Need Advice on a Deal - Posted by mvm

Posted by mvm on March 29, 2006 at 12:30:38:

Thanks Guys,
Thank you for the great piece of advice.
I’ve decided to pass on this deal.


Need Advice on a Deal - Posted by mvm

Posted by mvm on March 28, 2006 at 10:53:28:

Hi Gurus,

Need advice on a deal that I’m working on.
I have a 3/2 SFH that im looking at. the owners are going thru a divorce. they bought the house just 3 months ago in dec 05. The property is 100% financed with 80/20 loans.
the 1st mtg is 260k with a monthly payment of 2320$ and
the second mtg is 65k with a monthly payment of 605$.
The owners are behind by a month. The total monthly payments seem to be quite high.
my thought is to do a shortsale on the second and reinstate the first.
both, the 1st & 2nd are held by the same bank.
My question is, if the 2nd mtg disagrees to shortsale, would you take still do this deal as a SUB2 by making the payments current considering the high monthly payment and then lease option it to a tenant/buyer.
btw, the house is in perfect moving condition and there is no equity in the house.

Please advise.


Re: Need Advice on a Deal - Posted by Kevin - WA

Posted by Kevin - WA on March 28, 2006 at 14:32:10:

If you take this house Sub2, with no equity and the numbers you gave, you could have a problem. Unless you want to kick in money on the mortgage payment each month, you may have a problem selling it. Even on terms, almost $3,000 for a $320K house is pretty steep. And you did not mention if that is PITI. If you have a buyer already it might be worth doing, but be careful. These people are already behind, so obviously they are not going to pay 2-3 months for you so you can find a buyer. $3K in mortgage payments adds up quick when something is vacant 2 or 3 months.

I think I would pass unless I could get the short sale. Good luck.

Re: Need Advice on a Deal - Posted by Rich

Posted by Rich on March 28, 2006 at 12:07:18:

If the same bank holds the 1st and 2nd, then isn’t negotiating with one the same as the other? I’d try and convince them to accept a short sale. Hopefully its in an area where the hosues were selling quickly and now experience a slowdown so they’ll be motivated to accept a short sale to keep the property off the books.

Get a copy of the Mortgage (usually available on the County Recorder website) and read the due on sale clause. If you change ownership of the property, the DOS will be triggered. If you talk to the bank first regarding a short sale that might red flag them to look for a change of ownership. With rates edging up, they may decide to call the loan in order to get a higher interest rate. Problem with SUB2 is that is DOES trigger DOS and any action or inaction on the part of the lender is under the lender’s control not yours.