I have a hot pre-foreclosure lead with an extremely motivated seller in Randallstown, Maryland. The seller is $23k in arrears on the property and said her mortgage balance is roughly $110-115k, but she will take whatever she can get on the property. She also doesn't know when the bank is going to repossess the house, but said they've already placed lockboxes on all of the doors.
ARV is $220-240k and she estimates it needs about $30-40k in rehab. If what she says is true how would I go about navigating this deal with her mortgage company? And if the property requires much more in rehab, which would bring my offer price below her mortgage balance, is there still a way to structure this deal? Thanks in advance.
Hi @John Stoeber generally if it is that far along you will have to come up with the full cash amount to catch up the mortgage. They might do a modification but it seems unlikely in this situation since any modification will not change the ability of the borrower to make the payment.
You will also want to do a title search to make sure there are no other liens on the property that the owner is not telling you about.
I am happy to chat though it with you in more detail as I am navigating a similar but more complicated deal at the moment.
Sellers notoriously underestimate their arrears and balances. You'll need to see statements to verify. You need to become familiar with the local clerk/recorders systems so you can verify if foreclosure has already been filed, any scheduled sale date, etc. Typicall up until a couple of weeks before the sale you can reinstate by paying just the arrears. Then, buy sub2, rehab and sell. Agreed about running a tile search to find any other liens, back taxes, etc.
@John Stoeber ask her for her most recent mortgage statement and ask her if she has any secondary liens like a HELOC.
She probably has backed taxes and most likely other smaller liens.
You don't ask the bank for them, the owner does, and the owner already has them, as monthly statements. And yes, of course a purchase price has to pay the full mortgage off. Forget I mentioned the sub2 part.
If the seller is in Pre-Foreclosure, and you aren't a RE Agent, you could be violating the law. Here is a link to some relevant info on another Bigger Pocket post. Pay attention to @Ned Carey and his replies.- you may need to copy and paste the link- https://www.biggerpockets.com/forums/51/topics/383450-maryland-investors---pre-foreclosure-laws
Thanks for that link @Mark Owens. To clarify I was not marketing to pre-foreclosures, but this lead just happens to be in pre-foreclosure. Sounds like this is a dead end either way given the laws in Maryland.