Jim-FL or other Sub2/L/O practitioners - Posted by Gerald-DC

Posted by Gerald-DC on December 06, 2001 at 24:45:28:


I am a night owl.

I reviewed a letter from the lender’s atty stating that the seller needed 10K by December 10th to catch the loan up. So, if we work something out with Citimortgage, we may be able to stop the foreclosure.

The house is in pre-forclosure right now with the forclosure proceeding to begin on December 10th I think. Calling the atty to confirm the nos. tomorrow.


Jim-FL or other Sub2/L/O practitioners - Posted by Gerald-DC

Posted by Gerald-DC on December 05, 2001 at 13:00:01:

Seeing a lady tonight about a 3/1 duplex. She sounds very motivated and is receptive to a L/O. (didn’t go over Sub2 with her yet). Got my name from a flyer that her son gave her.

She purchased the property 18 months ago. She owes $116,000 to CitiMortgage and her PITI is 1088. Two identical duplexes on the same block sold for 129,000 and 135,000 within the past four months.

The property should easily rent between $1250-$1300. The only sticky problem is that she is behind six months on her payments and CitiMortgage is getting ready to start the foreclousure process.

My question is, how can I structure this deal without putting out any or very little cash and give her the debt relief that she wants, keep Citibank at bay, and of course lease option this property to a tenant buyer?

Thank you,


Re: Jim-FL or other Sub2/L/O practitioners - Posted by Dee-Texas

Posted by Dee-Texas on December 06, 2001 at 06:27:11:

This deal looks toooo skinny and with problems. Usually people NEVER really tell you how much they are behind, it’s always more. Why is she that far behind if the properties will rent for more? Is there more liens against it? Better check that out if your determined to do the deal. Problems with the property as in structural, building codes, electrical, or plumbing? Those things will eat up any and all profit that you might get.
I would probably pass on this one and find an easier deal for this time of the year. It’s harder to rent during the holidays and January (when everyones tapped out from Christmas). You will have a longer holding time.
RE Success to you,

Re: Jim-FL or other Sub2/L/O practitioners - Posted by Jim FL

Posted by Jim FL on December 06, 2001 at 24:25:44:

First, thank you, I’m flattered.
Now, frankly, with the economy the way it is now, I’m not too game to play with deals like this, if you can call it a deal.
Honestly, in my opinion, your time may be better spent marketing to get another seller with a better deal to call you.
But, I’ll take a brief look at the seller/situation you have written about here.
The house is worth $125k?
Seller owes:
$116k + foreclosure fees + arears
She has told you about $10k, and obviously the number will be bigger.
There are fees attached, and you will need to verify the amount to reinstate the loan.
I’m betting it is over the $10k figure.
So, you pay the reinstatement, and you are into the house for $116k + $13k(going light here) = $129k

As for exit strategy…hmmmmm…
You mentioned L/O.
Sure, if you want to pay out CASH, and not get it back for a while.
I just don’t see you recouping the cash you lay out from a T/B’er as option money.
Seems unlikely to me.

Even IF you got the deed, and sold the house FULL retail, then “maybe” you’d walk away with a couple thousand.

This is just not a deal to me.

The only way I’d appraoch this, if I was really of a mind to, (which is not likely.), would be to try and get a short sale from the lender, and retail the house.
This would simply mean you get an option to buy the house, contingent on the lender giving a satisfactory short sale price.
Still though, too much effort for a “maybe” in my book.

If this were me, I’d wish the seller luck, move on and sign another deal elsewhere.

Best of luck,
Jim FL

Re: Jim-FL or other Sub2/L/O practitioners - Posted by Ron_va

Posted by Ron_va on December 05, 2001 at 13:46:33:


You may can get her to contact Citi and see if they would let her pay maybe 2 months of payments and then put the other payments she is behind at the end of the term. They may be receptive to that as oppossed to having to foreclose.

Make sure you check the title good on this and be sure she doesn’t have any other leins on it.

Good Luck,

I’m not JimFL, but… - Posted by AdamFL

Posted by AdamFL on December 05, 2001 at 13:40:01:

…I’ll offer my insight. If you’re going to cure her delinquent mortgage, get the deed via subject-to. If I am going to lay out 6 mos worth of payments, I want to totally control the deal.

