Foreclosure is imminent.

11 Replies

Okay, so I will just preface this by saying that I posted this on another forum and was directed here, so if I am not following any guidelines I apologize.  It may also sound strange to you as I am delivering the information to a community that I haven't interacted with.  Hopefully this post will be an easy read for you. 

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Anyway: 

My house - my Mom's house - will be going into (pre) foreclosure in three weeks and I want to prevent her from losing everything. 


Back in February I thought we were about to make 800k in capital gains.  
Needless to say, this didn't happen and things have gotten increasingly desperate.

Her house is worth $2 million and houses in that price range don't move quickly. Some terrible financial decisions were made in the form of hard money loans where she was stuck paying 10-12k a month on the house. Now, we are at the end of her loan and she owes $1.15mil.

We also have moved the house's price down several times because we knew we really needed to sell it before the end of the 12 months (Dec 5th). I believe that this may have damaged the perception of the house.

There is so much information and context that I want to provide right now but I fear that I won't be able to do that without making this post too convoluted - so I am just going to stick to

the basics:

a) My mom owes $1.15mil on the house and because we haven't paid the loan it is costing $600 extra every day that we don't pay it.
b) If we get foreclosed on there is an extra charge of $150,000
c) The house is now priced at $1,699,000. (started at 2 million)

Our options (from what I understand):

1) We get the house refinanced through a hard money loan (my mom's credit is completely ****ed). It will cost us $100-150k out of closing of the house... and obviously we aren't guaranteed to sell it before the loan closes - putting us back in this situation but even worse.

2) Drop the price aggressively (to around $1.4mil) and try to sell in the very short window that we have.

- The issue with #1 is that we are stuck in this house (which has become extremely oppressive) even longer... and we aren't guaranteed to make it out of this with a sale. We could end up in even deeper waters!

- The issue with #2 is that even if we drop the house's price aggressively we aren't guaranteed to sell it within that period - and from my understanding dropping the price of the house will make the LTV way too high for someone to refinance us. This is assuming that they will look at the current price of the house to assess whether or not the loan is worth it for them. Can anyone contradict this?

If we drop and sell it for $1.4 in this period of time then that will mean that selling it refinanced for $1.5-1.6 would make it worth our effort to refinance it. I think there is a fair bit of certainty that we could sell for that price, but of course... you never know.

What I really want to know is how to find people who will buy this house at $1.4mil quickly - without dropping the marketed price of the house (which would ruin our chance of refinancing as a backup). Are we just going to have to go balls to the wall on one of these options?

If I had to pick I would say sell it fast and drop the price because I want to get out of here but I feel that may be even more risky than doing a refinance. To me it would be optimal to leave the public listing at $1.699 for the sake of re-financing, but still somehow bring investor's attention to this house at its current price point (meaning they know we will sell for much less than it is worth).

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Just to add a little bit of oxygen to the fire I'll add that I have given all of the money that I've made and my college funds to try and help this situation. I now recognize that I went way too far in trying to help, but I loved my mom too much and didn't have the wisdom at the time to say no.

I now understand where the line needs to be drawn. You must insure that you are taken care of so that you can best be of service to others. These lessons are invaluable to me and I honestly wouldn't take any of my decisions back. If you wish to judge me as being an idiot for doing this - then that is okay - the main thing is that I need to make this happen so that my mom can land on her feet and maybe I can get some of my money back.

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I appreciate your time in reading this. Sorry if some areas aren't clear enough. I will go back and fix things up when I get the chance.

Well, I guess my final question is -

Anybody got an idea of what I should do?

Dropping the price won’t hurt your refinance chances.....any hml is going to make their own determination of what is worth, on a quick sale basis, ignoring what you have it listed for.
The house is obviously Not worth $2M, assuming it has been in the mls for any length of time.
Drop the price now, and keep dropping as low as it takes.

Originally posted by @Wayne Brooks :

Dropping the price won’t hurt your refinance chances.....any hml is going to make their own determination of what is worth, on a quick sale basis, ignoring what you have it listed for.
The house is obviously Not worth $2M, assuming it has been in the mls for any length of time.
Drop the price now, and keep dropping as low as it takes.

