Help with a subject to

[Chris Igard]

Hello all and thanks for any tips in advance.

 My realtor is selling  a trashed out home that’s owned by a widower in their 80s, they are already behind one month on the payment and will more then likely be looking at 2 months shortly.  The home will need new, flooring, paint etc.  If the home were in good shape it would likely sell for $200-210k based on the comps and sit for a 2-3 months.  They owe about $140k on the property and an investor has offered $130k to purchase it site unseen (it’s trashed on the inside) but will look at it tomorrow and likely go lower. I offered to buy it subject to but I’ve never done one before.  What would be a good amount here if every cash investor is coming in at the $120s? The realtor would like them to pocket some money (translation) the realtor would like to make a 6 percent commission managing both sides. Lastly how does a subject to transaction work as far as closing fees? Thanks in advance. 

[Patrick Roberts]

Quote from @John Clark:

Quote from @Chris Igard:

Hello all and thanks for any tips in advance.

 My realtor is selling  a trashed out home that’s owned by a widower in their 80s, they are already behind one month on the payment and will more then likely be looking at 2 months shortly.  The home will need new, flooring, paint etc.  If the home were in good shape it would likely sell for $200-210k based on the comps and sit for a 2-3 months.  They owe about $140k on the property and an investor has offered $130k to purchase it site unseen (it’s trashed on the inside) but will look at it tomorrow and likely go lower. I offered to buy it subject to but I’ve never done one before.  What would be a good amount here if every cash investor is coming in at the $120s? The realtor would like them to pocket some money (translation) the realtor would like to make a 6 percent commission managing both sides. Lastly how does a subject to transaction work as far as closing fees? Thanks in advance. 

Don’t. You got too many issues, including the fact that the mortgage is already on the bank’s radar due to delinquencies. You are almost guaranteed a due on sale call.

I agree with this - this loan is on the servicer's radar because of the delinquency. There is a much higher than normal probability that the loan will be accelerated if the property changes hands. Also, I'm not really seeing where there is much equity in this deal. If the loan balance is at $140k, ARV is $200k, and the property needs a trashout plus full interior refresh, youre probably looking at putting $20k-$40k into, depending on the size of the house and quality of finishes.

So between rehab costs, transaction fees, and costs to bring the loan current, you'll be into this property for $175k-$185k on day 1, all to grab maybe $15k in equity? And to have the axe of a probable loan acceleration hanging over your head? I dont see where this is a deal.