How should I finance this - Posted by Chad NoCA

Posted by Chad NoCA on September 19, 2003 at 14:14:43:

Thanks for the advice. Would you keep in contact by regular scheduled phone calls until he falls behind on payments? Also, should I disclose to him that I cannot help him unless the loan is in default? I don’t necessarily want to be responsible for steering him in that direction, even if it may be for the best as far as negotiating with lenders.

How should I finance this - Posted by Chad NoCA

Posted by Chad NoCA on September 18, 2003 at 09:42:39:

I am working with a recently divorced disability recipient (can’t work right now due to injury) who wants nothing to do with his home.

asking 165K FMV= ? (last appraisal 2yrs ago=165K, owner thinks 175-185K)
Owner is currently redoing both bathrooms and painting the interior and is not adding any of the gained value to the price.

1st 118K at 7% FHA loan with WASMut Pmt=$1068
2nd 47K at 12.99% Homcomings Financial Pmt=$537
Total pmts= $1605 (includes PMI and taxes= $283)
He says both are assumable

He fell behind on the 2nd last month, but paid it up before any foreclosure filing. He is up for anything to get rid of house. He wants to file BnkRup if I can’t help him. I thought about lease/option, but I don’t think the rents will cover payments without having owner take on the negative cash flow. Would rather buy sub2, but the payments are insane due to the high interest on the 2nd, and a wraparound would have to be at an interest rate that I don’t think would bring in many buyers. The owner is willing to let me talk with his lenders and says that he will threaten BnkRup over the phone or in writing if I need something to help get the lenders to accept a shortsale. Is this deal worth it and how should I procede to make the best of it. I have never contacted lenders about this type of thing, but there is a first time for everything. Its the most motivated seller I have dealt with since I started (still somewhat a beginner). Thanks-
Chad NoCA

Re: How should I finance this - Posted by Ryan

Posted by Ryan on September 18, 2003 at 12:46:14:


It is highly unlikely that the second will accept ashort sale because the loan is performing. Even if you threaten bankruptcy it is unlikely they will work with you until the owner is dilinquent on his payments. Once he is dilinquent for a few months they will be more willing to negotiate a short sale. I would wait to work with him once he has several late payments.
A short sale is the only way I would do this deal. There is not enough margin to make it profitable. The risk is to high considering the appraised value is around what the liens are on the property.
Do not take the sellers word for what the property is currently worth. Pull some comparative sells in the market and see where it falls. This will give you a good guide line as to its value.