Posted by Jack Molloy on September 10, 2007 at 15:37:56:
IB,
Thank you for the further explanation! Nice to see someone else (that Karen) thinks like I did!
Thanks again,
Jack
Mortgage Play Question - Posted by Jack Molloy
Posted by Jack Molloy on September 08, 2007 at 16:00:12:
Ok, this might sound pretty stupid to alot of you experts, but here goes…
I was at a house today with a seller. He owes $99k and the house is probably worth about $185k in top shape. After going through the place, I’m guessing it needs about $20k in repairs so its worth around $165k as it is.
I made the guy a cash offer of $110k. He told me to do certain things with that offer, etc. etc. While he was going off on how awful my offer was, I got to thinking: I’ll just approach the lender and buy it/have it assigned at full value owed–$99k plus whatever late fees and penalties are tacked on.
Here’s my big question: if I were able to do that, when I foreclose on this guy myself, then can I sell it for FMV or am I limited to doing what the bank can: namely holding an auction and anything bid over the $99k goes to the homeowner?
Thanks for your help. This has been gnawing at me all day!
Jack
No advantage in buying a mtg - Posted by JT-IN
Posted by JT-IN on September 08, 2007 at 19:34:14:
Unless you buy it at a discount. If you have to pay PAR to purchase a mtg, and it goes to sale, you are not in an improved position over what you could have done at the sale, without owning the mtg.
If you did own the mtg and bid up to the total indebtedness and all fees, and someone out bids you, then you are outbid; period. No sense in bidding any higher as the mtg holder… now you may want to bid higher as an investor, which you could be doing anyway w/o owning the mtg, as I think you know. Each dollar bid over the total indebtedness and fees owed to Lenders counsel, will go back to the owner of record at the time of the LP was filed.
So either buy the mtg at a discount, or bid as an investor at the sale… If you cannot buy at a discount then you are better keeping your powder dry until the sale… Now if you are the Lender and buy it at sale, then you can turn around and sell it after the sale for whatever the market will bare… and all profits are yours to keep. No different from a lender who buys back at sale and an investor who buys at sale, following the sale, they are each investors now. Only if the bid exceeds the judgment amount at sale does the surplus bid go back to the owner of record. Hope that is clear… hard to fully explain w/o writing an epistle.
JT-IN
OK, I Don’t Get It - Posted by Karen H
Posted by Karen H on September 09, 2007 at 07:21:52:
I have been reading this thread with alot of interest and totally see Jack’s question.
My question Jt, is WHY does the lender have to offer it for sale anyway? I do not see WHY you would have to put something you already own on the auction block at all?! see I guess… lets say you bought your house and instead of going through a bank/lender me lent you the $ as a private lender… you defaulted on your loan I just take possession of the property as owner…
Wow! - Posted by Jack Molloy
Posted by Jack Molloy on September 09, 2007 at 05:58:57:
JT,
OK, after reading your post for the 4th time now (lol), I THINK I am understanding your position that if the lender bids $1 over the amt owed, they, the Lender can keep the property and re-sell it themselves as investors. Wow! My brain just got that one!
I was under the impression that the reason lenders bid $1 over the amt owed on the property was done solely to protect their interest in the amt of the loan itself—not to put themselves in the same type of position as an investor.
A major enlightenment.
Thanks, JT!
Jack
Thank You, JT - Posted by Jack Molloy
Posted by Jack Molloy on September 09, 2007 at 05:50:11:
By my email address alone, I admit to being a “greenhorn” in real estate and asked what I thought was a legitimate question. To be assailed saracastically by one and that conduct supported by another is something unfathomable to me. I’ve always tried to help those that express some interest in acquiring knowledge/information and would hope that would be returned in kind. From you JT and the obvious knowledge & experience you have in real estate I appreciate you taking the time to enlighten me on this.
The body of your post makes complete sense and I thank you again for responding.
Jack
Re: OK, I Don’t Get It - Posted by IB (NJ)
Posted by IB (NJ) on September 09, 2007 at 07:57:57:
The lender doesn’t own the house before the auction. They own the note which uses the house as collateral. In order for the lender to get the house they have to be the winning bidder at the auction like everyone else.
Read my response to original poster’s ‘WOW’ post. The lender has to bid like everyone else and gets the chance to open up the bids by bidding first. If someone bids over the lender, the lender gets their money and the winning bidder gets the house. If no one bids higher than them (in essence, if no one bids) then the lender gets the house since it was pledged as collateral for the loan.
Ib
Re: Wow! - Posted by IB (NJ)
Posted by IB (NJ) on September 09, 2007 at 07:53:50:
It IS to protect their investment as everyone, including the lender, has to bid on the house.Most lenders have no interest in becoming the investor at the auction and getting the house.