Posted by John (Houston) on March 17, 2002 at 01:07:24:
Can I get a copy of that 2? I am a newbie reading these posts and taking down good notes. I have a cousin (wife’s side) in the exact same position. Just the numbers are a 'lil diferent. He is just gonna let it go back reo, but I think it would be better to get in on this pre(instead of REO).
help! Foreclosure deal (my 1st one!!) - Posted by charles
Posted by charles on March 16, 2002 at 01:58:12:
the owner picked and left…couldnt handle the stress any further.
However i have her tel# in her new State and apparently she will take $2,000 under the table to just turn the sell/deed the home over to me and walk away.
comps are $115,000-118,000.
The foreclosing lender has balance of approx. $84,000 incl. atty fees/7 mos arrears.
Here;s my question
(i) Do i write a contract with her for say, 80,000 and then submit to the Lender for a “Short Pay off” (Short sale??)
OR
(ii) Do i encourage her to give the foreclosing lender “deed in lieu of f/c” and buy the home directly from the lender using conv. financing?
Please advise!!! Any ideas where i can get verbage for a “short payoff” request to submit to the lender??? Do I give them a copy of my contract with her if i get one?? (obviously i wont tell the lender about her getting 2,000 )
Please help!!
Charles
Re: help! Foreclosure deal (my 1st one!!) - Posted by Richard Rothschild
Posted by Richard Rothschild on March 23, 2002 at 13:56:09:
JohnBoy’s advice is superior!
Also… don’t forget to check the owner for liens or judgements that could also be encumbering the property in addition to the mortgage and taxes.
-Rich
Re: help! Foreclosure deal (my 1st one!!) - Posted by JohnBoy
Posted by JohnBoy on March 16, 2002 at 11:22:06:
When you verify the amount to catch up the arrears with the lender, before just agreeing to catch up all the payments, first ask them if the owner could pay all the principal and attorney fees that are due, if they would be willing to waive all the back interest that accrued? Sometimes they will, sometimes they won’t. But you never know unless you ask first.
The 7 months of arrears will mostly be interest accrued since most of the payments go towards interest first with a smaller amount going towards principal. So if the total amount in arrears including attorney were $10k to bring the loan current, $3k of that may be principal and attorney fees where $7k of it may be accrued interest. If they agree to waive the interest if the owner could pay the $3k in principal and attorney fees then all you would need is to send them the $3k instead and save yourself another $7k on the deal. All they can do is say no!
Then if they won’t go for that then see if they would take a partial payment amount and roll the rest onto the back end of the loan. Or at the very least if they would take a separate payment plan on the rest to allow the owner to catch up.
If they accept either of these terms then that’s just that much more cash you will save from having to come up with now to bring the loan current.
Then you can buy the property from the seller, subject to the existing loan, give her the $2k she needs and send the lender want they need, and just take over the payments.
As far as would it be easier to just get a new loan rather than taking over the existing loan, heck no! It might be easy for you to be able to just get a new loan, but WHY go out and put a new loan in your name if you don’t have to??? Why use your credit if you don’t have to? Why take on more personal liability for a loan if you don’t have to?
Later on IF the lender ever found out about it AND IF they pursued the issue by calling the loan due AND IF they actually followed through with it, they would still have to go through the foreclosure process to get the property back if you told them to go pound sand because you refuse to pay them off!
THEN if you had to when push came to shove, THEN refinance the property to pay them off if you had to. If you have the ability to get a new loan to purchase the property then getting refinanced after you OWN the property will be even easier and quicker than trying to get a new loan now to purchase it! But chances are that even IF the lender ever found out they would end up doing nothing about it as long as the payments are being made on time.
So WHY take on all the added liability with being personally liable on a new loan in your name and use your credit when you don’t have to???
Now don’t let onto the lender what you are thinking about doing here. Do just like JT said. Fax them the authorization form to release information about the loan and just act as if you are a friend of the family trying to help the seller out by bringing the loan current so they don’t lose the property. Then once you get the actual figures it will take to bring the loan current and you have verified there are no other liens against the property, have the seller deed the property into a land trust, naming the seller as the beneficiary of the trust, then have the seller assign their beneficial interest over to you using a separate assignment of beneficial interest form naming you as the new beneficiary of the trust, have it notarized, and that’s it! You now own the property! Send whatever amount the lender needs to bring the loan current and just start making the regularly scheduled payments on time!
