Jim IL, Phil Fernandez, JPiper, HELP with a deal - Posted by Scott SC

import · November 17, 2000, 6:22am

Posted by Leslie on November 19, 2000 at 01:49:41:

Yes, that loan info is very carefully protected, and rightly so. However…I once got a much quicker solution when I simply offered to buy it. I was transferred to a different department which was anxious to “sell” the note at a discount. And the discount got better if I could meet their “end of fiscal quarter” deadline. They can sell the asset without getting involved with the permission of the maker of the note.
In my case Household Finance was the note holder.
It was about $85k, and they reduced it to roughly $35k. They agreed to accept a fee for an option to buy the note. I think I got 30 or 45 days. My IRA bought the note and held it.

I tied up the property and found a buyer for it. The IRA made a nice profit.

Leslie

import · November 17, 2000, 6:22am

Jim IL, Phil Fernandez, JPiper, HELP with a deal - Posted by Scott SC

Posted by Scott SC on November 17, 2000 at 07:22:36:

Hello everyone!
I’ll try posting again, no response earlier.
I wan’t to run this deal by you and get some ideas. I sent some post cards out to folkes who were getting ready to be foreclosed upon and I got a very motivated caller.
The house appraises at $103,000, 3br 2 ba 1600 sq ft. Great condition.
He has a first of $73,000
A 2nd of $25,000
and his arrearage is $8500.

I’m trying to figure out a way to get this house without coming out of my pocket with a lot of $$$$$$$$$.

I called the 2nd mortgage holder and they said the least they would take to assign over the 2nd is $12,000.
To bring his mortgage current I would need $8500. That’s $20,500 out of pocket!!! Which I don’t have.
I guess my plan was to buy the 2nd, bring the first current and get him to sign over the deed. But I can’t come out of pocket that much money.
He doesn’t really act like he will help pay anything towards the arrearage. I mean he seems VERY motivated but I don’t think he has the money to help with the arrearage.
There is a deal here, I just don’t know how to formulate it. Any suggestions???
If I left anything out let me know and I will fill you in.

Thanks

import · November 18, 2000, 6:47am

Interesting idea, JohnBoy but couldn’t you… - Posted by doug,ky

Posted by doug,ky on November 18, 2000 at 07:47:01:

acquire the property just like you said using the 80% for total purchase price ( or better). But instead of going to the bank for the money (which is iffy), Just sell the property using owner finiancing and then sell the properly structured note at closing, pulling out the equity from the deal. Just a thought

Doug,ky

import · November 17, 2000, 5:13pm

You may need the practice … real life bootcamp? - Posted by leslie

Posted by leslie on November 17, 2000 at 18:13:16:

Why wait till the really big deal comes to find out what you don’t know. Things like authorization forms could cause you to loose time or loose out to another buyer when the “real deal” is at your feet. Go foward and learn all you can about lender’s attitudes toward discounting. Buying subject to, chasing down a refi, tie up the seller, tie up the discounts, sell your position, flip the contract and discounts as a package. Any and all possibilities are real life “boot camp” opportunities.

Happy learning

Leslie

import · November 17, 2000, 2:42pm

Re: , HELP with a deal - Posted by Rickey-TX

Posted by Rickey-TX on November 17, 2000 at 15:42:22:

Hey Scott,

Just curious! how long do you guys have in SC to do a deal that’s in forclosure before the sale. In Texas, from what I understand, there’s only 21 days to put a deal together. Don’t seem like alot of time, but I’m sure its being done all over Texas.

I’m just now looking to get into foreclosures, and I’m trying to learn all I can. BTW it seems as if your postcards are working. I would love to know what they say!
Nevertheless, I hope this deal works out for you.

Rickey-TX

import · November 17, 2000, 8:26am

Jim IL, Phil Fernandez, JPiper, HELP with a deal - Posted by JohnBoy

Posted by JohnBoy on November 17, 2000 at 09:26:42:

If you can qualify for new financing, here’s how to do it. You line up a lender that would refinance you once you take title to the property. If you get a lender that will treat this as a refi without any title seasoning, then you record the deed in your name. Once you record the deed in your name the your lender refinances you to pay off all the underlying liens. You now have the property with a new first.

Here’s the thing you need to be able to do. If the property will appraise for the $103k, you need a lender that will refi you for 80% LTV of the appraised value once you take title. At 80% LTV based on the $103k that would allow you to borrow $82,400. Now all you have to do is get with the first and second lien holders and get them to take a pay off between them that equals $82,400.

