SUB2!Owner Carry!Short Sale! HELP!!!!!!!!!!! - Posted by DFree

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)

SUB2!Owner Carry!Short Sale! HELP!!! - Posted by DFree

Posted by DFree on July 10, 2003 at 16:16:28:

I found this potential deal working on another foreclosure deal and not quite sure how to approach it.
Couple’s house is scheduled for trustee sale on Aug 5th, house is and has been on the market for 80 days (I just discovered after my direct contact with the homeowner). Couple is adament about not letting property sale on courthouse steps, but they’re getting discouraged and afraid due to house not selling as of yet and no real offers. I’ve mentioned a few options and they are willing to consider them, if no one makes a sound offer w/in the next week. I told them I’d get back with them in 2 days with an offer that they could take immediately. I hope this is enough information to get a proper response, I could go on with tons of other information but I want to keep it short.

FMV/House Value $150k
Loan amount $105k
Payment Arrears $6k
house in good condition, just can’t get an offer fast enough
No liens, no 2nd mortgs ready for move in.

Should I offer to pay arrears some cash to owner & reinstate loan on SUB2 deal.

Should I make an offer through the realtor with a lump sum cash now and sum later (6months)Owner Carry

Or Should I risk it and wait til 10 days before the sale and contact them again and offer to purchase at or just below (i don’t think the lender will accept too low of an offer, house in good condition,in a good neighborhood) and some cash to owner

Now the short sale part really has me nervous because I’m not sure if you can pay the owner anything with a short sale, please clear this up if incorrect.

Any Advice is greatly appreciative, I’m racking my brain with this one.

Re: SUB2!Owner Carry!Short Sale! HELP!!! - Posted by Bill H

Posted by Bill H on July 10, 2003 at 19:30:08:

  1. With 45K of equity,house in good condition, good neighborhood, etc., my personal opinion is you have slim to little chance of a short sale.

  2. One of the requirement on the HUD-1 is that the seller will get NOTHING out of the deal in a short sale.

  3. In order for the lender to short sale there must be compelling reason…seller broke, bad financial condition, house not worth loan value,etc. I see none of these in your post.

  4. Your other comments about Sub-2 or Lump Sum…do whatever you are most comfortable with and can get the sellers motivated to go along with.

Good Luck