I concentrate on short sales but I have a friend who is facing foreclosure that is not a short sale candidate. Can someone advise me as to how I can best help him?
His house is valued at $167k. I don't know the repair situation yet but I believe it would be minimal -- definitely under $10k. He owes $82k on a first and $25k on a second. That leaves equity of between $50k-$60k.
With this scenario, what would be the best solution to pose to him?
His best option is to spend the money to fix it up, and list it with an agent for $150-160K. Assuming it really is worth $167K in good condition. If he fixes all the stuff that's wrong, and lists it at $150, he should sell it quickly. In the listing, say "will pay up to 3% toward buyer's closing costs". He should net about $135K on the sale, and then pay off the $107K in loans. He'll have $28K in his pocket. Call the lenders and tell them its up for sale, and you should be able to buy enough time to close the transaction.
If you want to buy it, you have to put on your investors hat. If you think you could flip it for, say $150K, you would want to pay no more than $95K. That's 30% off the $150K, less the $10K to repair. That would net you $15-20K when you sell. That's what I would pay if I were buying. That means it IS a short sale candidate. Your friend will walk away with nothing. So, the first option is a LOT better for your friend.
Maybe you could bring the loans current, buy it subject to, and flip it. That would save your friend from either a short sale or a foreclosure, and would make the deal do-able for you. Its still a thin deal, especially if he's way behind. If you do this, you could consider an "equity split". When you do sell, you pay off all the loans, and then split the resulting proceeds with your friend. He would have to reimburse you for all of your expenses out of his proceeds. Probably gives him less money in his pocket, but if he doesn't have the cash to pay for the fixup and holding it until it sells, it might be an interesting alternative.
So since you are familiar with short sales, you know how to fill out their balance sheet and see if they have a chance to save it by their positive cashflow....correct?...
So get a release of information from them so you can see what their loans are like. If they have an ARM, Great...they are legible for then new bill the President just signed that they can refi to a fix rate up to 85%. Problem solved.
Otherwise, ask for a Forbarence, they will usually take the back payments and spread that over a 24 month period. The seconds are usually ALOT more negociable and maybe just still the payments at the end of the loan.
If that does not work, you need to play with their equity some say to save their house.
If they have good income, maybe something with some unsecured note...Credit card, 401k, ...something....but if they are negative cashflowing w/o a plan to get more income or reduce expences somehow, you are not doing them any favors... Better to get them out now...other secured notes, another house, a car, a boat, a tractor.
Why is your friend NOT a "Short Sale" Candidate???
If your friend is in foreclosure on the first mortgage have your friend sign it over to you "Subject To" and short the second mortgage down to $2,000.00-$5,000.00 bring the first current, fix up the property sell it and help out your friend anyway you feel comfortable. If you can't sell it let him stay there. Just make sure he/she is truely a friend.