There is nothing I can do here, is there?

Question

Hi,

So, I finally received my first lead after someone responded one of my ads.

After getting the courage to call them (fearing I won't know what to say or do) , the call was not as bad as I had imagined it to be.  After all, it was just another human being on the other end of the phone.  After calming my nerves, we briefly discussed about the property and what not.  It took the seller quite a while to provide me with an actual address lol, but she did eventually warm up to providing information after several attempts at asking the same question over and over again in different ways.

Anyways, interesting experience and a good first call.  Thanks to all the folks here for the knowledge I have gained thus far.  Now, after talking to the seller, I don't think there is anything here for me, but I just want to confirm.

From comps, I can gather the FMV is ~110-115K given average condition of the house.  The seller only wants is owed, which is ~109K and change.  On my first call with this person, they did not mention they were behind in payments, only that they needed to move because of <SOME>.   The seller apparently re-financed the house a year ago (going back to the record books, they had purchased it for 91000K)

Should it have raised some flags when the seller only says they want to 'break even'?

Given they want ~110K, which is almost FMV, and they are 2 months behind, I am assuming there is nothing I can do here as they have no equity?

Even if they sell at FMV, they will have to pay realtors, a mortage penalty, and lawyer fees.  Plus, they are in a smaller city/town where properties move a bit slower so they may fall further behind.

Any creative ways for them to get a loan, sell the property at a discount, use the loan to pay the balance of the mortgage, and make payments on the small loan?

I think I will just have to chalk this up to a learning experience, glad to get the first call out of the way.

Thanks.

Account Closed · Answer

The only option I can see is a short sale.

Please understand that the seller already took her profit out of the house last year when she refinanced. I wouldn't be concerned about making sure she comes out of it OK. She's taken out 100% of the value, so she can't get hurt.

I suggest that you never ever lease back to the seller. If the seller won't make the bank payments to keep from losing their own house, what is their motivation to pay you?

Plus there is the problem of people who can't get it through their heads that they don't own the house any more, and they have been known to actually sue the buyer, claiming that the buyer didn't really buy the house he was only loaning them money to help them out.

Jason Cummins · Answer

Im sure that does make a big difference, I have NO idea about investing in Canada!!  Though if it's close to the same, this IS definitely a candidate for a short sale.

Good luck.

Mazhar Pirani · Answer

Interesting.  I guess I need the sellers permission and account information to contact the bank?

I should mention that I am in Canada and we are nowhere near the mess the U.S is in.

Now I need to go read what short sales are all about ... :lol:

Thanks.

Michael Rossi · Answer

If the owner can't afford the mortgage, they certainly can't afford the rent!!!

Mike

Grand Wally · Answer

Short sale, Short sale, Short sale.....

a)  Find a good RE attorney and tell them you have a potential short sale.  If they don't know what you are talking about when you say "short sale", they are not a good RE attorney.

b)  With the home owner, talk to the bank and see if they are interested in doing a short sale.

If you want to be nice, give a little cash to the seller to help them transition to another home...........or.... do a lease option with them and rent it back to them

Jason Cummins · Answer

Yes, this may be a candidacy for a short sale.  Negotiate with the bank to take lower than what is owed.  With this current market they tend to be willing to take less.

Contact the bank's loss mitigation department.

However I would not mess around with lease optioning back to the seller.