This means if the first would take the $73k as full payment to unload the note, then the second would have to take $9,400 for their note. Maybe you could get the first to take $70k leaving $12,400 towards the second. You just need to figure out an amount between the two lien holders that they would take that doesn’t exceed $82,400 MINUS any other unpaid liens against the property. Things like back taxes, unpaid water bills the city may have place a lien against the property for, etc. You need to run a title search to verify if any other liens exist. Once you know exactly what liens exist, then work from there and get everyone involved to accept an amount that doesn’t exceed a total of $82,400.

Get the owner to deed you the property, but DO NOT RECORD THIS until you check the title for all liens and get a pre-approval from your lender for financing this subject to appraisal, AND something in WRITING from ALL lien holders on the amount they would except for a full pay off amount!

If you can manage to put this together you will get the property for 80% of market value leaving you with 20% equity. You will have done this for NO MONEY DOWN if your credit is good and can find a lender that will do a non-seasoned refi.

Now you can either L/O it or sell it on contract for deed for about $110k - $115k, get $5k - $10k down, and create a NICE monthly cash flow with a big payday on the back end!

Take a DEEP breath, suck in your gut and go SELL yourself in getting these lenders to work something out with you!!! LOL

import · November 17, 2000, 7:45am

Re: Jim IL, Phil Fernandez, JPiper, HELP - Posted by phil fernandez

Posted by phil fernandez on November 17, 2000 at 08:45:30:

Scott,

What are the payments on the first and second? And what would a reasonable monthly payment to a buyer for the house be? How much of a downpayment could you get from your buyer?

import · November 17, 2000, 6:51am

Re: HELP with a deal - Posted by JPiper

Posted by JPiper on November 17, 2000 at 07:51:15:

If you had $20K to do this deal by acquiring the second and bringing the first current, I wouldn’t suggest it…it’s not a deal.

To do these deals you’re going to have to get the first or second mortgages to discount sufficiently to make it a deal. If the second hung in there at $12K, it would be unlikely to see the first discount sufficiently to make this a deal. If either mortgage holder or both decides to discount, you’re probably going to have to pay them off…meaning you’re going to have to get financing.

The other way to go here is to take over the loans, bring them current, and then resell on terms to a new buyer where the new down payment brings in the cash that you use to bring the loans current. Only you would know whether this is possible, and whether after you have gone through this there is a cashflow to make this all worthwhile. Chances are in this case it is not worthwhile…no backend, and probably a high interest rate on the second making the total payment high therefore making a cashflow unlikely.

My “guess” is that there’s no deal here…but without payment information or market information it would be impossible to say with any certainty.

JPiper

import · November 17, 2000, 8:16pm

Leslie I Respectfully Disagree - Posted by phil fernandez

Posted by phil fernandez on November 17, 2000 at 21:16:45:

Leslie,

I would not call this a big deal. And you do have to know the geography of the deal or how else can you make an educated decision on the particular deal.

An authorization would take about one day. I doubt if someone will be beating you out within that time frame.

Better to know the whole landscape than to get lazy and guess.

import · November 20, 2000, 11:29am

Re: , HELP with a deal - Posted by Scott SC

Posted by Scott SC on November 20, 2000 at 12:29:45:

Hey Rickey,

I buy pre-stamped postcards from the post office at 15 cents per card. I just write on the back:
Dear Mr./Mrs XX
I buy houses. I would like to talk to you about your house on 999 Blank Street. Imay be interested in buying or know someone who is.
Thanks 555-555-5555

We have a few months before the sale in SC.

import · November 17, 2000, 7:21pm

The 10’ High Jump… - Posted by JPiper

Posted by JPiper on November 17, 2000 at 20:21:14:

Hey JohnBoy:

Let?s see if I can summarize: We have a first mortgage holder with a balance of $73K with arrears of $8500?.total $81,500. We have a second mortgage holder willing to take $12K. You?re suggesting a combined discount to $82,400 total. For the fun of it I?d put closing costs at $3K. So the discounted amount is now $79,400. So if the second doesn?t budge, the first has to discount to $67,400?.forgoing almost $6K in principal and $8500 in interest and penalties?a total of $14,500? And this is on a house in ?excellent condition?.

Now you say you?re going to do an unseasoned refi to take this deal down? As you pointed out, these are few and far between, perhaps even non-existent these days.

This looks to me like the equivalent of high jumping 10 feet. I think it might well be possible to go through this exercise on every foreclosure out there, and construct a scenario that sounds good. But at the same time I?d say the time might be better spent pursuing a deal where you don?t need a motivated seller, two motivated mortgage holders willing to discount, and an extremely motivated lender willing to do unseasoned refi?s.

Call me crazy but it sounds like a waste of time to me.

