Posted by Rich[FL] on January 17, 2002 at 08:33:03:
Great ideas Ron. I’ll keep them in mind in case I need to use some of them in the near future.
I keep remembering the relationship between price and terms. And another suggestion from one of the gurus about submitting an offer with multiple options for the seller to chose. In this case, my all cash offer would be for, say, $60k with fast close. For the terms offer, it would be full price - current mortgage balance but they would finance my purchase of their mortgage at a 2% interest. The first offer they would lose some money but would wash their hands of the whole thing quickly. The last offer they would at least get the money they loaned out for the original mortgage and they’d have a performing loan again and not have to show a loss, but I’d get great terms (about $384/mo payments!) even though I’d be paying a little above market for the house. In that case I could rent it for a little below market and still make over $200/mo.
I think the key here is to figure out what the differences are (cost, time, etc) to get a deed in lieu of foreclosure vs a straight foreclosure. I have a call in to a lawyer about this one right now.
This deal is really becoming kinda fun! I never realized I could negotiate with a finance institution like this (though I have heard it can be done) and to know you (I) have the power to solve their problems is exciting! I don’t think I want to do this everytime (pay more than market value for a house) but this opens up the brain cells to spot other opportunities.
Buying mortgage in foreclosure - Posted by Rich[FL]
Posted by Rich[FL] on January 14, 2002 at 15:41:59:
I’ve been advertising for pre-foreclosures through researching the courthouse records. I had one guy call me about his house and I went to see it. Unfortunately, this is not a good one to get “traditionally” (no down, subject-2, bring loan current, etc, etc) because the mortgage balance is $104k, cost to cure approximately $6k for a house worth at best $95k.
I almost walked away from this but I thought what if I go to the mortgage company (Household Finance) and ask them if I could buy their non-performing mortgage?
Here’s the $64 question: who would I want to talk to? President? VP? Loan Officer for the loan (I have that information from the seller, including the account #)? I figure if I could get them to sell at a big enough discount that would it make it worth my time and effort, why not? The back end idea is to have the owner give me a deed in lieu of foreclosure then I can turn around and re-sell or rent. Any other ideas or suggestions?
It used to be that this sort of decision was up to the local office manager. I believe this has all been centralized at the Ellensburg, IL office (if I remember correctly). You might try calling the local manager, but I think you will be referred to headquarters.
Re: Buying mortgage in foreclosure - Posted by Rich[FL]
Posted by Rich[FL] on January 16, 2002 at 12:51:17:
Thanks for the info Ron. I ended up calling the local office (the only number I had) and they referred me to the IL office. They also said that Household has never sold a mortgage in at least 5 years.
Called the IL office and they said it’s rare, but would entertain an offer to buy this defaulted mortgage I was interested in! They gave me a fax number for me to pass them a written offer.
Question for you since I’ve never done this before: should I spell out the detailed information about my offer (market value less fix-up less foreclosure less profit less contingency) or should I just send them the bottom line?
That sounds like progress in the correct direction.
I would suggest that there are probably two ways to go with this. One would be to set up some figures for them, as you mention. However, I would not get very elaborate with this. I would suggest it be less than one page, probably less than half a page. It would NOT include anything like your profit nor the fixed up value of the property. It would be a rough estimate of the current market value and maybe something about how much it will take to bring the property up to “useable” condition or “standard” condition.
The other way would be to just send the offer. I would not even mention that this is a negotiable number. Nor state that it is the “most I could pay,” or anything like that. Just something to the effect “I am willing to pay you $zyx,000 cash for the loan. I would like to suggest Jan xx, 2002, as the date to complete this transaction, if you agree to it.”
I am more inclined to the bare-bones approach. The lender will already have had a real estate broker or agent look at the property and give them some estimate of the market value of the property. And perhaps some estimate of the fix-up costs. Suppose that the agent’s value is lower than the one you tell them? Not so good. The only value of your estimate of value is if it is considerably lower than that of the agent, and it is believed. Your creditability, as a potential buyer, is going to naturally be less than that of the agent. Consequently, I doubt if you should provide them any numbers. If they decline your first offer, you might ask them what their “BPO” for the property is–that is “broker’s price opinion.” If their figure is higher than yours, you might say so and fax them some comparable sales and your estimate of market value and fix-up costs. But only after you reach this stage.
Now, remember, I don’t like negotiating. And some people might have different approaches and opinions. But this is how I would approach it.