Need advice on current deal I am working on
Ok so here's the rundown.
I've been working with a homeowner that is in default and she has equity. She has not made a mortgage payment since June 2013. She has tried everything to save her home but has exhausted all her options. She tried to do a loan mod but got denied. She filed chapter 13 BK but it got discharged because she does not have the income to support the repayment plan. Her debts do not exceed her assets, she is not insolvent.
About the property
- 4 bed 2 bath
- 1st mortgage is around 269k
- Property value is around 500k - 525k fixed up
- Monthly mortgage payment is $1389.64
- Payoff / arrears is $27,239.67
- Property is going to sale on Monday morning at the trustee sale auction
My original plan
My original plan was to purchase her property subject to financing. I got a contract signed a couple days ago from the seller. I would pay seller's back payments to save their house from going to auction. Then put 40k is escrow, give her 20k upfront to find a place and move, and the other 20k when she moves out on July 17th. In the meantime, I plan to make her mortgage payment. Once she moves out, I fix the property up, put it on the market, sell it, pay off her mortgage and get a nice payday!
Here are the problems
- After contract was signed, I ordered a preliminary title and it came back as "Husband and wife, tenants in common."
- Husband passed away 2 years ago. She has a quit claim deed but it's not notarized or recorded.
- She has a "will." It's hand written but not notarized. The will states that she gets everything and the husband's 3 kids get nothing.
This changes everything because now the husband's half ownership of the property will go into probate. There is a spousal property petition which is like an expedited probate that would take 30-90 days.
If I still choose to move forward with this deal.
- I would have to pay the 27k back payment to save it from auction
- Write a new contract with new terms that homeowner will do the spousal property petition.
- She wouldn't get the 20k upfront unless I somehow know that the spousal property petition will work out in her favor. This is a gamble because the 3 kids will have a chance to contest her "will," fight for the property, and potentially prolong the probate hearings.
I don't know. I'm so torn! This was a sweet deal until this issue came up. Today is Sunday and I have to make a decision on whether to save her from auction and move forward with the 2nd plan or let this deal go. I already have the cashiers check made out to the lender. Debating all day whether to pull the trigger or let this go.
Any probate / real estate attorneys can give me solid advice? I am all ears!