Re: Preforeclosure …my first one…HELP ! - Posted by B.L.Renfrow
Posted by B.L.Renfrow on April 10, 2004 at 14:10:59:
First, have you verified the numbers and checked comps? I hope you’re not taking the seller’s word for the FMV and the amount owed. Sellers have a way of overestimating the value and “forgetting” little things like second mortgages, liens, etc.
Sure they will “take $10k cash” in addition to you making up the arrears…mighty nice of them! If I recall correctly, foreclosures happen pretty quickly in Texas, and if it goes to foreclosure, what are they going to get out of it? Probably pretty close to nothing. If I were to make up their payments and prevent them from having a foreclosure on their credit, they sure wouldn’t be getting any $10k from me. Maybe a few bucks for moving expenses, but that’s about it. Remember, you are in this to make money, not to have the seller’s problems become your problems.
Next, I would strongly suggest you reconsider this sandwich lease option idea. I realize that if you are just starting out, your tool box may not have many tools in it just yet, and you’ve perhaps studied this, and it’s the only thing you feel you know how to propose at this point.
I assure you, it’s a bad idea. These sellers are in financial difficulty. What do you want to bet they’re behind on other bills as well? What happens after they lease to you, you sub lease to a T/Ber, then down the road you find the sellers can’t deliver good title because they have liens and judgments a mile long attaching to this property? You are in deep doo doo, that’s what. If I was going to put any money into this besides marketing expenses, I’d want the deed.
If the numbers are correct, you have a few options. First, you could simply take an option on the property for their mortgage balance. Then, market the heck out of it: “MUST SELL…$20K BELOW MARKET VALUE.” If it’s really worth $90k, offer it for quick sale at $70k and make a quick $19k (less expenses) for your efforts. Not bad, huh?
Or, you could simply get it under contract for the mortgage balance, then assign it to an experienced investor for a quick $5k or so. Again, if your numbers are right, should be a piece of cake.
If you have cash reserves, you could take it subject to the existing mortgage, make up the arrears, then rent it, lease option it, retail it or whatever. BUT…and this is a big but…DON’T consider this unless you have cash, or quick access to cash, to cover the arrears and several months of payments and holding costs.
Just some quick ideas…hope they’re helpful in stimulating your creative thinking.
Brian (NY)