Foreclosure Going to Auction but Owner willing to Sell to me

39 Replies

I need some advice ASAP.  I made contact with the owner of a house that is going into foreclosure over a $10,000 Mortgage.  The lady is disabled, does not have any money besides what the state gives her, and cannot afford a loan at all.  The current payoff after fees and taxes are $23,000.  The land alone is worth $100k in my town, not to mention the structure which does need a full gut.  I will say I'm dealing with an older lady who does not know much about whats going on except that she is losing her house.  She has agreed verbally to selling me her house for pay off plus $10,000 extra to help her start over in an apartment or she may go and live with her daughter.  

What do I need her to do and what do I need to do in order to get this deal closed? Should I get her a contract to sign?  If so does anyone have one I could use?

  I know I need to do a title search and she must call the bank.  What should she ask when she calls specifically? Should I have my title company reach out to her bank?  I'm going to have to walk her through this and deff drive her to the title company myself for anything as she cannot drive.  Please let me know what ya'll think!

Updated 4 months ago

The property is worth more around $60k after doing comps in the area.

Having almost the same problem with one of our properties in Louisiana.  Real Estate Laws differ from State to State.  So, I would Check with a local Real Estate Attorney to see if you can do a "mortgage Wrap" or Sale subject to the existing mortgage.

Cody, what a great opportunity to help someone out and score one for yourself at the same time-rare to find that! Looks like there is room in that transaction for attorneys fees and that would greatly simplify things for you and the lady. 

Alex Hamilton gave you some important advice.

Forget the mortgage wrap crap, assuming you have the cash, just buy it! Sign a contract, give that to the title co. .....they will do a title search and get the pay off for all liens and property taxes.

I have cash. No need for any mortgage. 

@Cody DeLong Does this lady have any relatives that, could later claim that you took advantage of her?  I'm not saying you are taking advantage of her.   

@Bob B. she has children but I can assure you I'm not. The house is scheduled for foreclosure and it's either she does this or it goes to auction. I'm trying to put money in her pocket instead of nothing and then even worst of a credit score. 

I will say guys I'm now partnering with someone who does similar deals to show me the ropes on the first one. We talked and he's going to help me out with it which is fine for me. I'd rather learn and know what to do when more come up. I just started so education is key for me. 

Make SURE that this woman is of sound mind and judgment to be able to make these decisions. If you are already questioning her competence, you better investigate whether she has an executor that makes decisions for her. If you proceed, and she has someone who is POA over her, it will make your deal voidable, whether you have put money in or not.

Also, I would question whether the $10k is a second loan.  That sounds low for what you mention as the value.  I would do more digging.

Have you talked to her children? The bank cannot talk to you without at least verbal permission from the owner. The bank may (should...probably by law considering her age and condition) agree to stay the foreclosure auction if she has placed the property up for sale. Pretty sure the bank will stay if the property is under contract...might need to fax them a contract. I know you’d like to make a quick 75k but she really should advertise on the mls and sell to the highest/best offer. Sounds like she needs the money and her kids may be in as bad of shape as she is.

@Cara Lonsdale she is vey much of sound mind. What I'm saying is she doesn't know much about the process as she inherited the house. We did preliminary already and it's the only mortgage on the house with no liens. 

Originally posted by @Cody DeLong :

@Cara Lonsdale she is vey much of sound mind. What I'm saying is she doesn't know much about the process as she inherited the house. We did preliminary already and it's the only mortgage on the house with no liens. 

 Great.  Then work fast.

Get her under contract, and have her call the bank to alert them that you have a contract for sale in place.  This can often delay a Foreclosure, and give you more time to complete the sale.

@Cara Lonsdale For sure.  We are meeting her tomorrow with contract in hand.  Monday we'll get with the title company and get this done as soon as possible. I have the cash on hand so it literally could be done in 2 weeks or less.  Shouldn't be an issue at all.

