Ed, I posted some a couple of months ago about a pre-foreclosure I was working on. It involved someone who was way behind on their payments, plus they owed about $105k on a house worth, at best, $95k. Here’s what I did. Since I couldn’t simply make up their back payments to bring the loan current because they were upside down, I decided to approach this from a different direction.
I got their mortgage information then called the mortgage holder (Household finance in this case). I gave them two offers (in light of the fact they told me they NEVER sold off their loans - even those in default!) One was a full price offer of the current mortgage balance, $105k, BUT they would finance it at 2% (win-win; they’d get ALL of their money back, though at a small interest rate; I’d get in with no money down with a small monthly payment - about $380 or so, great for cash flow); the other offer was a cash offer of $60k. Well, they did call me back after about 3 weeks and asked if I’d consider $85k. I said no, they were unwilling to negotiate further, and that was that. Oh well…win some, lose some.
If they have equity, why don’t they just sell the property before they get forclosed on? If they have enough equity to make it worthwhile for an investor to pursue, couldn’t they just list the property slightly below FMV and get a quick sale?
Is it that most people who are getting forclosed on just wait to the last minute to even think about the problem i.e. they are in denial? Or am I missing something?
I think ALOT of times the owners still think that they can save their property, or some “miraculous” miracle will happen.
Most of the times there are other fees assessed against the property.
Lawyers and other companies have to start paperwork.
The lenders have late fees tacked onto the loan bal.
Their will always be a re-instatement fee. By the time this is added up, there is not enough equity left to make up these amounts.
Anyone else can chime in here if I am wrong.
One of the things an investor can do is try to “discount” the mortgage.
But, it won’t always work.
Buying and selling a house is a very “emotional” event!!
Losing one and having their credit destroyed is even worse.
Thats why some people will deed their property to you when this happens.
We are just here to help them out.
Posted by Carmen_FL on March 04, 2002 at 18:28:22:
You are right, a lot of people who have equity in their home could just list it and still make some $$.
The problem comes when they actually have to DO something. Many people are paralyzed, by fear, embarrassement, you name it. So they wait for someone to come and do it for them, even if it costs them $$. Some people do take the “ostrich” approach, and “hope” that something happens before they get foreclosed on; then by the time they act, it’s too late to sell the house traditionally (list w/ a Realtor, etc.) 'cause it could take 3-6 months to sell that way. So now they feel stuck again.
And no, the cases where the owner has a lot of equity are not the only ones you can make $$ on. You can make $$ on houses with NO equity (where the seller wouldn’t be ABLE to sell because they’d owe more to the bank than they can sell for after costs). These people are stuck, if they don’t have the knowledge to do what we do - hence we get to make the money. We can put these properties in trust, do a short sale, lease-option them, etc. They don’t know how, and don’t want to - they just want their problems solved.