Seller would like to sell me her house, she owes 190k but only worth 130k and doesn’t want to hurt her credit with short sale, so what is the best way to handle this scenario?
Offer to buy it for $65,000. Remember we are in this to make money not bail people out. If she is going over the falls you don’t want her to take you with her. What I would do is take her to the local diner and buy her a cup of coffee. While we sit there I would give her any advice I could, but if she won’t come down to below the market value of the house (so there is room for profit) then we can’t do business.
Just like it is not in her best interest to come down on her price it is not in your best interest to pay $190k for a house worth $130k.
“Offer to buy it for $65,000” - why don’t you just insult the poor lady’s intelligence. That is not a viable option here.
If she does not want to hurt her credit with a short sale then her other option is to pursue a loan modification. The Obama Administration has set up several different programs that help banks refinance a loan at current rates and a market values. The key here is that she has to be able to prove that the current loan is a financial hardship and that she will not be able to continue paying on the current mortgage.
After that occurs, if she still wants to sell, you can then purchase the property for market value and pay offer her loan (make sure there are no penalties for early payoff).
If she does not want to ruin her credit that tells me that she is not behind yet on her mortgage. Find out what her monthly payments are (PITI) and what the property would rent for. If the rents are higher than her payment obligations, simply take control of the property on a long term deal.
You can either do a subject-to or just a long term lease (amount is same as her mortgage obligation) with an option to buy where your purchase option price is equal to the payoff on the mortgage upon exercise of your option. If let’s say there is a $200 monthly positive cash flow between market rents and her mortgage payment, if takes 5 years before you exercise your option that’s $12k profit you will make. In that time there is also amortization so the payoff on the loan will be lower. If market improves and FMV is higher than the payoff then you make additional $$ there.