@Marian Smith Yes that is what she should do but she isn't going to. If it was not for me she would have just had it auctioned off and been left homeless with no money. I'm trying to do something and help her get money in her hand, a mutually agreed upon date for her to be out (Likely 60 days), and I will probably pay for her moving truck because I am a very nice person. I want her to be very comfortable in this deal and also help her. I'm starting in this business to make money and help people out of the situations they're in. If everyone we bought a house from we told to just put on MLS and the foreclosure would stay then we wouldn't be able to make money. Also this house would not be able to get mortgaged. It is a complete gut job or full demo.

BP is a funny place every one cheering you on.. but really have to follow your own moral compass here if the land alone is worth 100k or more.. and she owes 10k.. she could list it and probably sell it close to 100k in time to pay her foreclosure..

your about to wipe her out and take her inheritance from here..  unless you're giving her significant equity but reading between the lines I bet that's not the case..

she should have a lawyer representing her and signing off so you don't have elder abuse and unconscionable profit taking which is the way your post reads to me..

saying your fixing her credit is total BS its already trashed if the loan is in her name and its probably not even in her name if you said she inherited it.. so that does not ring true.. I am sure you have someone help you rip this lady off..

Nothing to be proud of here from my vantage point.

Originally posted by @Cody DeLong :

@Bob B. she has children but I can assure you I'm not. The house is scheduled for foreclosure and it's either she does this or it goes to auction. I'm trying to put money in her pocket instead of nothing and then even worst of a credit score. 

Nonsense. She would do better letting the sale go through and make a surplus claim than sell to you.

your also under the impression that if it goes to foreclosure she gets nothing.

when in fact if its worth north of 100k that property will bid up to at least half of that if not more and she is entitled to the overages.. so would get a 40 to 60k or more check for doing nothing.. and then she can use those funds to go rent an apartment. 

Maybe you don't know how foreclsoures really work..

@Cody DeLong -

Do you have any thoughts on why she hasn't just sold the house?  We've been buying foreclosures for a few years and when we do get the chance to talk with sellers in preforeclosure, I've yet to find one that had such a low mortgage/value ratio.  

 I've yet to actually buy a property in pre-foreclosure so it is great that you have at least gotten to the point where you can pay the owner.  However, if she is of sound-enough mind to sell you the house at such a low price but hasn't taken the normal step of putting it on the market, to avoid foreclosure, I'd be concerned like @Cara Lonsdale  and @Bob B. have mentioned that someone would eventually recognize that and possible twist it into something else.  

I'm sure you have thought all of that through. Just my 2 cents on a Saturday afternoon.  

Note the property after doing comps is worth more around $60k.   Believe me I'm not trying to take advantage and now will be rethinking how much we offer. And yes any extra does go to her but now there will be auction fees, attorney fees, etc. so I'd say if it did get to $40 or $50k she ends up with about the same as what I'm offering and evicted where I'm willing to work with her. Regardless I will be making a better offer now knowing and understanding what you all are saying. I don't want to rip anyone off at all and can afford to be able to up my price to get her more money. 

Just think of your mother or your grand mother in the same situation then let your conscience guide you.  this is one of the things I have struggled with over the years myself buying distressed assets.

and one reason I preferred to buy vacant homes.. takes the moral dilemia out of it.

and I know its not popular thinking on BP as most here think your a hero when you rip a huge profit.

One thing I have done is and actually did it twice.. Is in this situation when the dollars are so low.. I paid off the mortgage and gave the elder a life estate.. we paid insurance they paid utls.. and we paid maintenance and let them live there.  you would be surprised on how well that can be received as they just don't want to move.

I am building 3 homes on a lot that I did that on 12 years ago.. not sure if it was the best use of our capital but back in the day and pre development we paid 80k for the house.. and now the area has regentrified and lots are worth a bunch  150 to 200k each.. but I spend another 100k getting that done. and she lived there rent free for 10 plus years.. and market rent in that area back then was probably 800 and in the last 4 to 5 years 1500 or more.. so like I said was it a great deal .. not sure.. but we had a paid for asset that is now worth a pretty good chunk and will build 3 homes on them and make about 300k net per home.. if I had to compete today  for the same lots if would be a big stretch to take it down.. but who knows right.

at 10k though seems to me you could pay it off and just set it and forget it.. when she passes or moves you own it for the 10k.. that seems like a win win.. think about that stategy.

