Posted by Charles-DFW on June 21, 2000 at 07:36:38:
You are right, the second gets paid out of what
is left after the first is paid. The third is then
paid out of what is left after the second is paid, and
so on until everyone is paid, or the money is gone.
You said the FMV was $125k, but do you know what the
house will bring at the foreclosure auction. Apparently
the investor that bought the 2nd thinks it will be a
little more than $105k (if he/she is selling at $33k).
If I owned the second, I would “push up” the bid to the
point that it would not be worth winning the bid, and
having the added expense of reselling the house. I
would not “push up” the bid beyond this point, because
I don’t know that someone will bid higher.
I just had this thought, and since I am still a beginer, I can’t believe that I could have actually come up with a new technique.
It relates to taking a property “subject to”. I have made two offers to take property this way and was rejected for the same reasons both times. The sellers were worried that the bank would find out and call the loan. They trusted me but it just seemed shady and kinda below board to them to have to hide it from the bank.
So, I had this thought; What if they gave you a second mortgage for the small amount there due (in my case both of the sellers were a couple payments behind) with the full amount due almost imediatly. Then had them sign a “deed in luo of forecloser”. It seems to me that the bank would then have to let you make the payments to protect your intrest. Thats the way that I understand it, in Florida anyway. Of coarse you wouldn’t report that to the credit bereau. So the credit could stay clean.
ie.
The property was worth about 90K seller owed 77. She was two pmts. behind 750 each. She wants $1000 to move with but would probably take less. I offered to give her $500 and take the property “subject to”. The numbers were probably OK to her but she is afraid of having a forecloser on her record. So she said that she didn’t think she would want to do that. I then went into L/O mode. But could I have given her (well technically loaned her) the $2000 having her sign a mortgage the took over her payments without having to ask the bank? The reason that I would rather not L/O are obvious
Less Down Pmt $$ than I could get W/ owner financing being the biggest one. As it is I’m not makeing much up-front cash.
Please tell me why this wont work. I dont know all the ins and outs of RE or forecloser, but from what I do know I can’t see the downsides. I hope someone can enlighten me.
BTW Go easy on me. Its just a thought from a reletive beginner.
The idea has been done before, but it is a lot of brain damage and does not prevent the lender from calling the loan due, since there is no exception under the law for a deed in lieu of.
The problem here is the lack of motivation of your seller. Most sellers that are truly motivated could care less about the due on sale. More often, the seller’s concern is that you won’t pay his loan.
My suggestion is that you find a seller more motivated to get rid of his problem - you will soon discover that the due on sale is not an issue for most motivated sellers.
OK That does answer my question, I am going to keep in touch with her to see if she changes her mind.
Any ideas about how to make this sound more “seller friendly”?
BTW Your “Cash Cow” was going to be my next REI purchase. I liked how thorough your L/O workshop was. Maybe you can fill in some gaps left by my other coarses
If there are 3 liens against a property, and I buy out the second at a discount (Deed of Reconveyance), does this move me in to the third position at the sale?
The property is FMV of 125. The first is 72K, second of 51K, and a third of 24K. I am thinking about buying out the second for 32K. I would then go bid at the auction against the first. Please tell me what happens under the following scenarios:
I think the land contract sometimes makes the seller “feel” better about the transaction because they feel more in control. Truth is, the land contract also triggers the due on sale.
If it is too simplistic, my apologies. I am not an expert in foreclosures. But I believe this is what my dad did.
If it is obvious that the foreclosue is going to go to sale call the 3rd note holder and ask what he plans to do at the auction. If he indicates in any way that he may walk, offer him $1K for his note.
Buy the second for $33K as you stated. Make up the back payments on the 1st loan.
Then you have a choice:
1- Go to the home owner and ask if he will give you a deed in lieu of foreclosure. That way you do not have to come up with the $72K at the auction. And you can take over the property subject to the first.
2- If you are worried about the due on sale clause taking the property subject to, then YOU Foreclose on the homeowner. The 1st lienholder will allow a junior lien holder to take over the loan.
Re: Questions about foreclosure - Posted by Charles-DFW
Posted by Charles-DFW on June 16, 2000 at 14:09:45:
Usually liens are postitioned by when they were
filed. Buying or selling a lien does not change its
position.
When there is a foreclosure lien holders are paid
in order of their position. The first lien holder
is paid off first, then if their is any remaining
the second lien is paid, then the third and so on.
If there is not enough to pay off any of the liens
they are wiped out (even a first position). The owner
still owes, but their is no lien(s) against the property.
Paying $32k for the second you need to be willing to
bid $104k to buy the house (72K first and 32K for your
second).
In this instance, where you make or save money,
if buying, is if the bidding goes above $104K.
I don’t know what % of FMV bidding at auctions
goes, but $104/125 = %83.
Can you wrap a land contract with another LC? - Posted by Jim Beavens
Posted by Jim Beavens on June 16, 2000 at 16:41:16:
OK, suppose a seller doesn’t go for a subject to, but for whatever reason they’ll sell on a land contract wrapped around their current loan. Would this still allow me to turn around and sell the property on yet another wraparound land contract to a new buyer? Do I need to have the deed now, or do I simply need to be able to deliver title when my buyer meets the terms of our contract? (in which case I would do a simultaneous close).
Like you say, subject-to’s can be a hard sell sometimes, and around here people seem to be a lot more comfortable with LC’s. As far as I can tell, the advantages are the same. What are the gotchas I need to watch out for if I went this way? My first thought is that I’ve merely switched the hard sell from the seller’s end of things to my buyer’s. ie, I’ll need to convince them that I really can deliver title, perhaps going so far as to show them a copy of the contract with my seller. But it seems like there are alot more motivated buyers out there than sellers. Any other thoughts?
Can you wrap a land contract with another LC? - Posted by Jim Beavens
Posted by Jim Beavens on June 16, 2000 at 16:37:04:
OK, suppose a seller doesn’t go for a subject to, but for whatever reason they’ll sell on a land contract wrapped around their current loan. Would this still allow me to turn around and sell the property on yet another wraparound land contract to a new buyer? Do I need to have the deed now, or do I simply need to be able to deliver title when my buyer meets the terms of our contract? (in which case I would do a simultaneous close).
Like you say, subject-to’s can be a hard sell sometimes, and around here people seem to be a lot more comfortable with LC’s. As far as I can tell, the advantages are the same. What are the gotchas I need to watch out for if I went this way? My first thought is that I’ve merely switched the hard sell from the seller’s end of things to my buyer’s. ie, I’ll need to convince them that I really can deliver title, perhaps going so far as to show them a copy of the contract with my seller. But it seems like there are alot more motivated buyers out there than sellers. Any other thoughts?
The trustee (lawyer) called back and said that the second had already been purchased by a private investor. She said the bank is sure that they don’t want the house they just want to make some money on the second. She thinks that they will settle for 33K. (She gave me their cell phone numer) I know this is a stupid question but I want to make sure that I have my arms around this.
If the first is
72K and the second’s face vale is 51K. Then doesn’t the bidding have to get over 72+51 = 123K before the third can get anything. In other words, If I pay 33K for my note and at the auction it goes over the 104, the extra up to 123K would be mine.
This thought occurred to me: If the bidding gets over 104, I could push it up (as long as I didn’t win). Not that I would, I have my own personal ethics that would prevent me from doing that.