possible first deal. Need guidance!! - Posted by JOHNMAN


#1

Posted by Johnman on December 17, 1998 at 17:29:24:

Kevin,

That’s the next step. Jackie sent me a copy of the form she uses.

Thanks for the support.

Johnman


#2

possible first deal. Need guidance!! - Posted by JOHNMAN

Posted by JOHNMAN on December 16, 1998 at 18:23:56:

Hi everyone,
I just got the call 1/2 hour ago. My ad finally produced a possible deal. The lady called and left a message on my machine. I called here back asking here “What can I do for her”. She wanted to know how do I do my business. So I proceeded with "I’m an investor…
blah blah blah and expressed I do this for a profit. Then I asked her what is their situation. She went on explaining! I thought she wasn’t going to stop. I listend and heard this person is MOTIVATED TO SELL! I was in control.

The house is in pre-foreclosure. The house will be up for sale next month (Jan), first Tuesday. They are trying to save their credit. She said she was interested and would like to meet me at the property with her fiancee, who actually owns the house. An ex-wife is involved so I told her that the ex-wife will have to agree with the terms or it will not work. She said the ex-wife is more than willing to cooperate.

Here are the specifics:(these numbers are preliminary as I have obtained them from this lady. I will do my research first thing tomorrow!)

loan balance $65,000 approx
appraised value $77,000 probably old. need to verify. comps
back taxes, payments, insurance $3,600

they have a for rent ad in the paper for $650 and she said she is getting lots of calls. probably could rent for about $725-$775. will check!

I can get this property for the back payments plus taxes and insurance and closing. So that’s about $4,000-$4,300 (maybe)

Here is my plan:

First, I’m going to inspect the property and get comps.

If the property is in good shape and the comps are high, I will have them sign a contract stating they are selling the property to me for the loan amount and no consideration to them. The property is to be placed in a land trust. I will expalin to them that the note will still be in their name and only the title will have a transfer of ownership. I have Mr. Bronchicks course on Land Trusts with all the necessary forms.

I will stipulate that a title search will be made to insure the property has clear title.

Now, my question is when I fill out the paperwork to transfer BENEFICIAL INTEREST to me, is this done SIMULTANEOUSLY at closing, and notarized by the same closer? I understand that the seller “creates” the trust and that Trust Agreement is signed and notarized at closing but what about the transfer of beneficial of interest?
Did I ask my question correctly?

Also, since this is about to go into foreclosure, how do I go about paying all the back payments? What is the process? Do I make the call the mortgage co. or does the seller notify the mortgage company and place them on notice that the payments are about to be caught up?

Does this sound good???

Any input would be appreciated.

Special thanks to Jackie in Dallas. Your posts have inspired me!!!

Thanks to you all!!

Johnman


#3

Re: possible first deal. Need guidance!! - Posted by Jackie in Dallas

Posted by Jackie in Dallas on December 17, 1998 at 09:55:09:

Sorry to bust your bubble - but it doesn’t look too good…

The most important thing you need to find out is what the reinstatement and actual payoff are - you can get this info by using the Request for Mortgage Information form I’m sending you today. have the seller fill it out, then fax it to the mortgage company.

The homeowner should have this information but may not want you to see the actual figures.

One thing you need to learn about motivated sellers - especially ones in foreclosure situations - THEY LIE!

They’ll tell you the payoff is $60,000 but you find out it is $67,000. They’ll tell you they are 3 payments behind - but you find out they are 13 payments behind - so what’s a little one in front of the number???

With the information you have given me - I’d say you need to pass!

The appearance of $10k - $12k profit can be eaten up real fast with closing costs to buy and sell, holding costs, and monthly payments while you are trying to sell the house not to mention the fix up costs –

BUT - it was good experience - the more motivated sellers you talk to the better you’ll get.


#4

Re: possible first deal. Need guidance!! - Posted by John Katitus

Posted by John Katitus on December 17, 1998 at 01:36:03:

I have done exactly what you are describing a few times. I’m with Irwin, though. You have to get all the numbers straight first.

Do you have a working relationship with a Title Company? The way I got good numbers for the amount necessary to bring the mortgage current is by having the Title Company call the bank or mortgage company and ask them. They don’t have to state why they’re calling. Ask them to do it before they check the title - it might not be necessary. They will need a release of information form signed by the owner (leave the “release to” blank empty) so get that and all mortgage info (numbers, phone number, payment amount, etc.) from the buyer first.

Paying the back payments and doing the Land Trust is fairly simple, but there is no reason to pursue that until you know you are going ahead. When you need those answers you can get them here.


