Land Contract on a future short sale

4 Replies

I have a question concerning a land contract/ subject to deal.

I will be proceeding with one of these deals, however, I have a question. She is "selling" the house to me for 75k but currently owes 98k. Essentially, I am land contracting a short sale. Whenever I buy the property in the next 2 years,  will I own it free and clear even if she owes the difference still?

What sort of things should I be on the look out for? 

You "think" you are buying the house for $75k.  You'll have to pay off the existing mtg to get clear title.  Your land contract will do nothing to delay any foreclosure either.  You're setting yourself up to have to walk away from this thing at some point, regardless of how much money, time and effort you've put in it.

Originally posted by @Josh Nabors :

I have a question concerning a land contract/ subject to deal.

I will be proceeding with one of these deals, however, I have a question. She is "selling" the house to me for 75k but currently owes 98k. Essentially, I am land contracting a short sale. Whenever I buy the property in the next 2 years,  will I own it free and clear even if she owes the difference still?

What sort of things should I be on the look out for? 

 For the foreseeable future your seller has found a solution to their problem, avoiding foreclosure and or a short sale. The next problem with this property now belongs to you. How are you going to get clear title for a property you're paying $75k for but the bank is owed $98k? Will your agreement with the seller stipulate they'll pay the difference when you elect to or negotiate a date of purchase? More importantly, if they agree to pay are they capable of making that large payoff?

Even if you can earn a decent cash flow from the property on a monthly basis when you plug in that cash flow into a DCF analysis I'm pretty certain the short sale negative will deliver a net negative on the property for several years if not several decades.

Sometimes the best investments we make are the ones we don't buy. I'm going to speculate this might be one of them!

I suggest you don't buy a property for $75K with an outstanding $95K lien without a plan. Does your seller have $20K to bring to closing, now or in the future?  Do not buy a property that is over encumbered unless you think you can discount the lien.  Doesn't matter if it's a land contract or if you get the deed.  The lien is against the property, not against the seller.  You will waste all your money unless paying off the $95K works for your purposes.  

Discounted payoffs are not that common and hard to pull off these days unless you are working with a private lender.

Why would you pay an arm and a leg for a three-legged horse?

Keep on hoofing it until you find a seller with equity.

Remember, you are either trying yo buy equity or cash flow at a discount.

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