Can anything be done here? - Posted by Tom

Posted by GL - ON on July 13, 2003 at 24:04:43:

All right. The “organisation” should pay for the damage they did, or put the property back into the condition it was in when they rented it.

If it was anyone else but a feeble old couple who were being victimised they would have been made to do this or get sued.

It’s too bad the old couple got ripped off this way.

Can anything be done here? - Posted by Tom

Posted by Tom on July 12, 2003 at 15:25:02:

We are looking at a home to live in for a very short time…just long enough to rehab it and shift money from some other deals that are closing soon. I have a larger family and the home is the perfect size for us, thus making sense for a home base for a time while we free up our other cash.

The FMV for the home is 140,000 and the current asking price is 95,000. The home has been sitting on the market for one and a half years and is now in pretty sad shape…alot of vandalism.

Because we are contractors, we would do the work ourselves for about 15k. We were hoping that since it had been on the market for so long, the seller would be desperate and willing to go between 70 and 75k cash but according to his realtor, he’ll get out with nothing at 95k. (His contract with his realtor just expired as well, leaving a little more breathing room)

The seller is motivated enough to want to get rid of this dead weight draining his pocketbook, especially after a year and a half of it, but he doesn’t want to come out of pocket to pay off the mortgage.

So my question is this, have you ever heard of a lender doing a short sale without the loan being in default? With the condition of the property, the lack of offers in a year and half’s time and the declining state of the sellers finances should tell the lender what direction this is going?

I don’t know, just throwing this out there…I know the seller doesn’t want to ruin his credit by defaulting and I don’t blame him. Just trying to find a solution for the both of us…

Any other ways to work this?

Thanks in advance for any input…


Re: Can anything be done here? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 12, 2003 at 21:02:06:


I think you have a better way to go. Since you only plan to live in it for a short time, don’t pay all cash for it nor get a new loan on it. Simply buy the property subject to the existing financing. Meaning you get a deed and you start paying the existing loan.

This means little cash up front from you. Just the fix up costs, maybe some closing costs, and the carrying costs.

It would be best to have the lenders premission, in writing, for you to do this. Arguments to them: current owner getting close to default, even he would prefer not to do so; not having to do a short sale, with the lender taking a loss; it will be a short term situation, with the end being about … months out; if the loan interest rate is greater than the current market loan interest rates, the loan continues to earn above-average returns. Now, these days many loans are actually owned by FNMA and FHMA, with the so-called “lenders” actually just being servicers of the loans. You may find that this is a situation like that. In such case it is possible the servicer cannot make the determination you want.

If necessary, you could hide the transfer from the lender by having the owner deed the property into a trust which action is recorded in the county land records. Then, the owner assigns to you the beneficial interest in the trust, which is not recorded.

Even if the lender finds out about the change of ownership, their remedy is to foreclose on their loan. In most states this takes about four months, after they start. So, you have some time to resell or refinance the property. If you do something like this, use an attorney to help you out. There is a lot of information on subject to transactions in the archives of this main board of the CREONLINE.COM website.

Good InvestingRon Starr*

Re: Can anything be done here? - Posted by GL - ON

Posted by GL - ON on July 12, 2003 at 20:57:26:

Why should the bank pay for the borrower’s misdeeds? Maybe they will but why should they? The seller should cough up the $20,000 or $25,0000. Or if it isn’t their fault the house is a wreck, then the insurance company should cover the damage.

Forgot to mention… - Posted by Tom

Posted by Tom on July 12, 2003 at 16:38:59:

that although we as contractors can turn this for 15k, anyone else would be into the house for 50k at least so the bank isn’t looking at any equity and there are no takers at what they are owed, so I’m not sure how a foreclosure would benefit them…maybe someone could clear that up for me…

Thanks again


Re: Can anything be done here? - Posted by Tom

Posted by Tom on July 12, 2003 at 22:33:54:

Thanks for your input Ron. I know very little about subject to’s so I might be totally off here but wouldn’t I still be essentially buying the house at 95k by taking over the payments? If so, I’d still be overpaying for the property…am I off on that? Again, feel free to set me straight on that as subject to’s aren’t really my area.

If that’s the case, with the months of labor I’d have to put in, I’d only break even on the property (not necessarily in cash, but in labor) and as much as I’d like to help them, I can’t work for free.

There may not be a way to make all parties happy on this one, I know that there are deals like that out there. It certainly doesn’t hurt me to pass on a deal that isn’t any good for me but I really wanted to be able to do something for this elderly couple.

I’ve learned so much from your posts (GL too)…thanks for all that you contribute.


Re: Can anything be done here? - Posted by Tom

Posted by Tom on July 12, 2003 at 22:18:05:

This is not a case of seller’s misdeeds…they are an elderly couple that rented the house to a ‘charitable’ organization that used the house as an elderly care facility. While that organization did maintain the house well, they also made some really unorthodox changes to the house (all without permits and apparently also without an experienced contractor!)…fast forward, the charity moved out leaving a home that the average buyer is afraid of and now after a year and a half of making payments and having no one local to check on the place (and they are disabled and unable to travel), the house has been vandalized badly.

My guess is that they don’t have the money to come out of pocket and their finances are slowly being drained away trying to make good on the loan…

As to the insurance, I don’t really know what they would cover or why that avenue wasn’t utilized…

What I’m looking at is how the finance company might see it…a definite foreclosure down the road and drop 50k trying to bring it to code or a short sale of 15k or so.

It’s not a case of anyone trying to get one over on the lenders. No one is going to pay more than what the house is worth as it stands, the owners don’t have the money to come out of pocket and the finance company is looking at an eventual short sale anyway.

I was just trying to find a way to do that without having the owners have to go through the ordeal of a foreclosure. Any other advice to make this work for all involved would be greatly appreciated…


Re: Can anything be done here? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 13, 2003 at 10:49:19:


Yes, you would be paying $95K. That is a pretty good price for $140K property, even having to spend $15K to fix it up. You’d be in the property for $110K. Subtracted from $140K, that means that your labor has added about $30K in value to the situation. I don’t know how many hours you would have to put into the property, but if we assume 500, that would be $60 an hour. If we assume 1K, the would be $30 an hour.

Depending upon what you could make elsewhere, this might not be enough for you.

I am just doubtful that the bank will do a short sale in the circumstances that you describe. However, there is only one way to know for sure: try it and see.

Good Investing*********Ron Starr************