Posted by Stacy (AZ) on October 05, 2000 at 11:58:25:
David, this is how I handle it as well. Get a deed notarized, but don’t record until it’s a deal. I also get the sellers to sign authorizations for me to speak to their lenders.
Stacy
How do you… - Posted by WilliamGA
Posted by WilliamGA on October 04, 2000 at 22:05:41:
Hello everyone,
I need help from those of you who have had luck in getting a second to discount or sell their note to you. This will be my first real attempt to get this done and I will appreciate all replies.
House has FMV of 130k
1st 82k @8.5% with pmts of 780 piti
2nd 35k @ 15% with pmts of 455 pi
1st is 4k behind
2nd is 1k behind and has already lowered interest to 7% for one year due to owner “hardship”
Owner is talking to first about a deed in lieu of foreclosure
House is in good shape except for interior paint and carpet and a pool that they partially filled in because they couldn’t afford a new liner (1500) I figure 5k ought to take care of it all.
Owners are separated and need to get rid of this house. Willing to do whatever to do so. Have tried one investor who told them he would take it, had them move out then reneged. House is empty, high grass, etc.
What do I say to this 2nd mgt holder (Empire Mgt.) to get them to discount to say 10k or less?
Thanks again,
WilliamGA
Re: How do you… - Posted by Randall_OH
Posted by Randall_OH on October 05, 2000 at 13:58:32:
First of all, I don’t think the first mortgagee will take a deed-in-lieu with a second mortgage on the property. If they did, then they would have to payoff the 2nd lien in order to sell the property. Obviously, they won’t do that, so their only option is to foreclose and get paid off from the proceeds from the Sheriff’s Sale. Since the first mortgage LTV is approximately 65%, they should come out whole.
Assuming this house brings 75-80% of the market value at the Sheriff’s Sale, the 2nd mortgagee would only get $17-18K on the high side at the sale. They would have to buy the house at the sale to protect their entire interest, and then resell it. Since REO’s don’t bring full market value, the 2nd lien holder is going to lose money. Assume the house sells as an REO for $120K. After paying a 5-6% broker fee, holding costs, minor fixup costs( mowing grass, hauling, etc), I figure the most they would net on the sale of this house is around $110K. Subtract out the payoff of the first mortgage of $87K, and they would end up with is $23K. I doubt that they will write a check of $87K in order to make an additional $5-6K. From my viewpoint, the 2nd lien holder is looking at loss of around $20K.
I would start at $10k, but instead of trying to do the short sale, why not buy the note? It is less time consuming, and you don’t have to jump through all the hoops of getting authorization from the borrowers, yada yada yada, etc. You could even escrow the $10k with your title company and have your attorney send in a written letter to the lender offering to buy the note. They know you are serious if you have already put up the money.Just make sure you get the deed from the seller, then buy the note for $10K. File the deed, reinstate the first mortgage, release the 2nd, and then you will be the proud owner of this property. Good Luck.
William, could you explain… - Posted by tb
Posted by tb on October 05, 2000 at 24:19:16:
…what you meant by this line in your post :
“Owner is talking to first about a deed in lieu of foreclosure.”
Thanks in advance and still greedy for knowledge!
tb
P.S.You da man! LOL
Re: How do you… - Posted by Mark
Posted by Mark on October 05, 2000 at 24:18:41:
All you can do is call them. Since you are dealing with a mortgage company, you won’t have much of a sales pitch. They know what their options are if the owner defaults. Tell them that you are interested in buying the place, but the current debt is more than your business plan for the property supports. Then ask if they would consider discounting their delinquent note in order to get their money now. If they say “no”, they are obviously unmotivated. If they say “yes”, then you can negotiate the amount. Unless you are in a depressed real estate market, you may have trouble getting them to discount a 35K note down to 10K. As a mortgage company, they have the funds to acquire the property and just resell it at FMV, but stranger things have happened, so it doesn’t hurt to ask. You may want to have some pictures of the overgrown lawn, bad paint, bad carpet and busted pool to show them. These things can make a note holder more motivated.
Good Luck
Mark
Re: How do you… - Posted by David Alexander
Posted by David Alexander on October 04, 2000 at 23:47:15:
Just call them up and and talk to them. I would get the deed first so that you are in control. Maybe the second will pay you to leave.
Sounds to me like they are either aggressive, or motivated and trying to protect their position a phone call or two should clue you in.
David Alexander
Re: William, could you explain… - Posted by Mark (SDCA)
Posted by Mark (SDCA) on October 05, 2000 at 10:26:41:
With a dded in lieu, the owner deeds the property directly to the bank. This at least lets the bank avoid having to go the whole foreclosure route.
As for the owner, they do avoid a foreclosure on their record but the 1003s (loan applications) I have been seeing lately specifically ask about dded in lieu as well.
Mark
Re: How do you… - Posted by Mark(SDCA)
Posted by Mark(SDCA) on October 05, 2000 at 10:28:10:
Why would you get the deed? If they refuse to discount then they will be foreclosing on YOU. I would get a contract instead.
Mark
Re: Deed in Lieu - Posted by Stacy (AZ)
Posted by Stacy (AZ) on October 05, 2000 at 12:04:04:
Many times a deed in lieu is recorded in the debtor’s credit history. Make sure they know that a deed in lieu will carry just about as much negative weight as a full blown foreclosure. Big mistake. Many times borrowers are not aware of this, and think it’s just an easy way out. One more reason to sell to you instead of allowing the bank to get it back.
Stacy
Re: How do you… - Posted by David Alexander
Posted by David Alexander on October 05, 2000 at 11:10:49:
No… they would still be foreclosing on the property. Get the deed, didnt say file it. Let the current owners know that if you cant work something out with the second then you you won’t be able to make the deal work.
But the action of having them deed the property to you will prevent them from giving in to the second lien holder and screwing up your deal when they put the pressure on to get the deed themselves.
Just the way I’d handle it.
David Alexander