Hard Money and Discount Mortgage? - Posted by MicheleCO

Posted by Nate(DC) on April 08, 2002 at 11:39:36:

I think you will have a hard time getting the lender to agree to a short sale if the borrower is no longer the owner of the property. The main reason a lender accepts a short sale is the certainty of cash (albeit, less cash then they are owed) NOW vs. the uncertainty of something (maybe some cash, or maybe having to take the property back and try to resell it) later. If the borrower deeds you the house and you make up the back payments, the lender isn’t going to be as interested in a short sale.

I think you’re better off just negotiating the short sale and buying the property outright with hard money. I am not clear why the “time it takes to go through the short sale process is cutting into your profit”. Until the short sale is done, you don’t own the house, so you are not incurring any liabilities. Assuming your short sale price is fixed (say, $60K), it doesn’t matter that the borrower is incurring new arrearages every month, because if the short sale application is approved, you pay the price you negotiated, nothing more.

NT

Hard Money and Discount Mortgage? - Posted by MicheleCO

Posted by MicheleCO on April 03, 2002 at 21:08:57:

Can I get a hard money loan to buy a discounted note? I have a house that the lender is willing to discount or short sale. I am going to be offering in 60-65 % range. The sellers will deed me the house contingent upon me aquiring a sufficent discount. My exit strategy is to sell retail or refinance and sell L/C or L/O. How would this work differently then a normal hard money loan? Thanks. MicheleCO.

Re: Hard Money and Discount Mortgage? - Posted by Nate(DC)

Posted by Nate(DC) on April 03, 2002 at 22:13:42:

Example: House worth $100,000. Seller willing to let it go for loan balance. Current loan balance is $70K and you want to negotiate it to $60K.

Step 1: Sign contract with seller for $60,000 contingent upon lender approval.

Step 2: Get lender approval.

Step 3: Get hard money lender to lend 60,000 on a 100,000 house.

Doesn’t sound too different to me.
NT

Re: Hard Money and Discount Mortgage? - Posted by MicheleCO.

Posted by MicheleCO. on April 03, 2002 at 23:00:29:

Got to thinking, If I had that much equity, why would I go the hard $ route? Couldn’t I just get a conventional investor loan. If I go the short sale route, I have lots of time to line up financing. If I go the discount route, I have access to quick money and I don’t have to jump though so many hoops. Does anyone have experience buying paper with hard $ or conventional methods? Thanks again for the help. It is always appreciated. MicheleCO.

Re: Hard Money and Discount Mortgage? - Posted by Nate(DC)

Posted by Nate(DC) on April 04, 2002 at 01:28:57:

Can you get a 100% LTV investor loan? If you buy the property in a “short sale” type of situation, the loan will be made on the PURCHASE PRICE even if that’s only 60% of the market value under normal circumstances.

If you think you can find this given enough time, then maybe that IS the way to go.

If you can’t find that or for whatever other reason decide to go the hardmoney route, I still think it’s easier to do what I recommended than to try to buy the note. A hardmoney lender will have a MUCH easier time trying to understand that they need to make a $60K loan secured by a $100K property, than that you want them to make a $60K loan, secured by a pledged first mortgage, for you to buy that mortgage for the purposes of foreclosing it and gaining title to the property. Essentially you would be wrapping the existing mortgage with the hard money loan.

Good luck, whatever happens.
NT

Re: Hard Money and Discount Mortgage? - Posted by MicheleCO.

Posted by MicheleCO. on April 04, 2002 at 19:14:57:

Actually, the seller would deed me the home in lieu of forclosure if that makes a differnce. I understand what you are saying in term of keeping things simple with a hard $ lender. I just thought it would be a quicker and easier process to go the discount route. I would like to get T/B’s in the house soon to offset some of the arrearages. The time that it takes to go through the short-sale process, is cutting into my profit. How can I put a T/B in the house if the sale has not been completed. Any suggestions or advice? I do L/O but have never done one in conjuction with a short sale. Not sure of the mechanics and could use some handholding. Thanks. MicheleCO.