But be sure to ask the lender about waiving any accrued interest if you could pay all the principal in arrears and attorney fees first. If they say no, then see if they would at least be willing to take a partial payment and roll the rest onto the back of the loan or if they would take some of it by setting up a separate repayment plan to catch up the arrears. Ask in that order. All they can do is say no and require the full amount to be paid up front in order to reinstate the loan! If they say yes then it saves you that much more from having to pay out of pocket to bring the loan current.
Hint:
When you talk the the lender acting as a friend of the family trying to help the seller from losing their home AND having to possibly end up filing a BK as a last resort to save the home, the lender may be more willing to take less and work something out on most of the arrears. When they hear owners may file a BK they know that can delay the foreclosure process, costing them more money and take them longer to get the property back, they may rather avoid all that if at all possible and agree to more favorable terms. Worse case is you will have to pay all the arrears to reinstate the loan.
Maybe I am missing something here… - Posted by JT-IN
Posted by JT-IN on March 16, 2002 at 09:02:30:
Charles:
Maybe I am missing something here, but using your numbers, if the FMV is 115K and the buyout of the mtg, including all fees is 84K, plus the 2K to the owner for the deed, that leaves you a 29K profit. Is this close…? If so, and if this deal does not produce a suitable profit, then I have been working way too cheap.
Just structure the contract with the gal, then have adequate title work completed. You should get an authoritzation form from the owner, for the lender to release mtg info to you. Verify that the lender will accept X dollars to cure this default… thru what date, in writing. Then pay the gal the 2K in exchange for an executed deed, and pay the lender the arrearage, keeping the loan in place.
Employing this method, you would be buying the property subject to the existing financing, and you may want to consider buying in the name of a Land Trust, for privacy purposes. This will shield from the lender, the transfer and hopefully any due on sale difficulties.
Now what is wrong with a 29K deal…?
To enter into negotiations with a lender, to attempt to structure a short sale, is no small task. If the mtg balance was higher, and that was the only way to do the deal, then Ok, but that is not the case here.
Now, if I have been working way too cheap… just let me know.
Just the way that I view things…
JT-IN
Re: help! Foreclosure deal (my 1st one!!) - Posted by charles
Posted by charles on March 23, 2002 at 20:47:53:
ok,
here are the reinstatement figures on this home. they look ugly!!! she is due for June 1st 2001 payment!!
11 PAYMENTS $10,054.44
total late charges $462.34
Property inspection fees $25.50
Foreclosure fees/Costs $1573.20
BrokersPrice/Appraisal $425.00
Bankruptcy Legal expenses $675.00
TOTAL $13,215.48
The house needs some work but would sell for 115,000-120,000 no problem. Probably needs about 5,000-6,000 worth of repairs/upgrades.
this is my first (POTENTIAL) deal!!! help!!
she also owes over $1500 in delinquent property taxes/
how would you approach the lender now??
Charles
Re: help! Foreclosure deal (my 1st one!!)more!!! - Posted by charles
Posted by charles on March 16, 2002 at 21:47:51:
oh boy!
not so good news. I talked to Sandra tonight, and now she is telling me that she actually “abandoned” the proeprty in a Chapter7 bankruptcy.
Where does this leave me?? Wouldn;t this mean the lender would catch on that she wants nothing more to do with this, and make it impossible for me to reinstate and take over the payments???
what do i do next??? please help! do i contact the BK trustee?
Charles
Re: help! Foreclosure deal (my 1st one!!) - Posted by charles
Posted by charles on March 16, 2002 at 15:28:00:
wow! i have definitely got a lot to learn! thanks for the info! I will pursue the option of having them waive the interest, and keep the loan in her name still. Besides, i just found out the loan has a 3-yr prepayment penalty, so best for me NOT to get conventional financing of my own and pay this baby off. Like you said, i will keep it inher name and get Deed. Thanks ocne again!!! That was awesome info. Will keep you posted.
Re: Maybe I am missing something here… - Posted by charles
Posted by charles on March 16, 2002 at 10:03:00:
ji,
yes it definitely sounds like a great deal.
You mentioned “verify that the lender will take X dollars to cure the default”…
How do i go about doing that without the lender catching on to the property soon transfering title?
Wouldn’t it be easier or less risky for me to just get Conventional financing, pay them off completely (a settlement amount/short pay off) and get the house that way? I don’t know. Whatever makes sense. Please let me know what you think.
For either scenario, do you have a sample letter or something you could email on how to go about contacting the lender on this ? cvamadeva@aol.com
thanks!
