Investor · Pasadena, TX · Member since 2016 · 105 posts · 25 votes
So next week I will be going to knocking doors on pre-foreclosure houses (2 months before the auction is what I can find) that are newly built ( little to no repairs) I'll explain to them what options they have to solve their problem. Then I'll present the option that could be one of their best solutions. That I can take over the mortgage payment(mirroring the note) and pay the back payments that the owner owes. Saving their credit and saving them from foreclosure. I'll create a wrap using a specific contract that a Real Estate attorney will provide that fits with the law. Then before I agree to everything (closing) I should have found a retail buyer that can owner finance the deal, if not the next option would be a short sale or terminate the contract. To the retail buyer, I would ask him to put a down payment and make the monthly payments (which it will be a little higher than what I owe on the wrap) and I will give them a beautiful 2010 4/3 house. Let's say he agrees, then I would re-sell it to him/her (retail buyer) use another contract I imagine from the attorney. Then use a loan service company to make things easier, and make sure the payments happens till it's paid off. I imagine that's is how it's done if not let me know.
I would also like to partner up with an investor that has done this before a "Wrap Deal" to make sure I'm walking the right direction. If I find one which I will, I'm willing to give a very good percentage of the downpayment.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
Boy I just cringe at this... unless you have VERY deep pockets lets look at how this plays out.
now I am going to write out devils advocate here and I am in no way saying this is you I am showing you the other side of the coin so you can look at it objectively.
1. you knocking on doors of someone in financial distress and unless you have been there or have dealt with a ton of owners facing foreclosure you don't really know how hard this is on people on lives on families on children.
2. your not saving their credit their credit is already trashed if there is a notice of sale. so to lead them on that you some white knight helping them save their credit is bunk.
3. Double cringe your going to sell to some low down payment probably not financeable person who you have no idea if they are going to be able to carry thorugh.. and the reality THEY WONT they will walk in a few years.. ( @Rick Pozos that's why Rick says 12 months or less which is all at most you should do).. so I bet you have not thought through as most guru's leave out the other side of the coin. So let me ask you this switch positions . your seller.. you just deeded your home away you think everything is great.. now the payments are made for a year or so then. stop.. your seller probably has not really fixed their financial position and is now renting and so they can't afford rent and to pay a mortgage on a home they do not own... you as the real nice middle man who solved their problem is long gone you could care less you got your dough you just stuck your seller with basically a sub prime borrower they don't know... house will now finally go to foreclosure because both parties can't cure.. and of course your long gone you got paid you have no skin in the game does not affect your credit.
4. the people you saved cannot get another home because their mortgage is still on their credit.. they are stuck and did not realize it when they deeded it over.
5. your Seller gets way pissed and files a complaint against you at the AG s office as you have taken advantage of someone in dire straights and now they are totally messed up. ( I have rescued investors who this happened to)
So I know there are guru's that teach this and it all sounds good.. but UNLESS you have the ability to cut a check to payoff the underlying at anytime its called then step in and foreclose your lease option or contract for deed folks out.. then this is a horrible idea .. and again I know its taught and on the surfice it sounds wonderful
and it works like I said if your very well cashed up .. but most who do this are not ERGO they want the sub too deal as they see this as leverage into a deal with no personal credit.
Also let me tell you there are sharks out there that do this and walk once they get a few grand ..
in many states you cannot even deal with folks in foreclosure unless your a licensed foreclosure consultant.. our state is that way.
So careful .. think it through .. use the 10 commandments due unto others.
OH and lastly your comment about just walking that one really gives me heart burn.. you lead people on you bail on them and leave them no time to fix their problem when they could have been talking with a real investor or short sale broker that could have actually helped them and is not just looking to help themselves.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
9y
You pretty much got it. The problem is that when you do the wrap, the lender can now foreclose. They probably will not. Really, anytime that the seller sells the house, the lender has that option. I have some that I have kept a year and nothing happened. I like to do them for short term light rehab, then rent for 6 mo or a year and get the buyer to refinance me out of the property. I recommend only holding a sub-to property for a year or less. I would never hold it until the loan is paid off (15 or 20 years).
I might give the seller a couple thousand $$ to move and get the deed, but I would make the payments, not the seller. This way I know that they are getting paid on time and not causing the bank to have any issues.
I would not really do the wrap mortgage. I would just get the deed in my name and like I said, clean it up and sell as quick as possible so that they can cash me out. I guess if you wanted to, you could refinance after a year or so.
If you contract with someone, be the stand up person and buy the property. Dont back out because you did not find a buyer. Pay the back payments like you said you would. After you told this person how you were going to help them and then at the last minute you tell them, "Well, I couldnt find a buyer, so I am cancelling the contract. Here is your house back a day before the auction, good luck". That would be a pretty ****** thing to do.
