Short sale or Subject to?

13 Replies

I recently finish renovating a house I purchase and the lady next door approached me. She is selling her house for 117K but actually owes 140K. She knows she has to pay the balance and is considering going bankrupt. No offers has come as houses with similar conditions are being sold at around 90K . She is reaching out to see if there is something I could do. Before approaching her, I want to reach out to the bp community and look at some options. I was thinking talking to the bank and do a short sale but what about a subject to? Please give me some feed back as I would like to help this lady and make some profit in the process.

How much work would it take you to get it to top of market shape? How much could you get ARV? If the numbers worked to flip her house, you could get her out sub2 and make some money in the short term. If the numbers don't work, best bet is probably to have her approach her bank about a short sale. You should be able to have no issues walking through the place to know what to offer the bank to make it work for you.

A short sale seems like the only realistic possibility. Also before you talk to the bank, make sure it is legal for you to do so in your state. In Maryland you have to be licensed (not a real estate license) in order to negotiate a short sale.  Even us licensed agents are forbidden from talking to the banks directly.

I recently finish renovating a house I purchase and the lady next door approached me. She is selling her house for 117K but actually owes 140K. She knows she has to pay the balance and is considering going bankrupt. No offers has come as houses with similar conditions are being sold at around 90K . She is reaching out to see if there is something I could do. Before approaching her, I want to reach out to the bp community and look at some options. I was thinking talking to the bank and do a short sale but what about a subject to? Please give me some feed back as I would like to help this lady and make some profit in the process.

I see some other options here

  • If she is willing to come to settlement with $23,000, maybe make her an offer to make a payment of $23,000 on the principal of the note and you take over ownership and payments, now having a balance of $117,000. But if the real market value is at $90-k, this may not be a great deal, unless you know the values are going up in that area.
  • If she goes for the the above option, negotiate with the bank to lower interest if the seller will give them $23,000. Everything is negotiable!
  • If she is considering BankRcy, she is very stress and motivated. Try to help her, give her some good suggestions without trying to take advantage of the situation.
  • You could suggest that she has a reserve public auction subject to the bank's approval of the high bid (she can always use her $23,000 as an incentive to the bank to accept the high bid if it happens to be lower than the bank would accept.) 
  • You could get a fee from her or the auction company for putting this deal together. Give seller full disclosures.
  • I don't think you want a subject to in this case, not enough equity!
  • Help first, profit will come later.......maybe the University Law of Prosperity will touch you!

Charles Parrish

I HAVE DONE SUB-TO and I HAVE DONE SHORT-SALES.

I see some other options here

  • If she is willing to come to settlement with $23,000, maybe make her an offer to make a payment of $23,000 on the principal of the note and you take over ownership and payments, now having a balance of $117,000. 
  • [THAT IS YOUR WISH BUT I DON'T THINK SHE HAS THE MONEY IF SHE CAN DO IT THAT BE GREAT.]
  • But if the real market value is at $90-k, this may not be a great deal, unless you know the values are going up in that area.
  • [NO. YOU HAVE TO USE ZILLOW. IF Z-ESTIMATE IS $90,000 THIS IS A BAD DEAL, IF Z-ESTIMATE IS $117,000 THIS IS A GOOD DEAL.]
  • If she goes for the the above option, negotiate with the bank to lower interest if the seller will give them $23,000. Everything is negotiable!
  • [WHAT ARE YOU DREAMING?  YOU LIVE IN 2010? OR IN DISNEYLAND? THE LANDSCAPE TODAY HAS BEEN CHANGED. ...NEGOTIATE WITH THE BANK...OLD LADY NEGOTIATE WITH THE BANK? FOR LOAN MODIFICATION? YOU KIDDING? WE PROS TRY MANY TIMES OVER WITH OR WITHOUT LAWYERS...LOWER INTEREST RATE IS A PROCESS CALLED LOAN MODIFICATION IS MORE DIFFICULT THAN SHE CLIMBING THE MOUTAINS...IT IS A BATTLE THAT IS FULL OF DOCUMNATION AND EVEN IF SHE IS QUALIFIED I DON'T THINK YOU OR HER HAVE THE CAPACITY TO DO IT. 
  • SECOND, IF SHE PAYS DOWN THE $23,000 HER LOAN MODIFICATION WILL BE DENIED. I GUARANTEED YOU. IF YOU ARE THE BANK, YOU JUST GOT PAY-OFF $23,000 FOR THE MORTGAGE YOU THINK I AM GOING TO LOWER THE RATE? NOT A CHANCE...THANK REAL...]
  • If she is considering BankRcy, she is very stress and motivated. Try to help her, give her some good suggestions without trying to take advantage of the situation.