JPiper

import · November 17, 2000, 8:53am

Jim IL, Phil Fernandez, JPiper, HELP with a deal - Posted by Scott SC

Posted by Scott SC on November 17, 2000 at 09:53:34:

Great plan JohnBoy!!
A lot of strategy in this email.
I wonder how hard it is to get someone who would finance this deal as you said.
I guess I should find this type of financing, have the banks already agree to a payoff, and do the title check before getting the deed right?
This is a very creative idea.

import · November 17, 2000, 7:34am

Re: HELP with a deal - Posted by phil fernandez

Posted by phil fernandez on November 17, 2000 at 08:34:40:

Hi Scott,

I also don’t see a deal here, but I do like the way you are thinking. The structuring that you suggest is excellent if you could get a bigger discount on the second and perhaps getting some type of a discount on the first.

You have talked to the second mortgage holder, but have you talked to the first. The first with a LTV ratio of about 70% is in a pretty secure position and might not negotiate. Even tacking on the $8,500 arreage the LTV is at 80%. But as the old saying goes, " you never know until you ask." When you call the first mortgage remind them that they may not want another REO in their portfolio and if they do take the house back they will have holding costs and will in all probability have to pay a realtor. You are a quick and clean solution to their potential problem.

Good luck with it.

import · November 17, 2000, 7:22am

Re: HELP with a deal - Posted by Scott SC

Posted by Scott SC on November 17, 2000 at 08:22:36:

Thanks Piper for your comments. I always receive excellent advice from you.

Yes, the 2nd is on a 15 year term at a high interet. The total payment on both is over $1000. I know I couldn’t get this much per month for the house.
Also, if I did make up the arrearage of $8500 I wouldn’t be able to get this much as down payment or option money.
I didn’t talk to the first about a discount, but I would have to finance the deal if they did discount, which you already stated.
There doesn’t seem to be much to work with here.
Hmmmm, and I was excited about this deal Piper.
I need to move on to the next deal I think.

import · November 19, 2000, 12:24am

How dare you… put up your dukes - Posted by Leslie

Posted by Leslie on November 19, 2000 at 01:24:13:

How dare you misunderstand my perfectly worded, gold plated advice… lol.

I meant to say this was not “the” super deal, but
great opportunity to learn the ropes. Practice is a good thing. Real offers and real life experiences are the true teachers.
Not knowing (or simply not remembering) about a form to use might show inexperience in the sellers eyes. Not having everything you need to move forward just might cause a “newer investor” to fumble the ball on the money maker deal next month. I like to encourage people to wade in and find out what works. In this case talking to those lenders about discounting might help to gain the experience, and self-confidence. I often learn a lot on the little deals even if I decide not to finish the them.

Leslie

P.S. landscape my eye (he he he)

import · November 17, 2000, 9:42pm

Re: The 10’ High Jump… - Posted by JohnBoy

Posted by JohnBoy on November 17, 2000 at 22:42:24:

Jim,

Are you saying this would to much of a waste of time to just pick up a phone to make a few calls to these lenders to find out what they would or not be willing to do? Jim, a couple of phone calls??? Isn’t that pretty much what most DEALS consist of doing at a minimum? I mean, how else does any one even know if there’s a deal or not unless you take a little time to check into it?

I know these non-season refi’s are hard to come by, but he said he could get financing on this deal if he needed to. Now I don’t know what his credit is like or how strong of a borrower he would be considered or even if he has a relationship with a local bank or not that he might be able to get funded through. But why not at least pick up the phone and make a couple of calls to at least find out what these lenders might be willing to do?

Also, we don’t know how far into the foreclosure process this is or how long the process could take in his state. I don’t think getting the first to wave the $8500 in arrears is impossible. Granted, they may not reduce the principle balance of the $73k, but they might at least wave the arrears if that meant clearing this thing off their books now, rather than letting this thing drag on, especially if this can drag out for some time yet.

The second said they would take $12k. That’s was their offer if I understood correctly or assumed correctly I should say. So would they reject a firm offer of $9600?? Who knows. But you won’t know until you ask or submit a written offer to find out. Would that be to much of a waste of time to submit a written offer to the second after making a phone call to the first and assuming they accepted to wave the arrears for a fast close on the deal?

As far as closing costs, if he finds a lender to treat this as a refi vs. a purchase, how much cost could their be? Plus, they would probably roll the cost into the loan costing you nothing out of pocket. I guess that would all depend on the lender and whether or not they want to hit you up for some points or not and whether you’re dealing directly with the lender or using a broker. When I did a deal like this (taking the deed and refinancing after recording it) my total cost was $600. They only charged us for appraisal, recording and title and they just added into the loan. Now whether he could find that or not I wouldn’t know. But the first thing I would do with this deal is at least pick up the phone and see whether I can get any where with the first or not. A simple phone ot two would pretty much determine whether the deal was worth pursuing or not. Would you at least agree with that? A phone call to see if you have a shot at picking up around 20% equity on a deal! That seems worth the time to make a few calls to me!

import · November 17, 2000, 8:31pm

Jim Did I Ever Tell You I could Jump That. - Posted by phil fernandez

Posted by phil fernandez on November 17, 2000 at 21:31:41:

Hey Jim,

I’d never call you crazy, at least in a creative real estate sense. LOL. But your key here is, can you get the mortgage holders to discount. If they won’t or if they only discount an insignificant amount, no deal. However if you could get them to discount enough why wouldn’t this be a good deal.