One way to come up w/the $$ for CitiMortgage is to (1) take the house subject to the mortgage and (2) find a T/B and collect upfront option money with which to pay off CitiMorgage.

Hope this helps…I’m sure JimFL will chime in too! :wink:


Re: Jim-FL or other Sub2/L/O practitioners - Posted by Gerald-DC

Posted by Gerald-DC on December 06, 2001 at 01:12:40:


Here in Montgomery County, MD, the market is still hot, especially for starter homes in decent condition such as the subject property.

The actual value of the house is around 135K (identical unit on same block just sold for 135K 4 months ago). If I sell it on l/o or cfd I would sell it for at least 142K.

The seller showed me a letter from the lender’s foreclosure atty stating that the amount needed to bring the loan current is, in fact, 10K. The 10K needs to be paid by Dec 10 to stop the foreclosure proceeding from commencing.

The seller can pay 2K towards the back payment. I would be willing to put up to 5K into this deal. If I can get the lender to take 7K to stop the foreclosure and put the 3K back into the loan, would this deal make more sense to you?

The numbers would thus be 119K (new mortgage amount)+ 5K (from me) = 124K.

Selling house on l/o or cfd should give me an opportunity to get most of my 5K back and give me a positive cash flow.

If the house is sold for 142K then 142K less 124K would provide a 5K front door(which would make me whole), a $200 monthly cash flow and a 13K back door profit.

You mentioned fees associated with this process. Since the house is in pre-forclosure, if the lender agrees to roll the 3K back into the loan and the remaining 7K is paid, would there be any additional fees?

Thanks for your input Jim.


Could this work? - Posted by Gerald-DC

Posted by Gerald-DC on December 05, 2001 at 17:32:08:

What if I did take the property subject to the existing mortgage, pay off the back payments, get the seller to refinance the property at a lower interest rate which would allow for me to get my $6,700.00 dollar back and then l/o the property to a tenant buyer.

Or make her back payments, get the seller to give me a note for it, do a friendly foreclosure, and have her give me the property in lieu of foreclosure, then refinance the debt and try to recover my $6700.00?

Re: Jim-FL or other Sub2/L/O practitioners - Posted by Jim FL

Posted by Jim FL on December 06, 2001 at 04:13:02:

My opinion here may be based partially on what I’m seeing in the market now, whether it be here in my own back yard, or other parts of the country I keep an eye on.
But, the numbers you give for the comps, this was a few months ago, right?
Things have changed in the market.
Houses are just not moving as fast, or if they are, they are not fetching the prices they were.
People seem to have less cash to put up.
This is all since the September 11th incident.
The market NO WHERE is the same as it was 4 months ago.

I’d not want to lay out $5k, and then get stuck making the payments on the house as it sat empty.

Obviously you have no buyer lined up, so you need to find one. (Spells, HOLDING COSTS)
If you were to proceed with the deal as you described it, I’d want to make sure the whole agreement with the seller was contingent on me finding a buyer. No funds would be paid to anyone, except the sellers $2k to me, to hold for use when buyer is found.
The agreement would state clearly that if you are unable to find a buyer, the house very well may go into foreclosure and you are not to be held liable.
Get the seller to initial this part, and make it clear.
Kind of a “If it sells GREAT, if not, whats to be lost…same place the seller was before.”
In fact, I’ll often ask sellers, “If I don’t buy your house, what are you going to do with it?”
This will often give them a blinding glimpse of the obvious that I very well may be there ONLY hope.

Honestly though, I doubt the lender will take the $7k to stop the foreclosure, without some strong pursuasion, if at all. Do you even know who you will present your case to?
Where do you go for that?
Who has the authority to make this decision?
Is the loan federally insured? (if so, the lenders incentive to work with you is less, they are covered from large losses.)
Finding all this out will take away valuabe time from marketing the house to buyers.
If I were to do this deal, which again is unlikely, I’d try to do both, and perhaps enlist family members or friends in the marketing of the house while I worked on the lender issues.
Pull out all the stops and get a buyer FAST.
Also, keep in mind, it is the holiday season, and people are less likely to want to move.
Not to mention the cold weather slowing down the market as well. You are in the north. (well, north of here anyway.)

