Creative Financing?

Question

Hi, need your input please. Have a seller who is facing foreclosure on their property. They owe $64,000 and he wants $84,000. MAO is $64,000, repairs would be $25k for a flip and $15k for a rental. Properties in that neighborhood sell for about $120,000. He will not accept MAO but is open to creative financing. Any suggestions on how to approach this? Thanks.

Randy Stuart · Answer

Have someone else go visit him and offer 58k, and have them tell him how dumb he is for wanting to foreclose for less than 84. Have this person also describe of the future headaches that the foreclosure will mean to his sister. Then you go back and nicely offer 64k. If he is still too ignorant move on.

Account Closed · Answer

I would be concerned that he has other liens on the property, I would check with your foreclosures laws in the area, in Md. you could get in trouble dealing with someone with pending FC,

I dont think he is in a great position to be negotiating. Buy it at the court house steps, get it free and clear of the other liens he is not paying.

Account Closed · Answer

How far behind is he on his mortgage? What are his plans once he sells this property (renting, moving in with family, etc)? What type of loan does he have on the property (FHA, VA, conventional)?There are a lot of things you can do to help this guy out. Have you checked all his options for keeping him in his home? If you have and the best route is to help him move the property, one thing you can do is a subject-to purchase if his mortgage isn't FHA or VA. I'd go that route rather than a JV so that you maintain the control while you rehab the property and either sell or rent it. Kick him money on the re-sale or structure the note so he collects interest should you choose to keep it as a rental.

Shabyna Stillman · Answer

@Randy Stuart, Lol!! I like your response, thanks!!

Shabyna Stillman · Answer

@Timothy Martin, thanks. @Gerardo Dominguez and @J. Stark thanks for your input. To clarify the situation a little more, the property is his sisters, who does not want to live there anymore. He wants his sister to walk away with 20K that's his reason for wanting 84K. He said that he'd rather file for bankruptcy than sell below the 84K.  The mortgage is FHA.

Thanks for your responses!

Gerardo Dominguez · Answer

@Shabyna Stillman What about a JV with the owner?  Explain to him how you arrived at your offer.  Using the math below, your offer makes sense; his does not.  From there, explain to him how much profit your expecting on this deal.  He provides the property, you do all the work, you both split the profit?  Win, Win.  Or maybe you can work with an expert in the area to buy it is a short sale from the owner?  Either way, make sure he understands that you're his lifeline.  Without your help he will likely face a foreclosure.  You may not be able to give him the amount he wants but whatever he gets from you will be a hell of a whole lot better than being foreclosed on.

• (ARV * 70%) - Est. Rehab Cost = MAO --> $59K - $69K

Timothy Martin · Answer

I would look to have it for rental property

Creative Financing?

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