Also… - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on June 15, 2000 at 22:18:43:
I forgot to mention in my other note that a lender is more likely to discount if you show that the current owner is NOT going to receive any monies from the transaction. The best way to do that is to have your escrow agent create a preliminary HUD-1 showing where the purchase money is going. There should be no line item for the seller, or left over funds for the owner to pocket.
For example, let’s say you’re going to pay $100,000 for this house; however, there are 3 liens with principal balances that total $110,000.
Lienholder 1 (foreclosing): $78,000 current principal balance + $6,400 reinstatement amount (HUD-1 might show $78,000 loan being taken over “subject to” and $6,400 going to reinstate the loan)
Lienholder 2: $7,000 current principal balance (HUD-1 might show a discount to $4,000)
Lienholder 3: $25,000 current principal balance (HUD-1 might show a discount to $11,600)
Since the first lienholder is foreclosing in this example, the second and third lienholder are in precarious positions; especially if this home isn’t worth, say, $125,000. They risk being wiped out. And, if they haven’t started their own foreclosure actions by bringing the first current, chances are they don’t see any value in doing so. Hence, they’re hoping to get something from the sale. They MIGHT get something, but they might get nothing. So, if they can see that your offer puts more money into their pockets than they might get by “rolling the dice”, they just may go along with the discount.
This example is just that; an example. However, I hope I was able to make the point.
Bill K. (AZ)