Is this a proper offer on this preforeclosure? - Posted by Debby in Houston

Posted by Bill K. (AZ) on April 24, 1999 at 15:38:13:


I’m in the middle of closing on a preforeclosure myself. The seller just wants out, but I plan to throw a few thousand his way IF I can get FMV fairly quickly. However, my offer is just to take over his deed of trust “subject to”. If the lender won’t allow you to take over “subject to”, you may have to assume the loan or fund $103K through another source. Using a trust to take beneficial ownership may work as well.

Your estimate to reinstate the loan is probably close based on what you’ve told us here. I would also get access immediately upon acceptance of the offer. This will allow you to assess repairs, and you might be able to start some of the repairs while the seller is still there.

Regarding offering the seller more, don’t do this in the offer to purchase. If you really want to offer her more, explain that if you can sell it quickly and at full price, you’ll be happy to share a small amount with her. It won’t be binding if not in writing, but you don’t want to tie your hands. Here’s why…

If the property does not sell quickly, you may need to list with a realtor at 6%, or $8,400. In addition, you will have holding costs of $1,210/month until sold. Assuming 3 months, you’re looking at $3,630. If you have to find new financing, you could be looking at loan origination fees of 1% to 2%, or $1.000 to $2,000. Total costs to you under this scenario, over $13,000 PLUS closing costs. At 6 months holding, over $16,000 PLUS closing costs. If you end up holding for a while, you can see that you can quickly eat up your profit leaving little, if anything, additional for the seller.

If you decide to let the seller stay, you should consider charging rent from the date of close to her move date. I understand that she might not have a lot of money since her property is in foreclosure, but you’re already doing her a favor by keeping a foreclosure off of her credit record.

Write up an offer, get it signed, open an escrow and put this one in the bag. I hope this helps.

Best of luck to you.

Bill K. (AZ)

Is this a proper offer on this preforeclosure? - Posted by Debby in Houston

Posted by Debby in Houston on April 24, 1999 at 14:53:00:

Got call from a lady 9 days away from the foreclosure May 4 auction. Has a beautiful 2872sf home in a beautiful neighborhood built '94. $103,000 left on a ARM loan, pymts are currently $1210. She’s 6 mos in arrears and my estimate is $10,000 to reinstate the loan. To sell it would need new carpet and inside paint job. All the comp sales are much less footage and 2 yrs old, but I believe I could easily get $140,000 as after repaired value. I got authorization to talk to the bank on Monday and offered her $1000 for the deed on the spot, but she wanted to run it by “a friend”. She asked if she could have to May 9 to move. I plan to keep in close touch with her, but wanted to know if my offer is/was okay. Once I verify w/bank, can I offer her any more? This is my first face-to-face with a preforeclosure. How do I go from here?

Re: Is this a proper offer on this preforeclosure? - Posted by Chan Lipscomb

Posted by Chan Lipscomb on April 25, 1999 at 17:14:57:

Why talk to the bank? Too much chance to cause problems. Have the seller call the bank, say “I have access to some money, I need something in writing faxed to this number (which happens to be your number, or maybe your attorneys) that tells me exactly how much I need to send you to reinstate the loan”. Then take title subject to.
I would not let her stay…

Re: Is this a proper offer on this preforeclosure? - Posted by Bud Branstetter

Posted by Bud Branstetter on April 24, 1999 at 20:22:19:

Add another 1K+ for title insurance. Get the deed if you can but also get a contract. You could get it postponed if you were paying the bank off. Since you want to only redeem for now you need to keep the loan in place. Your challange is to do all this quickly. It is an expensive game and not always for novices.