A DEFAULTING MORTGAGE DEAL FALLS IN MY LAP AND I'M LOST!
Atlanta GA · Member since 2019 · 101 posts · 59 votes
Hi Guys,
I need a lecture. Yesterday I got a call from an agent who said his client had defaulted on their mortgage and would be foreclosed on. However, the homeowner was open to transfering the mortgage and taking cash.
i'll put out as much info as I have currently
Home's in Baltimore. Comps are at $175k.
Home was purchased in 2017 Nov for $134k. Owner has defaulted by $15k.
Owner is asking for $29k and they'll hand mortgage over. Home is in fair condition. Nothing a touch of paint and some landscaping won't solve.
Home is a 3 bed 2 bath.
I'm assuming this has to be a case of "assuming Mortgage". I have no idea how that works. Also had no idea what else to ask for so I came to you guys.
Now teach me. * Kneels down*
Hey @Laurence Obi!
// Begin Cranky-Old-Man Mode //
You need waaay more information:
Also be aware that this agent is due a commission on any purchase transaction. If you bought the house for exactly what they owed (let's say $130K), that would put $3,900 in the agent's pocket at closing (assuming 3% commission). Technically, this would be the seller's problem, but since they'd be getting ZERO money at closing, you'd need to cough this up yourself or you'd have no deal.
Lastly, I'm both amused and amazed that a seller who has already received $15K in free housing subsidies thinks they are entitled to another $29K in sales proceeds!
If I were to take over this loan (subject-to), I'd plan to cure the default, pay the agent, and give the seller enough money to move out ($2-5K). They don't have any real equity at this point, and they need to understand that in a hurry!
// End Cranky-Old-Man Mode //
Good luck!
Hey @Laurence Obi!
// Begin Cranky-Old-Man Mode //
You need waaay more information:
Also be aware that this agent is due a commission on any purchase transaction. If you bought the house for exactly what they owed (let's say $130K), that would put $3,900 in the agent's pocket at closing (assuming 3% commission). Technically, this would be the seller's problem, but since they'd be getting ZERO money at closing, you'd need to cough this up yourself or you'd have no deal.
Lastly, I'm both amused and amazed that a seller who has already received $15K in free housing subsidies thinks they are entitled to another $29K in sales proceeds!
If I were to take over this loan (subject-to), I'd plan to cure the default, pay the agent, and give the seller enough money to move out ($2-5K). They don't have any real equity at this point, and they need to understand that in a hurry!
// End Cranky-Old-Man Mode //
Good luck!
Concise explanation.
Thank U Mitch
I don't know what your financial situation is, but I had a similar experience last year. Property owner was looking to move a multi-family property, but was in default. She left the tenants high and dry, and just wanted to get out from under the mess she'd created. The bank had begun foreclosure proceedings. Knowing her payoff, I called the bank that held the mortgage, spoke to the president of the bank, and made an offer to buy the mortgage for 50% of what she owed. Because they were sick of her and wanted to avoid foreclosure, they agreed. Then my lawyer drew up the paperwork so she'd sign the title over to me, and she could walk away. No closing costs, just a couple of hours to my lawyer, and roughly $500 to register the title in my name with the county.
Long story short, talk to the bank and try to buy the mortgage. Inform the owner that you're doing them a favor. Not having a foreclosure on your credit history is worth a lot more than $24k, if you ask me.
I don't know what your financial situation is, but I had a similar experience last year. Property owner was looking to move a multi-family property, but was in default. She left the tenants high and dry, and just wanted to get out from under the mess she'd created. The bank had begun foreclosure proceedings. Knowing her payoff, I called the bank that held the mortgage, spoke to the president of the bank, and made an offer to buy the mortgage for 50% of what she owed. Because they were sick of her and wanted to avoid foreclosure, they agreed. Then my lawyer drew up the paperwork so she'd sign the title over to me, and she could walk away. No closing costs, just a couple of hours to my lawyer, and roughly $500 to register the title in my name with the county.
Long story short, talk to the bank and try to buy the mortgage. Inform the owner that you're doing them a favor. Not having a foreclosure on your credit history is worth a lot more than $24k, if you ask me.
This sounds like a very viable plan.
I like it.
Will look into it. I already asked for the mortgage statements etc. Will take it from there.
Thanks.
Hi,
Lots of questions: So you are going to invest long distance? Have you done this before? Do you have a team of contacts in the Baltimore area? I am also not sure if you are thinking of this as a rental or resale? Is it Baltimore county or city? If it was bought in 2017, there is likely a mortgage on it close to the purchase price, do you know what the mortgage balance is? If the owner is $15k in arrears and you add that to the mortgage AND you add another $29k to the owner ( even if the $29k included the $15k) and you add that to the mortgage, there likely is no room for a deal here in my humble opinion. What is the state of the default? What stage of foreclosure assuming that is the case?
Hi,
Lots of questions: So you are going to invest long distance? Have you done this before? Do you have a team of contacts in the Baltimore area? I am also not sure if you are thinking of this as a rental or resale? Is it Baltimore county or city? If it was bought in 2017, there is likely a mortgage on it close to the purchase price, do you know what the mortgage balance is? If the owner is $15k in arrears and you add that to the mortgage AND you add another $29k to the owner ( even if the $29k included the $15k) and you add that to the mortgage, there likely is no room for a deal here in my humble opinion. What is the state of the default? What stage of foreclosure assuming that is the case?
Hi Michael. Thanks.
I brought this here so I could leverage of knowledge and opinions. I haven't decided to do the deal yet. The reason it states "I am lost" is because I have never handled a Sub2 deal before. It was eventually going to be a deal or learning opportunity. And looks like it's the latter.
And thanks for ur points.