 The house has been up for 10 months.  The average time to sell for a house in our price range is 2 years.  It is worth 2 million... but that doesn't matter right now.

I'm going to take your advice on dropping it, as that is what I have heard from other sources.  Thank you for taking the time to share your thoughts!

I think you're saying your mom (and you) did a really high end fix and flip using hard money.  You're now at the end of your loan term and it hasn't sold.  So you're weighing alternatives.

Let me put an alternative on the table you didn't mention - deed in lieu of foreclosure.  You say the lender has a $150K fee if they have to foreclose.  They would also tack on legal fees, if that's not covered by this charge.  That seems intended to get it to do a deed in lieu.  To do that, you agree to hand over the house to the lender.  That wipes out the loan.  This is much quicker for the lender, though has some risk if you have any subordinate debt or liens on the property.  

You seem to also be considering refinancing the property and holding onto it.  Is that really realistic?  You say "my mom's credit is completely ****ed".  If her credit is good enough to get a loan, you're looking at $6-7K a month payments.  Can she qualify for those payments?  Can she afford them?  Most lenders won't refi a house that's on the market.  So, you'll need to pull it off the market for some period of time to even start that process.  And that's a month or more at best.  And, yes, whatever price you last had the house listed for is a factor.  Because it was listed at that price and didn't sell, its obviously worth less than that.  A lender will do their own appraisal, though, and come up with a value.  So the last listed price is a factor but only one factor.  Realistically, it may be worth less than the $1.4 million.  What does your RE broker say?  What has been the feedback from showings?

There's no miracle here.  High end buyers are few and far between.  You're in the worst possible time of year to sell a house.  Honestly at this point, and given what you wrote, I'd drop the price radically  and at the same time pursue a deed in lieu with your lender.

The house has been up for 10 months. The average time to sell for a house in our price range is 2 years. It is worth 2 million...

Sorry, but no it is not. You may wish it was.  You may have thought  it was.   But if its been on the market for 10 months and is now listed at $1.7 million it is most certainly not worth $2 million.

I'd double check the foreclosure laws in your state. Hard money lenders aren't exempt from state or federal foreclosure regulations.

Originally posted by @Ron S. :

I'd double check the foreclosure laws in your state. Hard money lenders aren't exempt from state or federal foreclosure regulations.

Hard money lenders rarely lend to someone who's going to occupy the property, specifically because of the regulations on residential loans.  Usually these are commercial loans.  So, yes, they are regulated, but the aren't nearly as tightly regulated as residential loans.

Post a link to the listing.  It is hard to comment with so little information.

Also:

1.  Is this a flip?  When you talk about "her house" it seems like the house she is living in.  There is a reason that hard money lenders do not lend on owner-occupied homes. This could help you or hurt you, depending on what you attested to;

2.  Price is a function of what people are willing to pay.  Period.  Not what you think it is worth, not what you spent, not what a listing agent says.  If your house was exposed to the market for months at $2 million, and did not sell, it is not worth $2 million for a quick sale.  So you are right to be thinking of an aggressive price drop.

That is about all of the advice I can give without more detail about just what exactly is going on here, and without more detail about the house itself.

4570 Blackland Dr,Marietta, GA 30067

7 beds9 baths11,459 sqft?

I did a lot of work in this market during and after the great recession when I worked for FDIC and after with several banks who had assets in this market. I still have contacts in this market who may be able to help but you are running out of time.

I will PM Mitchell with my contact info. Or see my signature line below.

Originally posted by @Jon Holdman :
Originally posted by @Ron S.:

I'd double check the foreclosure laws in your state. Hard money lenders aren't exempt from state or federal foreclosure regulations.

Hard money lenders rarely lend to someone who's going to occupy the property, specifically because of the regulations on residential loans.  Usually these are commercial loans.  So, yes, they are regulated, but the aren't nearly as tightly regulated as residential loans.

The federal rules do not rely on occupancy when the subject property is a 1-4 single family residence. In a foreclosure, as an example, owner occupied or not, the lender cannot file the NOD (First legal) until after the 120th day of delinquency....regardless...without exception.

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