions with the property after getting it.

Assuming (big assumption, btw) that $500K is a fairly accurate resale value, then at $335K, you’re already below 70%, which is great. Now, as long as the repairs don’t cost $100K, you’re on your way.

As far as negotiating, you could explain that if the seller doesn’t find a way to get rid of this property soon, then they’ll end up with not only no money, but totally ruined credit, too. You can fix late payments. It’s very tough getting back on track with a foreclosure on your reports.

That may work, but truth be told, if your numbers are even close, then another investor is going to swoop in and grab this one FAST, even paying the $25K to the seller.

Here’s why. Say you’re in a stable market. ARV is $550K and the home doesn’t need much, if any, real work. Buy it (number of ways HOW), put it on the market for $500K. A decent RE agent will have it under contract FAST. Allowing $60K for costs, you’ll still gross $80K.

Raj

7

seller will “let you” assume the loan.
thats nice …but its the banks choice not the seller!!
loans are never! assumable .
so lease option might work if the buyer you find can get a new mortgage.
and 2 mos. behind means lis pend./foreclosure process is well underway and is very hard to stop.
Be careful!

8

Not necessarily true. A more correct statement would be “modern residential loans are rarely assumable…”

Keith

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seller will “let you” assume the loan.
thats nice …but its the banks choice not the seller!!
loans are never! assumable

If it is formally assumed, then one would have to get the bank’s approval, pay a small fee and carry one. That’s still assumed, and very doable in a foreclosure situation. Banks want paying customers, especially in this market. However, there is always the option of doing it Sub2. No formal loan assumption, but still paying the bill.

L/Oing the prop as an investor is the LAST option that I would recommend.

2 mos. behind means lis pend./foreclosure process is well underway and is very hard to stop.

In what part of the country? 2 months behind probably wouldn’t have gotten any more than maybe a stern letter. Going on three will probably initiate the “foreclosure proceedings have begun” letters. Most banks won’t actually hit the courthouse steps until at least 6 months have passed. Very hard to stop? I’ve stopped it the day before the auction with a simple (but firm) purchase contract.

Raj

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The broker teaching my real estate license course actually pulled one out AFTER the auction. Some poor guy won the bid and still didn’t get the property. I forget what the details were as far as when the contract was signed but he had to go to court a few days after the auction with the signed purchase contract. If he tells the story again I’ll note the details so you can know the rest.

11

Mortgage Loans not ASSUMABLE??? In what state?? Now CAR LOANS are not ASSUMABLE!!! I have even seen an investor ASSUME THE NON-ASSUMABLE LOAN :bobble! Maybe I could be wrong??? :anon

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So, let me get this straight…

Seller is willing to SELL you $165k - $265k in equity for $25k in cash?

Why doesn’t the seller sell it for $400k+ and get $65k+?

Why don’t you just get it under contract and wholesale it for $400k, pay her $25k, and walk away with $40k and no headaches?

Am I missing something?

13

Sellers have their reasons to sell

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Almost all conventional (not under programs such as FHA or VA) mortgage loans made after 1980 are not assumable.
its called due on sale clause

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Are not assumable WITHOUT the banks permission. Get lender’s okay, loan is STILL able to be assumed!

Take title subject to the existing financing, loan is NOT formally assumed, but you do legally agree to make existing monthly payments, therefore, it is assumed, just not formally (no permission from the bank).

And yes, the 2nd option does violate the DOS clause in MOST loan agreements. However, that is NOT a crime, NOR does it mean that the lender will call the note due. It simply means that they now have the OPTION of calling it due. Now, since the loan is current and paying AND interest rates have dropped (and foreclosures are already UP), chances of a lender calling a performing note due is highly unlikely.

Duh.

Raj

16

If your figures are correct then you are probably not the only investor talking w/ the homeowner by now. Lock it up before another investor does.

GET THE DEED sub2 or lock up in a land trust.

To cover yourself, get an ATR signed, submit to lender. Request payoff and reinstatement figures from lender. Pull title through title comp or attorney.

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Forget assuming the loan, just take it over subject to the existing loan, reinstate the pmts. now you have the deed, in 6 mo to 1 year of making payments you will improve the owner’s credit they will love you for that. Sub 2 then either sell out right or L/O 2-3 years for maximum profits. You can give the seller some money now the rest when you sell the home. Remember, keeping your name out the loop is the name of the game. Call us when you cash the big check. :beer REMEMBER YOUNG ONE CONTROL THE DEED NOT THE LOAN! Happy Halloween to all

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Sounds like there is a deal here if you have the $25K for the seller. I would recommend that you get the seller to cooperate with you and negotiate either a loan modification or a forebearance with the bank so that you do not have to make up all the loan payments at once. Then I would buy the property “subject to” the exsiting loan. You would get the seller to deed the property to you but do not do this until you have the forebearance or loan modification worked out with the bank. It sounds like there is good equity in this deal and you should be able to make it work.