This strategy will help your customer to pay off their loan and avoid damage to their credit rating.
You customer may qualify if:
Owner-occupant (rental or vacancy considered by lender on a case by case basis)
At least two months delinquent at time of closing
Arms Length Transaction
This is an expression used to describe a transaction between persons in which each acts in their own self-interest. Unrelated persons usually deal with each other at arm’s length, although this might not be the case if, for example, one is under the influence or control of the other.
Doesn¡¦t have resources to bring current
Foreclosure is inevitable
The “as is” appraised value is at least 70% of the amount owed and the sales price is 95% of the appraised value
The loan is at least 2 months delinquent prior to the pre- foreclosure sale closing date
Your customer is able to sell their home within 3 to 5 months (depending on what the lender agrees to).
A presale is regular cash out sale - Not much creative but can provide a delay that you will need as an investor to conclude the transaction.
If PMI (Private Mortgage Insurance) is involved a company may subsidize the sale even if the property has negative equity. The PMI Company will pay off part of the loan as long as the amount to be paid stays within the policy limits.
As part of this agreement, the property owner agrees to sell the property to pay off the rest of the loan. Normally the investor will have to make this attractive to the PMI Company by placing a large deposit towards the purchase of the property.
If the lender sees that the borrower has equity and is making serious efforts to market, the property the lender will generally delay foreclosure for a reasonable time to allow the property to sell.
The lender will probably require the borrower to make full or partial payments during the marketing period to keep the overdue balance from growing.
You as an investor can front all the cost as part of your purchase agreement.