You really need to keep in mind carrying costs here.
The lender has said they want the cash by December 10th, which means they file then. This will add some fees to the re-instatment.
You basically have a few days to bring the loan whole, and to get a buyer in it.
If you do not, there is another mortgage payment due.
Add in 3-5 months of those, plus other expenses of holding the house, and the deal gets skinnier.

Frankly, I’d not mess with this deal.
I know there are better ones out there.
I don’t care if you are in a “hot market” or not, motivated sellers with better deals than this are everywhere.
Especially during the winter months up north.
I always bought a ton of houses during the winter in Illinois.
We just had to buy them right, to hold them until buyers season picked up in the spring.
Then we made good money because we had inventory.

Maybe it is just me, but I’m not patient enough to put a few thousand in and wait to get my profit out later. I want some of it now, not just to break even on the front end. Whats the fun in that?
“Hey, gimme a dollar and I’ll give you one back?”
Not a good way to invest, in my opinion.
I LIKE my three profit centers when I sell on a L/O.
When you buy right, they should all be there.

Remember, you make your money when you buy, and I just don’t see enough here to entice me to want a deal like this.
But, to each their own.
We all have our own investing strategies and methods.

If the numbers make you happy, even AFTER taking into account all the expenses that could, (assume they will) happen, then do the deal.
The ultimate decision is yours.

Just remember…while you are out there pounding the pavement to get this deal to move fast, you just might have been able to buy 3 or 4 houses with no money down and no payments due for a few months.
This would get you profit now, and certainly would be nicer and perhaps more profitable than chasing this deal, for a mere $13k backend…maybe.

Just think it over before you go ahead.

Best of luck,
Jim FL

Re: Could this work? - Posted by AdamFL

Posted by AdamFL on December 05, 2001 at 23:09:30:

Hmm…let’s brainstorm…

(1) Why would the seller refinance on a house s/he doesn’t own any longer? I suppose they could do it, but I’d be leery of that. Why not refinance before taking subject to? I’d also wonder how difficult it would be for the seller to get financed given that s/he is about to go into foreclosure.

(2) I must admit that I’m not too familiar with friendly foreclosures, so I’ll defer to more experienced people on this question.

Hope my brainstorming has helped.


Re: Could this work? - Posted by Gerald-DC

Posted by Gerald-DC on December 05, 2001 at 23:35:58:


I see your point about the refi. The seller can’t refinance until the back payments are made up and once she deeds me the property, I am not sure she can legally refinance anyway since she is not the owner of the property anymore.

Furthermore, after meeting with her and her family from 8:30pm to 11:00 Wed evening, I learned that the back payments is really $10,000 and not $7,000.00 as she originally had me to belive.

Obviously, I will not make pay any money until the deed is in my name. So refinancing may not be applicable until I have the property for at least six months or so in my company’s name.

My strategy right now is to contact the lender and try to get them to take as little as possible now to start the foreclousure proceedings from starting and possibly add the remaining delinquencies into the loan.

Get the deed and send the seller on her way.

I was hoping by refinancing I could get all of my cash back and maybe give the seller some money to help with her move. Then l/o the property or maybe keep it as a rental.

Also, her interest rate is 8.5% so if I could get that rate down to 7.5% that would add to my monthly cash flow to about $100.00 or so.

With the loan balance of $116,000 after the back payments are made up and with a FMV of $135,000, I still think there is a deal here but I will not put up more than 5K to get this property. The seller can contribute 2k, so I need to get the bank to hold off for the other 3K to make this deal work for me.

Tomorrow I am contacting the lender’s foreclosure atty. Hopefully, they will work with me.

Re: Could this work? - Posted by AdamFL

Posted by AdamFL on December 05, 2001 at 23:53:45:

Obviously we’re both insomniacs! Anyway, I think you’re on the right track. A couple of things about your new post…

First, isn’t it strange that the back payments are more that she originally told you (sarcasm)? How do you even know they’re $10K?? You need to speak with the bank to find out the correct amount. Who knows, it may be $15k!! I hope you had them sign an authorization to contact the bank. If not, do it so you know all your facts.

Second, from what I understand about trying to work back payments, the foreclosure proceedings will NOT stop even if you are in the process of working a payment plan with them.

Good luck with your plan. I’m happy to work through some of these issues with you.