#5

Re: possible first deal. Need guidance!! - Posted by Irwin

Posted by Irwin on December 16, 1998 at 21:54:47:

In the situation you present, here is my thinking:
The economics of this deal does not look very good. The info you have is flawed because it was given to you by the property owner. THEY ARE ALMOST ALWAYS WRONG. They will invariably quote the debt low because they haven’t kept track of accruing interest and costs, and they will most often quote the value higher than it really is because they don’t know the market. Even if this owner is on the money, I don’t like the deal.
The loan balance plus arrearage equals about $70k and the fmv is only $77k. To me this presents such a small equity potential that and I wouldn’t go any further with it as an assumption. If you can buy the mortgage at a discount you can create equity; however it’s not easy to get this done. Thereis a lot of resistance on the part of foreclosure departments to selling their paper at a discount. It’s hard to find anyone with enough authority (not to mention guts).

I wouldn’t put $70k into a property unless I see an easy resale value of at least $85k with nothing more than cosmetic fix up.

If I do reinstate a mortgage and take it subject to, I use a very broad power of attorney from the seller, which gives me the power to deal with the mortgage account in all respects. I can’t guarantee it’s fool proof against due on sale, but I don’t see any current loans getting called in, so I don’t worry about it much.
Hope this helps. Sorry if it runs contrary to you doing a deal, but I think there are better ones out there for you.


#6

Re: possible first deal. Need guidance!! - Posted by Doug

Posted by Doug on December 16, 1998 at 20:12:18:

I am assuming the back payments you will be paying is on an assumable mortgage? Are you going to assume there loan? If so being that they are in foreclosure there is a good possibility that they have let other bills and creditors fall behind as well and if thats the case make sure before you assume the Mortgage that no other creditors have put liens on the property. If you need to accomplish this by Jan I wish you the best of luck… Remeber dont rush into a deal because you are afraid you might loose it as that deal might be better off being lost…
Best of Luck
Douglas Timko
notes4sale@yahoo.com


#7

Re: possible first deal. Need guidance!! - Posted by Johnman

Posted by Johnman on December 17, 1998 at 17:21:08:

Jackie,
Don’t worry. You didn’t burst my bubble. I just got excited that I received a call from my ad.
I met with the owner today with his fiancee who is helping him. He really wants out so I told him I need good numbers from the mortgage co. Your form will help a lot. I will send it off next week. I also found out that it isn’t going to be sold at auction next month. They just received the notice that it will go into foreclosure if they don’t do anything about their back payments. I’m on a fact finding mission. If the numbers don’t come out right, MOVE ON TO THE NEXT ONE. It is good practice and the experience I will gain will help me in the future. Thanks for the input and the form.

See yah,
Johnman


#8

Re: possible first deal. Need guidance!! - Posted by johnman

Posted by johnman on December 17, 1998 at 17:27:23:

John,
I’m in Savannah and I will be working with an attorney. Jackie sent me a form for the owners to sign to release information. All of you are correct in stating the numbers from the mortgage co. need to be correct plus the comps must be good. Like I told Jackie I’m in the fact finding mode. Details, detail, details. The numbers need to come out just right.
Thank you for the advice. I appreciate it.

Johnman


#9

Re: possible first deal. Need guidance!! - Posted by johnman

Posted by johnman on December 16, 1998 at 22:13:12:

Irwin,

Thanks for the eye opener. I will do more investigating tomorrow. I will check for comps in the area. I will have the owner call the mortgage company to find out their loan balance.
I will keep you posted of my progress. I won’t rush this.
Thanks,
Johnman


#10

Re: possible first deal. Need guidance!! - Posted by johnman

Posted by johnman on December 16, 1998 at 20:35:55:

Doug,

I guess it would have made my situation clearer if I would have added that they were behind because the renter didn’t pay them for 4 months. These renters were supposed to buy this property from them. I will definitely make sure that there are no other liens on the property. If everything else is hunky dory, how do I go about curing the mortgage?

Thanks,
Johnman


#11

Re: possible first deal. Need guidance!! - Posted by Kevin(OK

Posted by Kevin(OK on December 17, 1998 at 09:50:28:

Don’t trust the seller with this job. You need to find out the amount to bring the mortgage current (I’m sure you will not be pleased with what you find). Have the seller sign a Mortgage Information Release form, and get the info. yourself.

Good luck!!

Kevin(OK)


#12

Re: possible first deal. Need guidance!! - Posted by Doug

Posted by Doug on December 17, 1998 at 24:50:32:

Ok… One way to go about it is to find out if it is assumable… If it is assumable try to call the bank collections unit ( get the letter of contact from the seller as if they are 4 months behind I am sure they have recieved a handful of letters from the mortgage company ) anyway contact the mortgage company and try to explain to them the situation and your willingness to assist in relieving them the burden of foreclosure… Ask them if they would be willing to put the past due payments on the back end if you got the sellers to do the deal so they dont have to foreclose on the property. Banks dont like REOs on their books they cost them money to maintain and are liabilities…But if that doesnt work than assume it and pay the back payments… If taxes arent escrowed by the bank you need not concern yourself with them to close the deal so you can lower your upfront cash needed to close…But you mustn’t forget they are behind and pay them off asap… If an assumption is not something the bank will allow than you must seek conventional funding or non conforming to get the deal done… But if you can assume it you would be in a better situation… Best of Luck to you…
Douglas Timko
notes4sale@yahoo.com