1st Deal: Motivated Seller Going To Trustee Sale 6/26.. Advice pls - Posted by Gary (San Diego)

Posted by Michael Morrongiello on June 17, 2000 at 22:50:27:

What makes you so sure the 2nd trust deed lienholder will take much less than what is owed them? I would begin my conversations with them ASAP. They may very well be insulted by your low offer of $5K cash to them (this recently happen to me on a $30K 2nd lien behind a $140K 1st lien on a $240K home in Petaluma, CA recently). They may roll the dice as see what happens at the sale (on my deal to my amazement, the 2nd trust deed holder was paid off in FULL as the bidding went well over what was owed on the 1st lien and the 2nd lien).

I would start talking with BOTH the 1st lien holder and the 2nd lienholder to find out what their positions will be. This will assist you in formulating a stratergy to better play this one out.

Michael Morrongiello

1st Deal: Motivated Seller Going To Trustee Sale 6/26… Advice pls - Posted by Gary (San Diego)

Posted by Gary (San Diego) on June 17, 2000 at 24:30:20:

Still working on my first deal since CRE Online Convention. Don’t want to screw this up. All suggestions welcome. Here’s the details:

4B/3B 2,415 sq ft., gated community
Built 1997
Comps = $290,000 (from OCTitle online)
1st TD = $192k ($1776 PITI, $20k reinstatement - unconfirmed)
2nd TD = $35k ($9k reinstatement)
Trustee Sale on 6/26 (10 days from today)
Needs $10k to move into another place and a obtain used car.

I think I have two ways to go:

  1. Forward this to a person who specializes in pre-foreclosures who has access to fast acting private funding to pay all cash for 1st TD, discounted 2nd TD, $10k to owner and $5k referral profit for me. This would be easy but less profitable for me. Or,…

  2. I can take ‘subject to’ existing 1st TD and buy the 2nd TD at a discount. That is, I can borrow $20k (private funds) for reinstatement of 1st TD, discount the 2nd TD to $5k (not sure if this is reasonable offer to the 2nd TD noteholder) and $10k cash to owner (needs $$ for moving, and used car). Total cash outlay would be $35k. So, I’d have a $290k house with a $192k first. $98k equity for $35k cash upfront. I’ll sell at $275k or $280k to get cash out fast and minimize holding costs. Big profit ($53k to $68k), but no experience with the mechanics of this. This home is in a hot market (San Diego) with median price around $210k. So here are my questions:

a. Do I get a title search before I do anything?
b. How do I reinstate the first? Do I get a confirmed reinstatement amount from 1st TD holder? Do I send a check straight to them from me and say it’s on behalf of the owner? Do I not do pay this until the owner places house in land trust and assign beneficial interest to me?
c. If they can’t move without cash and I won’t give them cash without them moving, how do you resolve the statemate?
d. How much of a discount on the 2nd TD should I ask for? Is there a rule-of-thumb on what noteholders will accept?
e. If I buy the 2nd TD, do I record it? Under my name? If under my name, will it raise eyebrows if I’m also recorded as the trustee for the land trust holding the property’s title?
f. I have 10 days before sale, in what order should I take care of things?
g. Most important, am I missing any other considerations in this deal?

Sorry for the long post. If you need more information to help me through this one, let me know. I’m also very open to discussing this over the phone. E-mail me directly and I will give you my phone number or you can give me yours.

Gary (San Diego)