Potentially a probate opportunity?

Question

Hello!

Well, where do I start? I'm totally new to this whole investing thing and would love some feedback!

My husband has only been a real estate broker for a little over a year now. He has a client who wants to sell her mother's property but apparently her recently deceased mother still owes about $270k on the loan. So the daughter wants to try and sell the house for $300k plus but it's been on the market for about 5 months now. I believe she's willing to go into foreclosure if it does not sell but my question is, would this be an investment opportunity for us? The house is in decent condition, maybe needs a few minor upgrades and rough cleaning but other than that, it's in a decent location and a solid house! Would we be able to get this house for a discounted price and maybe we can try and resell it?

Thanks!

Kerri Junio · Answer

@Christopher Phillips Thank you for your response. I checked the market analysis and most of the homes are selling under her loan amount. So it's a pretty much upside down type of deal. I think a short sale for them is the way to go.

Christopher Phillips · Answer

@Kerri Junio

If it is a shortsale, you might be able to get it at a discount if you go through the shortsale process. Since the owner is deceased, you might be able to get through it rather quickly.

The problem is with the heir. If the heir has no motivation to deal with it, she might just let it foreclose instead.

Do you know if it was a reverse mortgage? There are special rules on those.

Nadia White · Answer

It could potentially be a deal. You'll have to run your numbers. What is a solid ARV for the house? What are the monthly payments? Are they PI or PITI? What is the average rent in that neighborhood for the number of bedrooms in that house? What type of repairs does the home need and how much are the repairs (breakdown the amounts for an easier decision process).

Here is what you could potentially entertain if the numbers work: take the house "subject-to" and do a stack and wrap. Or if there is no room for a spread : take the house subject-to and sell the contract to someone who wants to acquire a home, can afford the home but cannot qualify for a mortgage. I'm willing to review your numbers with you, but they are paramount to decision making. Also be aware that in both exit plans you will need to be very ethical in your disclosures to all parties and there is some paperwork involved.

Christopher Phillips · Answer

@Kerri Junio

You need to do the analysis on the property.

What a person owes on the mortgage has zero to do with the value of the property.

You need to look at the comparative sales in the area. At least 3 similar styled homes, sold within the last 3-6 months, similar number of bedrooms and baths and amenities (garages, basements, pools, etc).