Originally posted by @Cody DeLong :

I need some advice ASAP.  I made contact with the owner of a house that is going into foreclosure over a $10,000 Mortgage.  The lady is disabled, does not have any money besides what the state gives her, and cannot afford a loan at all.  The current payoff after fees and taxes are $23,000.  The land alone is worth $100k in my town, not to mention the structure which does need a full gut.  I will say I'm dealing with an older lady who does not know much about whats going on except that she is losing her house.  She has agreed verbally to selling me her house for pay off plus $10,000 extra to help her start over in an apartment or she may go and live with her daughter.  

What do I need her to do and what do I need to do in order to get this deal closed? Should I get her a contract to sign?  If so does anyone have one I could use?

  I know I need to do a title search and she must call the bank.  What should she ask when she calls specifically? Should I have my title company reach out to her bank?  I'm going to have to walk her through this and deff drive her to the title company myself for anything as she cannot drive.  Please let me know what ya'll think!

You mention that the land alone is worth $100k and then you updated this to mention the property is worth $60k???   

@Cody DeLong you need to get a solid ARV. Saying the land is worth $100k alone, and now the house and land is only worth $60k... what does it comp out at, that's a HUGE swing between $60 and 100k.

The house is almost uninhabitable and I was not looking at good comps. I drove by for the first time after I posted this and it is far from the condition I was told. The house needs to be torn down completely and the land is going to be the value. I'm honestly not sure how this woman lives there but I'm going to find out when I meet. A parcel of land that's 2 acres in the town sold for $65k in he summer and another At $52k. I'm not looking at eh house value as there is no value in the house. 

Originally posted by @Cody DeLong :

I need some advice ASAP.  I made contact with the owner of a house that is going into foreclosure over a $10,000 Mortgage.  The lady is disabled, does not have any money besides what the state gives her, and cannot afford a loan at all.  The current payoff after fees and taxes are $23,000.  The land alone is worth $100k in my town, not to mention the structure which does need a full gut.  I will say I'm dealing with an older lady who does not know much about whats going on except that she is losing her house.  She has agreed verbally to selling me her house for pay off plus $10,000 extra to help her start over in an apartment or she may go and live with her daughter.  

What do I need her to do and what do I need to do in order to get this deal closed? Should I get her a contract to sign?  If so does anyone have one I could use?

  I know I need to do a title search and she must call the bank.  What should she ask when she calls specifically? Should I have my title company reach out to her bank?  I'm going to have to walk her through this and deff drive her to the title company myself for anything as she cannot drive.  Please let me know what ya'll think!

I spent 15 years buying foreclosures from the courthouse. I guarantee this woman will get more $ letting the sale go to the courthouse than taking the $23K plus payment for an apartment. At the courthouse, in an open and competitive bid scenario, she will get the highest amount for a dstressed sale. If she listed the property, she would get more.

While it seems to me there is something screwey with this deal (low loan payoff and relatives not stepping up) I've seen this before. In my state, this sale via the upset bids go on and on... until someone buys it out for a far price or capitulation from a bidder. But Maine appears to have a 90 day redemption. So investors, in a perfect world for the OWNER, would make offers and redeem to teh best price.

@Jay Hinrichs thank you for giving me a good answer and some things to process. Im trying to figure out what it's going to go for at auction and offer that. I unfortunately don't have the ability to just pay taxes and have $23k out for years. She's not super elderly, late 50s. Like I had mentioned in another response the land looks to comp at $60k and that's with drilled well and septic. The septic I'm going to assume needs to be done and as I said the house I believe has no value but id let the new septic and the house equal itself out. You'd need to put $100k into the house to make it a $100k home. With that being said I'm just trying to think of a fair offer where I can make a good return but not too much. My plan is to demo the home and offer as land. Probably put a new gravel driveway in that goes further back on the property 

Have you checked the title to see if there are other liens especially IRS. Is she the sole owner? It is much safer buying from her directly than buying at tax auction.in Maine you have sit on Home for several years before you can flip it safely when you buy from a municipality for taxes unless you get the tax payer to sign off on it which can be very difficult or expensive. If you plan to keep it a minimum of 5 years for rental or to live in then the risk is minimized.

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