If your concerned about having to buy out the 1st, you might want to consider a lease option using the $3,000 as the option money. Raise the rent give them a rent credit to accumulate some more downpayment money so you can close the deal conventionally down the road. This way if they stop paying you’re talking eviction not foreclosure.
If your buyers had a bankruptcy two years ago, it would seem that you could find financing for them. Have you asked the banker if they need the extra year to get 95% financing. Or a better question to the banker might be, " will your bank 95% finance these people in a year.
Posted by Bill Taylor on May 08, 1999 at 22:06:43:
Ready to flip my first rehab and here is the situation. Bought the house for 17000. Put 16000 into rehab. Now have it sold to someone for 55000. Problem is they had a bankruptcy two years ago. They can come up with about 3000. Some lending institution will go 80% LTV. Now lender is suggesting I cary back around 15% on a second for a yr. giving them enough time to re-finance at hopefully a 95% LTV. Any suggestions? I am a little concerned if I would have to take the prop back in a yr.then I would have to come in and buy out the first and also have a house that wouls not be in as good a shape. Any suggestions?
If the foreclosure laws in your state take a lenghty period then I would not put them on title. You can use a contract for deed or a lease/option arrangement to be able to remove them quicker if needed. The only person to win in refi’s is the lender. You may also want to find a B/C mortgage broker that can determine if he can get them a higher LTV loan.
16K seems like a major rehab. I think everyone would appreciate if you would post the rehab costs by catagory.
FHA will finance a borrower 2 years after bankruptcy…assuming that the borrower has had NO further difficulties subsequent to the bankruptcy, and assuming that they have reestablished positive credit in some manner.
If this guy has had further problems subsequent to the bankruptcy…I’d either want more money down, or I’d find another buyer…he hasn’t learned his lesson.
Since the buyer has credit problems and you have to carry back a 2nd mortgage, tell the buyer that you have to increase the price of the house to compenstate for your increased risk in selling them the house.
If the property will appraise, raise the price to $60-65k. At 85% LTV of $65K, the buyers new loan is $55,250, which is what you were asking for in the first place. And you still have a 2nd mortgage on the property that you may get paid on in the future. For every additional 1k increase in appraisal value(assuming the buyer can qualify for the increase), that nets you additional $850 in cash at the close.
Talk to the loan office about this. It should put some extra $$ in your pocket.