Re: help! Foreclosure deal (my 1st one!!) - Posted by JohnBoy
Posted by JohnBoy on March 24, 2002 at 16:10:20:
So what would the total pay off be if you were to cash the lender out and pay the loan off?
Before you said you thought it was about $84k. Would it be $84k plus the $13,200 reinstatement fees for a total of $97,200 or what?
Re: help! Foreclosure deal (my 1st one!!)more!!! - Posted by JohnBoy
Posted by JohnBoy on March 16, 2002 at 22:45:29:
Has her BK been discharged yet or is she still in the process of going through with it?
Even though she filed BK and discharges the mortgage in the BK the lender would still need to foreclose to get the property back. Unless she freely agreed to deed it over to them.
If it’s still tied up in the BK process then you would need to go through the trustee to get permission to buy it. If the BK has been discharged already then the BK is done. Then it’s just a matter of time until the lender gets it back through foreclosure. So you may still be able to work something out on this, but it depends on where she’s at with the BK at this point as to how to approach it.
Is the house the main purpose of filing the BK or does she have a lot of other debt on top of this? If the house is the main reason and if the BK hasn’t been discharged yet, then you might see about her having the BK dismissed if you can cure the loan on her house with the lender.
Re: help! Foreclosure deal (my 1st one!!) - Posted by JohnBoy
Posted by JohnBoy on March 16, 2002 at 15:42:54:
A lot of the prepay pentalties they have out right now don’t apply if the property is being sold, only refinanced by the owner. So you would need to check that out to see if that is the case here. Of course, if you take it over then it won’t matter anyway since you won’t be refinancing it.
When you pursue the option of trying to get the lender to discount anything or work out a repayment plan, don’t get into anything about keeping it in the seller’s name. As far as you’re concerned you are just a friend trying to help out by giving them the money to reinstate the loan. As far as the lender is concerned, the seller plans on keeping the house! Don’t get into anything about you buying the thing or taking over the loan. Let them believe the seller wants to keep it!
The only time you get involved letting the lender know you are wanting to buy is if you were planning to buy it out right and in that case you would try to get the lender to do a short sale by agreeing to take less that what is owed on the mortgage.
In this case you are going to just take over the payments subject to the existing financing. So “mums” the word about any of that when talking to the lender! They don’t need to know anything about that part!
Re: Maybe I am missing something here… - Posted by Brad (CA)
Posted by Brad (CA) on March 16, 2002 at 11:56:38:
It is always LESS risk to use someone else’s financing already in place. Unless you ENJOY PERSONALLY GUARANTING money. If you sign for it, then if for wahtever reason the payments do not get paid, YOU are personally responsible and your credit gets ruined. Hers already is in poor shape, so she is better off having you just take it over and paying the loan.
Even if they do find out the property has transferred, which is few and far between, especially using a land trust, then they have no recourse against you but to take over the house (which they most likely will not do if payments are being made). SO, the most you risk is $2,000 and any money you put into it. But that is much better then risking your credit and legal responsibility.
Re: Maybe I am missing something here… - Posted by JT-In
Posted by JT-In on March 16, 2002 at 10:20:00:
Charles:
The dept of which you will discussing this amount to cure the loan deficiency, called the loss mitigation dept., does not usually connect with whether the loan is being assumed, or assigned. Their sole function is to collect the deficiency… adn yo are about to make their life easier.
Just approach this like you are helping a friend… adn there should be no questions asked, with the authorization properly signed, and with all the pertinent loan data.
BTW, the Auth Form is in your mail box…
Just the way that I view things…
JT-IN
Re: help! Foreclosure deal (my 1st one!!) - Posted by charles
Posted by charles on March 24, 2002 at 20:49:47:
i am not sure. i will check with the title co. this week and see what the payoff would be.
I met with a Contractor friend over at the house a couple of hrs ago…he thinks it needs about $10,000 worth of remodeling/upgrades/repairs.
I need to find out specifically what the lender would take.
I think 120,000 is the best sale price possible.
Worst case i guess i could keep it as a rental instead of flipping it. its behind the Mall and in a quiet, nice neighborhood.
Charles
Re: help! Foreclosure deal (my 1st one!!)more!!! - Posted by charles
Posted by charles on March 18, 2002 at 22:47:35:
she is still in the BK, but she has told the trustee to abandon the property.
I ordered a Title report today, also Reinstatement figures. I wanna see if there are delinquent taxes against the home ( I am sure there are!).
thanks for the good ideas, will keep you all posted!
Charles