[WHAT YOU CAN DO IS 

1. FIND A GOOD SHORT-SALE AGENT AND MAKE AN OFFER ON THE PROPERTY THRU THAT AGENT.

2. MAKE AN OFFER THAT IS 10% below market but 103% of the list price. Make sure you have the agent list 10% BELOW MARKET OR Z-ESTIMATE THE "LOW RANGE". I BOUGHT AND SOLD SHORT-SALE PROPERTIES ALL IN THIS WAY. THE BANK WILL SEND OUT APPRAISER AND DO THEIR OWN APPRAISAL SO DON'T BE AFRAID THAT YOU GOING TO CHEAT THE BANK...

  • You could suggest that she has a reserve public auction subject to the bank's approval of the high bid (she can always use her $23,000 as an incentive to the bank to accept the high bid if it happens to be lower than the bank would accept.

WHAT IS THIS RESERVE PUBLIC AUCTION SUBJECT TO B.S. CRAP...IS THIS YOUR INVENTION? RESERVE PUBLIC AUCTION ...NO BODY BIDS = REO (REAL ESTATE OWNED BANK PROPERTIES)

  • You could get a fee from her or the auction company for putting this deal together. Give seller full disclosures.

SUCH A SCAM. BUYER BE AWARE.

  • I don't think you want a subject to in this case, not enough equity!
  • AGREED. NEED 20% EQUITY OTHERWISE, YOU BE A LANDLORD FOREVER AND RESPONSIBLE FOR THE MORTGAGE AND IF YOU LET GO, SHE IS GOING TO BLAME YOU.
  • Help first, profit will come later.......maybe the University Law of Prosperitywill touch you!

NO. PROFIT FIRST, HELP LATER. IF THERE IS A PROFIT WITHOUT HELPING, I TAKE IT. IF THERE IS A PROFIT BUT I AM HELPING SOMEONE AND IS A WIN-WIN SITUATION? I TAKE IT.

BE A REALIST.

SINCERELY,

FLIUTRUSTEE

Charles Parrish

The house is worth actually worth aeound 125K 130K based on resent sales and because I am familiar with the market. Thw house needs repiars and houses similar that need repair are being sold at 90k. I bought the house next door from a REO at 76K and I am now renting it at 1,500 I was offered 120k but decided to kept it as a rental and take an HELOC for 35k. That is how the market is moving in this area. You guys are gicing me excellent feedback. I think that a short sale makes more sense. A sub2 would not work because it would not give me enougj equity or cash flow. I will try finding a short sale agent ASAP and see if we can work something out. Thanks everyone...

In my experience short sales take a long time. Depending on your landlording skills I would seriously consider Sub2 and keep as a rental. You would not be concerned about equity but cashflow. Equity will be built up over time and paid by your tenants. Possession can be in as little as 5 days.

You're getting $1500 from the property next door!?

How much are the payments?  If there's positive cash flow and she's giving it to you, why are you concerned about not having a great equity position?

If you have to put $10-15K into it, but could get that back in 2 years, that's a very acceptable return.

@Rocky V. @William Hochstedler The house has a mortgage of 1,420 so no cash flow. I do not mind waiting 2 years; it is not the only deal I am working with and this would be harvesting a good deal for the future if possible. I do need to learn more about sub2 though, after talking to my attorney she told me banks in my area hardly ever make a due on sale call and I would love to take advantage of this.

@Carlos Velasquez

Subject to what? Would you be interested in purchasing the property? If the comps are in the 90s then you may be able to purchase the property in the 90s. A short sale would be the sellers best bet in my opinion. She could potentially even get some funds to relocate

The bank will have to order a value on the property and what they will accept will . Who is the mortgage servicer?

Are you in contact or have you ever spoken to the listing agent and asked why they are not already doing a short sale if these are the circumstances?