Sub-to Deal maybe...

Hey All,

I am finally getting things to go my way. Had a call from a guy with a finalized divorced. The house was rented out or leased out or something. I have a Private lender.

Anyhow, it is worth $80,000. and he would like for someone to just pay his loan off of $50,000 and $555 mthly. Now, I was think yes this is a great deal. I read the details from the listing agent and it did not state a thing was wrong with it. Well, big fat no no…it had cracks in the middle of the walls on both sides of the property. It seams someone smeared a little concrete on one of the bottom walls, I guess to cover it in the past. Now, it appears this is the reason they wanted get rid of it. He claims, “I am going to give it to the bank if nobody buys this house”.

Should I do any of the following?

A. Get a release of Authorization and see if the lender will take less, if so then buy have foundation fixed, and flip?

B. Place ad for Owner finance, $2000.00 down $775.00 a month. It is in a prime location, right behind High School

C. Is there anything else I could offer? Is there something I am missing here that other investors did?

D 3 other investors walked, should I do the same?

Let me know what all of your thoughts are?

  1. Is he behind on his payments yet? If not, the bank may not start bargaining until they see the loan actually not performing.

  2. The 3 investors walking could be a red flag, but not necessarily. They could have been newbies, also, and got scared of the deal.

  3. Do you know what other repairs are needed now and in the near future? IOW, is the W/H broke or look like it’s on it’s last leg?

What you could do is put it under contract with a 10-day inspection clause if it sounds good to you. During those 10 days, get a structural engineer out to assess the cracks, etc. Also hire a regular house inspector to check the remainder of the house. If things come up that cause concern, walk.

Perhaps primary of all is to find out (1) how much the property is REALLY worth and (2) if there are any other liens besides the 1st DOT. You say it’s worth $80,000, but is this what the seller told you, a “guess”, or a solid figure based on comps? Also, find out what rental comps are, too. Based on the info you gave, it could be a deal if there are no problems other than minor cosmetics. If it is a foundation leveling issue, it could be around $12-18k just for that, making the deal less attractive.