I don’t think this would be a slam dunk because you are going to have to find a lender that will do a nonseasoned refinance, but heck give it a try. And what if the guy has a great track record, don’t you think the bank will have to look at this.

import · November 17, 2000, 9:51am

Jim IL, Phil Fernandez, JPiper, HELP with a deal - Posted by JohnBoy

Posted by JohnBoy on November 17, 2000 at 10:51:05:

One more thing. You might want to go ahead and get the deed from the seller NOW. Just DON’T record it yet! That way if you get everything else worked out all you have to do is record the deed at that time. This will eliminate any chances of the seller changing his mind later once you’ve gotten everything lined up or deciding they want some money out of the deal or they won’t sign the deed. Just explain to them that you will take the deed now, but until you can get everything verified and approved you will not be recording the deed. If it doesn’t work out you will just tear up the deed and the deal is off. If everything goes to plan then you will record it and at that time it will be a done deal.

This way you keep total control of the deal and don’t leave anything to chance with the seller trying to change their tune later if you get everything finalized to close the deal!

import · November 17, 2000, 9:34am

Jim IL, Phil Fernandez, JPiper, HELP with a deal - Posted by JohnBoy

Posted by JohnBoy on November 17, 2000 at 10:34:08:

A lot of times the bank will want verification that you have the funds to close or the financing already lined up before they will commit to any pay off amounts. So I would start locating a lender that would do this type of a loan now and get pre-approved based on your credit for up to 80% LTV on a $105k dollar amount. That way if one of the lenders want proof of funds you can get a pre-approval letter from your lender.

Another alternative to try if you can’t get the first to agree on a workable amount or the second to take less is to try and work a deal with the first getting them to finance you. Usually once a loan goes bad the lender just wants it off their books and doesn’t want to be bothered with it again. But their are times they may be willing to work something out depending on the circumstances. You just never know until ask!

If you can’t get the numbers worked out using the first approach, then try this one and see if they would do anything or not.

You ask them, Mr. Banker, if I could show you a way that would SAVE YOUR BANK from LOSING any more money on this deal by having to pay out attorney fees, court costs, waiting to get the property back which you know could take up to a year or longer, ESPECIALLY, when the borrower drags this out until the end and then files BK to drag the process out even longer sticking your bank with additional holding costs, because your note is not performing and then having to either, spend MORE money to fix up the property just to TRY and recover your losses or take a steep discount to get it sold and pay a realtor commission on top of it, would you be interested in avoiding all this and put this note to rest by financing a new qualified buyer? If your bank would consider refinancing this with a new first and adding about $12k to it so we can satisfy the second lien holder on this I can give you a qualified buyer that would buy the property TODAY, and give your bank a new performing loan NOW and put this old non-performing loan to rest! Would that be something your bank would be willing to look at Mr. Banker???

Unless you ask, you’ll never know what they will say. The only problem with this approach if they would consider this will be that they will more than likely want to add all their fees and arrearages to the new loan in addition to the $12k to satisfy the second making your new first at much higher LTV. So I would work hard on the first approach and try to get them to discount something just to take care of this problem now and get the loan off their books.

I don’t know of any lenders that are doing non-season refi’s for non-owner occ off hand. They are harder to come by right now, but you might try giving Ed Garcia a call and see if he knows any one doing these. If his license covers the state you’re in he may even be able to handle the financing for you on this deal.

I know Associates used to do these in some states, but I heard they have changed things a lot and in some states they aren’t even writing new loans, but you can check with one of their branches in your state to see what they say. I’ve used them to do a deal just like this one over a year ago, so you might look into it for your area and see what they tell you.

import · November 17, 2000, 7:50am

Re: HELP with a deal - Posted by Scott SC

Posted by Scott SC on November 17, 2000 at 08:50:45:

Thanks Phil. It’s good to hear from you.

I will call the first and just see how willing they are to negotiate.
I don’t mind getting the financing for this place if the deal is good enough. It’s not my first choice for getting properties but if the equity is in the deal I can do it like that.
The wife is a pretty reputable realtor in the area (shhhhh, no booo’s please) and she thinks she could have the place sold for appraised value in 3 to 6 months. But the carrying costs are great.
I’ll call the first and see if they will discount.