Posted by Jim Locker on December 15, 2000 at 10:41:56:
Let me get this straight. Seller owes $45K on first, and $25K on second, for total debt of $70K on property valued at $65K?
Doesn’t look to me like you can make any money on it at all.
Even if the 2nd mortgage company discounted the paper 50% (and why would they?) you still would be looking at $57.5K debt on a $65K property. By the time you factor in sales costs, there will be very little left and in order to get even that you will have to sell - quickly - at full retail for the property.
This kind of seller was the subject of a post that I made just yesterday here:
Sorry to keep giving references to posts at The Motley Fool, but I have been a regular there for several years, and a lot of these issues have come up there already.
Flip with a 2nd Mortgage? - Posted by Walt Beasley
Posted by Walt Beasley on December 15, 2000 at 10:32:49:
I have an opportunity to take a condo “subject to”. Owner wants to walk away from burden w/out filling foreclosure or bankrupcy and start new life in another state. Very motivated BUT there is a catch. FMV of property is $65-68k, owes $45k. Its in near perfect condition, current on everything. He took a 2nd a few years back to address some consumer debt, still owes $25k. Is there a way to take the property subject to based on the orginal mortgage and not effect the 2nd? Or contact the holders of the 2nd explain the owners situation(forclosure)and see if they would be willing to reduce the payoff? If so, how would I go about this. Feel confident could flip or L/O for $65. Is there hope here? Any ideas by anybody would be appreciated.
Re: Flip with a 2nd Mortgage? - Posted by JPiper
Posted by JPiper on December 15, 2000 at 11:03:02:
Mortgages are always subject to discount…BUT, if these mortgages are current it’s unlikely that either mortgage holder would discount. Once they’re in arrears the story changes. That second mortgage holder may become more than willing to discount…and probably more than 50%. But again, it’s going to take delinquency on the part of the borrower.