Deal with EQUITY!! Next Step? - Posted by Brian Beard (MD)

Posted by B.L.Renfrow on July 24, 2003 at 18:52:43:

Sounds like just a matter of which gets done first: either the stay gets lifted, and the lender proceeds with foreclosure, or the judge dismisses it, and the lender proceeds with foreclosure.

What you do depends, to some extent, on how long the foreclosure process takes in your state. Unless it’s at risk of going to sale immediately after the BK is dismissed, I’d wait until it is dismissed, then do whatever you’re going to do, whether it’s paying the arrears and taking title subject-to or buying for cash. Of course, if the seller is hot to trot, you may want to have her go ahead and deed you the property, then just hold the deed until after the BK goes away.

I’d also try to convince her to wait on filing the Chapter 7 if at all possible. If she can’t or won’t, I’d probably go ahead with the deal, but just beware there is a chance, however slim, that the sale could be set aside if she does go ahead immediately with the Chapter 7.

Brian (NY)

Deal with EQUITY!! Next Step? - Posted by Brian Beard (MD)

Posted by Brian Beard (MD) on July 24, 2003 at 08:52:11:

Good Day,
I’ve been talking to a lady who would like me to help her out of a possible foreclosure. She is willing to let go of the home for her remaining balance of $145K. Just wants to walk away free and clear. Solid comps for the home are $210K. I’ve looked at the property and it could use carpet and interior paint, that’s it.
She has filed a ch.13 (for around ~$12k) but is in arrears an additional 2 months for $2,600.
She received a default letter while I was there yesterday. She has a meeting set for Monday to file Ch. 7 and just let the bank take it back.

What can I do? the trustee says I have to plea with the courts about purchasing or Lease Optioning. This process will take at least 20 days in itself. She has signed an authorization to release information and allows me to negiotiate on her behalf.
What happens if she files Ch. 7?
I don’t really understand the foreclosure process I guess.
Any help is greatly appreciated.

will sell $145 (what she owes)
banckruptcy $ 12
Arrears $ 4 (assuming she wont pay Aug.)
Cosmetics $ 4 (Carpet, interior paint)
Total $165-
Comps $210-
profit $ 45K ($30-35 for quick sale, hot market!)

Thanks again,

Re: Deal with EQUITY!! Next Step? - Posted by Marcos

Posted by Marcos on July 24, 2003 at 11:15:19:

Don’t let her file the CH 7 yet. You can’t do anything until she falls out of the CH 13. You can’t even buy her house at this point. But as she’s behind, the bank is not too far from getting a relief of stay, or the bankruptcy getting dismissed. As soon as the home is out of the protection of the court. You can step in and buy it/tie it up. I would offer to arrange for everything. Get her a fresh start in another apartment. Help her get her 13 dismissed. And offer to pay for the Chapter 7 after the house issue is dealt with. If she doesn’t pay on the 13 it will happen anyway, you just need to push it along a little faster.



Re: Deal with EQUITY!! Next Step? - Posted by beck4353

Posted by beck4353 on July 24, 2003 at 09:21:39:

This hightlights a question that I have with CREI in general.

If this lady has a potential of 25-45k equity in the property, why would she not just sell it herself. Especially if it is a “hot market”???

That is a question I ask frequently: If I can swoop in and take it off their hands, and sell it using conventional methods, why would they not do it themselves?

Re: Deal with EQUITY!! Next Step? - Posted by wpage

Posted by wpage on July 24, 2003 at 08:59:48:

Brian The best way for you to help her would be to come up with the cash somehow to help her eliminate bankruptcy. There is more than enough equity in the property. That would be a win win situation for everyone.Get her to re-think filing on Monday. Surely there is another solution for paying $12,000. of debt.
If she files bankruptcy I doubt that the courts are going to give up such a large amount of equity when it can be used to pay creditors.Good luck wpage

Giving away EQUITY - Posted by GL - ON

Posted by GL - ON on July 24, 2003 at 11:23:29:

Why do people “trade-in” their used cars when they could make thousands of $$$$$ selling them themselves? Why do they throw things in the trash when they could have a yard sale?

Some people are not profit minded, that’s why. They would sooner get out and not be bothered.

By the way I know how they feel. I have been in deals where I would have been happy to get out quick, and let someone else make the profit.

Re: Deal with EQUITY!! Next Step? - Posted by B.L.Renfrow

Posted by B.L.Renfrow on July 24, 2003 at 10:24:23:

Every seller’s thought process is different, but some common answers to your question – which is a good one – include:

  1. Just don’t want to deal with it. Silly as it may seem, there are plenty of sellers who think the whole conventional home-selling process is just too cumbersome and complicated, and they’d rather give up their equity than go through that.

  2. Don’t realize the FMV.

  3. Denial. They believe that somehow it will all work out in the end and a “magic” solution will appear in time to prevent foreclosure.

  4. “Head-in-the-sand.” Similiar to denial, these homeowners will ignore the situation and hope it goes away. When some of them realize, at the last minute, that’s not going to happen, they call us.

  5. Don’t want to pay a broker’s commission.

  6. Need for immediate sale – as in, the next day or two.

  7. Desire to be rid of the property and move on immediately, and they don’t care what it costs them.

  8. Desire to avoid further credit damage and foreclosure, at all costs. These folks may know very well how much equity they have, but they also know that every month they can’t make a payment, the more their credit is being damaged. Particularly if they’re not not in a hot market, or if the property needs repairs, they know a quick conventional sale is far from certain.

  9. Don’t want legions of agents and potential buyers snooping through their property, often on little notice.

  10. Don’t trust agents/brokers.

There are plenty more, but these are some of the common reasons sellers would willingly give up their equity. And putting together a deal and selling, whether conventionally or creatively, is NOT easy. After all, if it were, everybody would do it. There are a lot of obstacles to navigate, and while it may seem simple after you’ve done it a few times, you have to remember the average homeowner only buys or sells a property a few times during a lifetime, so it can be a very intimidating process.

Brian (NY)

Re: Deal with EQUITY!! Next Step? - Posted by Brian Beard (MD)

Posted by Brian Beard (MD) on July 24, 2003 at 14:31:44:

She is mostly a 1 and 6 I’d say.
When talking with her yesterday I told her the property comped for $200K+. Her response was “Heck, the one across the street just sold for $228K but I don’t care, I just want out and to be done with it, if you can buy it then go ahead or else I’m letting the bank take it.” So, being in the position I’m in, I think I’d like to take it off her hands AND help save her credit from a foreclosure.

Oh, the trustee just called while I was writting this and they are going to file for a dismissal for non-payment of the CH. 13. It sounds like it takes at least 21 days before it can be dismissed. I guess the bank has begun filing for the foreclosure process as well.