Foreclosure

[WebBoard]

From: Anonymous


A friend of mine knows a couple that has defaulted on their home loan and the bank is going to repossess the house in the near future.

The house has been valued by a bank last week at $310,000 and the amount owing on the loan is $250,000.

My friend wants to know what he can do with this sort of deal?? He doesn't have any property at the moment and not too much money either!

I suggested he could just offer them $260,000 or so for the house. Buy it and then refinance it the next day with a different bank at $310,000 to get his cash back out for the next deal. I realise he has to pay mortgage insurance and application fees twice, but at least he will get his money back.

Has anyone done anything like this? any suggestions?
vendor finance by getting them to leave money in the deal. Stacking the contract etc etc??


Thanks

Anthony Anonymous

 

[Glenn]

Reply: 1
From: Glenn Mott


In all transactions, we should be seeking a "Win-Win" result. From what you are suggesting, the people who are in trouble at the moment are experiencing a short term cash problem and not a long term problem. Banks do not lend people $250,000 of their shareholders' money without the knowledge that they will get their money back.

You could arrange an independent written valuation from a Bank's panel of valuers and then buy the property from these people for 10% under that price then immediately write them a Lease Option for market rent plus another $75 per week toward the principal, plus a sale in say, 12 months at the written valuation. You would be helping the people involved because

1. They certainly do not want a bad credit mark
2. Probably do not want to leave a home that they are emotionally attached to
3. Do not want to change phone numbers
4. May want to keep matters to themselves

You would be compensated for your risk by the difference in buying price to selling, and receive your money in 12 months or get to keep a property that you have received strong rent for this time that you bought 10% under market value.

Making 1 friend in business may make you more than 1 good deal in years to come.

Glenn

 

[WebBoard]

Reply: 2
From: Peter Scully


Hi, In my experience people who are about to be sold up by the banks don't care about their house, they actually hate the damn thing because they see it as the cause of all their trouble. Also they usually have numerous other bad debts. They tend to go into denial about their financial situation.
I have bought or gained control of a number of houses through situations like you have described.
The important thing is to know what the owners want, you will be surprised when you ask them this question, ask them what is important to them, I bet they will say things like "living without stress", "being able to get on with their lives", "a chance to start over".
Your friend needs to talk to them and find out.... 1). what they want...
2). How far the bank has gone to recover their money?
3). What other debts they have?
4). What their attitude is like..... this doesn't sound like much but its of utmost importance, if they want to be helped great, if they don't.... forget about it.
To give you a couple of examples...
1). 4Bdm house worth 155k we bought for 21k down plus assuming the loan of 80k and spent 6k on paint etc then sold it for 165k. Both the purchaser and seller are still clients and personal friends (they weren't friends before). There was no bank qualifying.
2). 3Bdm house with en suit, bought for 87K spent 12k on it, sold it for 175 with a 10k early settlement discount. This one was a bit harder because the initial purchaser had been a very bad bank client and therefore the bank was not willing to negotiate, they wanted the 87k paid in full within 48 hours, but we still made it work.

in summary theres no end of ways to make it work but the attitude of the people you are dealing with is very important.
All the Best.
Peter Scully