I have a golden opportunity to pick up a home sub2 for myself to live in. The owner did a loan mod which brought the payment down to $1150 PITI which is a steal on a $220K house. Only problem is he’s upside down…owes about $320K. Payments are current. House needs minimal repairs which I can take care of while living there.
Here’s my thoughts: get the deed, live there until I don’t want to anymore, then when I’m ready to sell it simply do a short sale. If all else fails I can rent it out indefinitely with such a low underlying payment.
I guess asking if this is too “risky” is the wrong question…if I buy it sub2 I technically don’t have any risk other than what it costs me to get the deed. I guess a better question is how good or bad of an idea is this?
Actually I would be the owner. Once he hands me that executed, notarized deed I own the house. I won’t be the borrower but I’d be the owner.
The main reason I want to get the deed is for tax purposes. I did some flips this year and that $8k tax credit would help me TREMENDOUSLY. Plus I can write off the interest and closing costs.
You’re right I could certainly rent it from him but I prefer the control of ownership. Once I get the deed I can do whatever I want with it as long as I maintain his payments. I can even do a short sale when I want to sell it…I’d just need him to submit his info to the bank (not mine). They don’t even have to know I own it.
Whelp, just found out the deal-killer I’ve been missing…turns out his low $1150 payment escalates annually until it’s back up to his $2300 default payment. I knew there would be something I was missing.
There’s no guarantee the lender will accept a short sale in the future.
Also consider what the seller understands about the deal. Are you leading the seller to believe you will take care of the payments until it is paid off? If you misrepresent your intention they could have a legal case against you… though unlikely.
I like the idea of that small payment on a house of that value. Just remember it’ll take many years for your equity to build up…
If you are just looking for a place to live for a few years then its a great deal. Just make sure the seller understands you may not pay it off, may need to short sale, or may need to walk, etc…
I think you have a golden opportunity to eat your cake and have it too…
Grab the deed and dont record the darn thing… MOVE into the house… Moving into the house gives your unrecorded deed enforceability even if the seller grants the property to someone else… Even if they grant it to the lender as a deed in lieu
Make certain you have a valid irrevocable exclusive right to occupy lease within your purchase contract… at a “Fair” market value… Although at the low end. Put all utilities into your name… Start paying the gardener. Pay all cost that the “Landlord” should pay however have the landlord responsible for the costs with in your purchase lease agreement.
Take extensive pictures of the house at occupancy transfer… I am not saying remove the appliances, toilets, and light fixtures; take a few pictures and then reinstall them, however… During occupancy save all receipts for maintenance to the property.
The lease period should be for a minimum of 36 months.
Start your short sale… If they record a Trustee Sale then on a daily basis fax to the lender and the Trustee a disclosure that the property is tenant occupied and the tenant has a 36 month lease. The lender will postpone the foreclosure.
Backing up to the BPO… When the agent comes out make certain they know that the fixtures were not in the house when you moved in and that they are your personal property… give them a copy of the pictures. Give them the estopple notice or purchase walk thru that you and the seller signed at purchase.
Youll be very surprised how much the lender will work with you now…