The only time I have had to cancel a contract is when there were title issues that could not get cleared up. I ask a 1000 questions now about the owners, the property, bankruptcy, child support, liens, judgements, etc. and then I do a title search just to make sure.
Investor · Pasadena, TX · Member since 2016 · 105 posts · 25 votes
9y
Thank you for the comment@Rick Pozos, I like that strategy! but since i'm looking to find a property where I can have cash flow and not worry about the property as much that's why I want to try the wrap method. I know it triggers the "due on sale clause" and that could make the lender close on me, but it wouldn't make sense to do it. Actually I would help the lender keep getting money and have them not lose at all, save someone from foreclosure, and help the end buyer get a house that he couldn't get a traditional loan.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
Boy I just cringe at this... unless you have VERY deep pockets lets look at how this plays out.
now I am going to write out devils advocate here and I am in no way saying this is you I am showing you the other side of the coin so you can look at it objectively.
1. you knocking on doors of someone in financial distress and unless you have been there or have dealt with a ton of owners facing foreclosure you don't really know how hard this is on people on lives on families on children.
2. your not saving their credit their credit is already trashed if there is a notice of sale. so to lead them on that you some white knight helping them save their credit is bunk.
3. Double cringe your going to sell to some low down payment probably not financeable person who you have no idea if they are going to be able to carry thorugh.. and the reality THEY WONT they will walk in a few years.. ( @Rick Pozos that's why Rick says 12 months or less which is all at most you should do).. so I bet you have not thought through as most guru's leave out the other side of the coin. So let me ask you this switch positions . your seller.. you just deeded your home away you think everything is great.. now the payments are made for a year or so then. stop.. your seller probably has not really fixed their financial position and is now renting and so they can't afford rent and to pay a mortgage on a home they do not own... you as the real nice middle man who solved their problem is long gone you could care less you got your dough you just stuck your seller with basically a sub prime borrower they don't know... house will now finally go to foreclosure because both parties can't cure.. and of course your long gone you got paid you have no skin in the game does not affect your credit.
4. the people you saved cannot get another home because their mortgage is still on their credit.. they are stuck and did not realize it when they deeded it over.
5. your Seller gets way pissed and files a complaint against you at the AG s office as you have taken advantage of someone in dire straights and now they are totally messed up. ( I have rescued investors who this happened to)
So I know there are guru's that teach this and it all sounds good.. but UNLESS you have the ability to cut a check to payoff the underlying at anytime its called then step in and foreclose your lease option or contract for deed folks out.. then this is a horrible idea .. and again I know its taught and on the surfice it sounds wonderful
and it works like I said if your very well cashed up .. but most who do this are not ERGO they want the sub too deal as they see this as leverage into a deal with no personal credit.
Also let me tell you there are sharks out there that do this and walk once they get a few grand ..
in many states you cannot even deal with folks in foreclosure unless your a licensed foreclosure consultant.. our state is that way.
So careful .. think it through .. use the 10 commandments due unto others.
OH and lastly your comment about just walking that one really gives me heart burn.. you lead people on you bail on them and leave them no time to fix their problem when they could have been talking with a real investor or short sale broker that could have actually helped them and is not just looking to help themselves.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Rick Pozos I know I take a hard line on this strategy.. I assume it comes over the internet that way.
and as you said be a stand up guy.
these wholesalers who just thinks this is some sort of game tying up property and walking if they can't flip them.. just bugs the ever living you know what out of me.. To me it shows no morals or ethics whatsoever.. to even think this is OK.. just gets me.
Like you I built a substantial sub too portfolio over the years.. but I also had more than one called.. and we stroked 100 to 300k checks for them..
there was a group here in PDX I think they got this from rich dad or another guru that came through town they did about 30 of these long term sandwich deals. and one by one the buyers flaked.. sub prime borrowers no matter where they are what they are .. are a big default risk.
by the time they got to me 14 of the 30 were not paying.. and of course in our area mortgages are in the 1000 and above range.. and they are making their 200 a month delta.. but when you have 14,000 a month negative.. hostile owners of homes that know it takes a year to boot them.. and the folks you bought the house from are screaming.. ( many of these folks the credit was fine ) it was a cluster of epic proportions.. calls to AG to DA come to Salem for a hearing.. If they did not find me who came in and cashed a bunch of this out.. got the tenants out with cash for keys etc etc.. they may have faced some criminal charges..
Investor · Pasadena, TX · Member since 2016 · 105 posts · 25 votes
9y
@Jay Hinrichs, I want to thank you for opening my eyes I haven't seen that side until now. So one question how would you help someone in pre-forecloser? here in texas you don't have to have license to work on foreclosures.
