Posted by B.L.Renfrow on July 10, 2003 at 19:27:15:
No, you can’t pay the owner anything on a short sale, and in this case, I doubt the lender would even consider it because of the spread between the loan balance and FMV. There would be no benefit to them doing so. They can just bid the amount owed at auction and get every dime they are owed at resale. Or if it’s bid up higher, they’ll make out fine also. A short sale is attractive to the lender when the amount owed equals or exceeds FMV, particularly if there are major repairs needed or other aspects of the property which would make resale difficult.
I don’t like your second plan either – trying to get the owner to carry financing. Too risky. With the owner in financial difficulty, who knows how many other debts he’s unable to pay? If you do this, there’s nothing to prevent liens and judgments from attaching.
This appears to be a good candidate for a subject-to deal – IF – and only if – you have the funds available not only to reinstate the loan, but to do any necessary repairs and carry the property for a few months in case you are not able to find a qualified buyer or tenant-buyer right away.
Don’t have the money? Bring a partner into the deal who does. So, you have to give up probably 50 percent of the profit. If your numbers are right, there’s about $40k equity. Half of that isn’t bad for a little work putting this together.
Of course, since the property is listed, the broker will likely be owed a commission. Technically, it’s the seller’s responsibility, but if he doesn’t have the money, it’s going to have to come from somewhere.
And by the way, no, I wouldn’t be offering anything to the owner except maybe a bit of moving money if he is destitute. If you are putting $6k into the deal, paying the broker, saving his credit and taking all the associated risks, you deserve the profit.
Brian (NY)