Real Estate Investor · Chillicothe, OH · Member since 2008 · 33 posts · 1 vote
I had an guy call me this morning and asked me what kind houses i buy. I told him that i do a variety of things, then he went into detail about he is getting close to be foreclosed on, and he would love to stay there if he could. I got out of him that the house is valued at 140,000 as of last year, the bank is willing to let it go for 115,000. The home owner would like to see if he could have someone do a short sale and lease option it back to him. Could i get some advice how i would go about this.I'm done a few wholesales before but never a short sale and a lease option on the same house before.
The lender will forbid the current owner from getting any benefit from the short sale. That means he cannot lease or buy the place. Owners moves out or you move on to the next deal.
115K isn't a good deal. You need to partner with a local investor that specializes in Short sales and has the processes in place to actively negotiate it. It would require seller to submit a whole new Short Sale packet that you submit..... Pass it off to a short sale expert and get a fee if it closes and move on the your next deal!
From a distance it looks good but of course i have never done a short sale i would love to pass it off to someone here locally, that could do it better then what i could. Does anyone know anyone in the columbus ohio area that does the short sales?
The lender will forbid the current owner from getting any benefit from the short sale. That means he cannot lease or buy the place. Owners moves out or you move on to the next deal.
The lender will forbid the current owner from getting any benefit from the short sale. That means he cannot lease or buy the place. Owners moves out or you move on to the next deal.
I was going to say that, but I didn't want to speak without knowing for certain as I have not completed a short sale transaction as of yet.
From what the home owner and told me i haven't talked to the bank, But he told me the bank would allow him to do a short sale for 115,000 and he was wondering if someone went in and bought the house and turned around and leased it back to him. Come to find out from the owner he had lost his job for one thing or another, and it took him awhile to get back on his feet. Now that he is back on his feet and the bank told him that either short sale it or the house gets foreclosed on.
Nicolas
You have to know where the file is at with the bank.Is it in the foreclosure department,short sale department,customer service,collections,or loss mitigation.
If the loan is owned by a small bank they tend to do workouts differently than the large ones.Options will depend on if it is Fannie Mae or Freddie Mac backed or it's a conventional loan.
The process of lease optioning back to him is not allowed anymore and these are strategies investors use to use along with assignments and other things.
The banks after short sales have grown in the last few years have systematized everything instead of flying by the seat of their pants on each file which is how we did them 3 to 5 years ago.
It used to be a person in the loss mit department that would handle all the short sale files as the others didn't really know how to do them.As files grew the banks started up whole departments and hired file originators who were laid off from the loan origination side and moved to the loan default side.
The banks have riders on all these types of strategies now where you would be committing fraud if you employed them.Once they enact a rule with addendums you have to find a new way to do deals and change strategies.
If this person has recovered then their best best is to go after a loan modification especially if they want to hold onto the property.
I am seeing permanent loan mods where the lender will put back payments into the loan.
Example
Loan is 140,000
With back payments,penalties,interest,attorneys fees etc. now 150,000 is owed.
Interest rate was 5% but now has adjusted to 8%
They will adjust rate down to 2% for first 3 years,then 3% for 3 years, and so on and when they hit 5% keep that rate for the remainder of the new structures loan.
The borrower might have to bring a few K to pay reinstatement fees and as not all back escrows and payments can be put into the new loan amount.
The lender would rather do this than foreclose and take a big loss.The 3 month trial plans are easy to qualify for but the permanent restructures I mentioned are harder to get approved.
If they deny the borrower for the first loan mod then they can ask for another.Many servicers can offer 2 to 3 different types of loan mod plans depending on the situation.
Why would a servicer do this?? They make money servicing the loan AND the insurance company if not all options are documented and performed will deny a payout claim.
The lender on the loan takes a hit then and sues the servicer for not following the servicing agreement.
Hope this helps.This is basic but I don't want to write a book about the details.
115 k for a 140k house ? That's 82 cents on the dollar. before you pay for closing, soft costs and do repairs.
Where is the deal?
Also, 140k is the value as of last year. Most likely the value dropped since then.
Trying to give the home owner some quick advice about loan mod is one thing, but 115k for a 140k house is not a deal...even if it's still worth 140k now. I'd pass.
