A general warranty deed is the only way. They do not have clear title so they can not do contract for deed. And the loan makes it against the law to quit claim.
As for the 12.5K, who is they the bank or the owners. I am assuming the bank.
Here is how I would approach the deal. Get a signed purchase and sale contract for the agreed deal. I would try for owners get $1500 cash to move within 5 days and I would take care of the foreclosure. Once the contract is signed call the bank that has the first and talk to the VP of lending. Tell him that you want to meet with him to discuss the foreclosure on address XYZ. When you meet with him ask about the back payments and lawyer fees owed. If they are in your range tell him you will pay these fees if he will loan you the money to buy and fixup the house. Unless you are a really big credit risk you will get the money. The bank may even pay the closing cost for you. I usually ask for them to. Remember you are doing the bank a favor.
Remember when you go to the bank, you are going as a professional investor. So play the part. Have all of your financial data ready and the statements to prove it. Take the comps showing the value of the house. Take everything that supports your case. If you project confidence you will get more than you would believe. Make the bank think you are a seasoned pro.
I have a property in Texas that I am working on currently that is in pre-foreclosure. The home is valued at $140,000, and they have a first balance of $50,000, and liens total $10,000. I have agreed to pay them $35,000 at closing. The back payments total $12500. I was wanting to do a contract for deed for the property, which has an assumable loan, pay the back payments for $12500, when I do the contract for deed. I need help on how the contract for deed works, what needs to be done so that the house is taken off the foreclosure docket, and is this the correct way to do it if I have the $12500 to pay now? Any help at all would be greatly appreciated.
Brandon,
Why are you paying the owners 35K? I don’t mean to sound so heartless, but you are doing them a favor by saving their credit. I would go back and tell the owners that you will give them 35K minus the 12.5K for the back payments. I would not exchange any money until they are out of the house and the bank has agreed to stop the foreclosure.
Also, you don’t owe the people with the 10K liens any favors either. So talk to this creditors and ask for a discount. Offer to pay them 20% of the amount owed. This is not uncommon when dealing with foreclosures. Sounds like you have a good deal here. So good luck. Just make sure that the house is worth 140K. Use an appraiser’s opinion not the owner’s.
Nick, Do you know what I should use in this situation? A General Warranty Deed, Contract for Deed, or a Quit Claim Deed. The loan is assumable, but my credit is not good, but I do have the access to $12,500. This is the only way that they will do the deal.