Joe! Is this a good deal? - Posted by Fred De La Riva


#1

Posted by BankRobber on December 05, 1998 at 20:16:37:

I find it hard to believe that any solvent Bank would discount a $110,000 mortgage on a $148,000 house down to $85,000. If they would, then just buy the note and foreclose off the liens.


#2

Joe! Is this a good deal? - Posted by Fred De La Riva

Posted by Fred De La Riva on December 05, 1998 at 17:37:24:

I found a 3bd/2bth house. The house is in good condition and the property is in a decent part of town.
The owners have not paid in three months and they want out.
They have tried to sell, but preliminary title searches have found that their creditors have six different liens on the property totaling 23,000 dollars. The amount they owe the bank on the house loan is $110,000 dollars. The house has been apparaised at 148,000. My broker has told me that an all cash deal could lead the bank to sell the house at around 85,000 and that he has spoken to their creditors and they are willing to discount what they are owed by an average of 40%. That means that I could probably get the house for about 98,000, not including the costs of the loan.
A hard money lender is willing to finance the deal, but only for 80,000 dollars plus six points and if the lien holders subordinate their liens to them. How can I make this deal work? Better yet, should I make this deal work? My goal is to sell the house of quickly probably under market value and put as liitle of my own money into the deal.

Fred


#3

Re: Joe! Is this a good deal? - Posted by Bill Gatten

Posted by Bill Gatten on December 07, 1998 at 22:22:27:

Fred,

Nobody name’o Joe here; BUT… let me say that if you can get the lender to go for an Offer-in-Compromise (Short Sale) down that low, go for it fast! I LIKE those deals, and will be tickled plumb goofy to be your little pardner on it (notice the Texas twang there).

How would we dispose of it (Pard)? Read my other posts on the board today (I’m getting writer’s cramps and boring everyone).

Essentially, my game is “Texas Hold 'Em,” in that I like to get someone else in the property to make all payments, cover the closing costs, and handle all management, maintenance, repairs, upkeep, property tax, insurance, HOA, etc., while we (you’n me) sit back with no duties, no obligations and no expenses, and wait for my (excuse me “OUR”) equity to puff up (while someone else, other than us, pays all the bills).

How do you get them to cover all costs and obligations? Trade them the financing, the tax write-off, and part of the equity build-up and future appreciation, for their agreement to take care of the property and its payments, taxes and insurance.

How do you give them the tax write-off? Make them a co-beneficiary in OUR little ol’ Title-Holding Texas Land Trust.

When the trust terminates and the property is disposed of, we (the non resident beneficiaries) take back all equity and non-recurring closing costs we may have started with; they get a return of their initial non-recurring closing costs; and the remainder is split 50:50 between non-resident and resident beneficiaries. In the end, they got a house for a little bit down and no bank qualifying, and you and I got income property for nothing down and no payments.

And, oh by the way: Offers-in-Compromise have been the way of life here in California for the past 8 years: so I don’t doubt that a bank might entertain a deep cut if the loan is an aged one. Even with a big cut, they’ll usually meet their Note Rate Yield (by eliminating a potential non-performing asset in favor of a new loan) and net a big tax write-off. Typically, they don’t lose a penny on a Short Sale. It’s quite possible that they’d do it, if they can be paid off right away (don’t wait until after their tax year ends, however, as all the rules change then*).

[*Owned a chunk of a bank once and served on the portfolio committee ? wily bunch ?o folks].

Good luck. 'Sounds like you have a winner there. And I hate to say it; but you don’t me in it… it’s too good for that (Though I’m always game. Hey!).

Regards,

Bill