Austell, GA · Member since 2017 · 21 posts · 1 vote
SITUATION: Seller has an active bankruptcy and wants to sell b/c she's relocating. She would negotiate a short sale with lender if necessary, and I'm wondering if subject to is a viable way to acquire this deal or if it even is a [doable, good] deal at all. The trustee she's working with is aware she wants to sell her home. Seller is willing to "discharge" her bankruptcy to get a creative deal done if possible.
DETAILS:
- Seller filed ch 13 in 2019.
- Mtg payoff amt $137K
- PITI $917/mo
- Lender states borrower is 14 payments behind ($917 * 14 = $12.8K)
- ARV $207K
- Repairs: none
- Avg. Rent: $1300/mo
- Seller wants $5K to help with her move
QUESTIONS: How would one structure a subject to in this situation? Will catching up the back payments (and seller paying off legal and trustee fees) to discharge the bankruptcy suffice in making sub2 work? Is a short sale the better route (I've never done one before)?
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
6y
Hi @Dara Abasute! Congratulations on connecting with a seller who seems to really need some help!
First, let's talk short-sale: Not gonna happen! There's ZERO incentive for the lender to accept anything less than the full loan amount in this case. They'll foreclose long before they'll accept a short-sale.
Regarding sub-to, I would urge you not to attempt one without basic training and also excellent paperwork. The penalty for getting these deals wrong can be severe and career-ending!
Regarding the seller's request for $5K, just keep in mind that they have been living in this house for over a year and paying nothing toward the mortgage. And now they need money to move? Perhaps this deal could be done with a more reasonable amount paid to the seller. Just sayin'.
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
6y
Hi @Dara Abasute! Congratulations on connecting with a seller who seems to really need some help!
First, let's talk short-sale: Not gonna happen! There's ZERO incentive for the lender to accept anything less than the full loan amount in this case. They'll foreclose long before they'll accept a short-sale.
Regarding sub-to, I would urge you not to attempt one without basic training and also excellent paperwork. The penalty for getting these deals wrong can be severe and career-ending!
Regarding the seller's request for $5K, just keep in mind that they have been living in this house for over a year and paying nothing toward the mortgage. And now they need money to move? Perhaps this deal could be done with a more reasonable amount paid to the seller. Just sayin'.
SITUATION: Seller has an active bankruptcy and wants to sell b/c she's relocating. She would negotiate a short sale with lender if necessary, and I'm wondering if subject to is a viable way to acquire this deal or if it even is a [doable, good] deal at all. The trustee she's working with is aware she wants to sell her home. Seller is willing to "discharge" her bankruptcy to get a creative deal done if possible.
DETAILS:
- Seller filed ch 13 in 2019.
- Mtg payoff amt $137K
- PITI $917/mo
- Lender states borrower is 14 payments behind ($917 * 14 = $12.8K)
- ARV $207K
- Repairs: none
- Avg. Rent: $1300/mo
- Seller wants $5K to help with her move
QUESTIONS: How would one structure a subject to in this situation? Will catching up the back payments (and seller paying off legal and trustee fees) to discharge the bankruptcy suffice in making sub2 work? Is a short sale the better route (I've never done one before)?
1. You can't do a short sale and a Subject To on the same property. (It's gets a little technical, but that combination doesn't work.)
2. If someone is in bankruptcy they are required to get court permission to sell any asset unless the Trustee has filed a "Notice of intent to abandon" that particular asset (house, car, boat, etc)
3. The bank will get a say in whatever the debtor asks the court to do. The attorney files a motion, the court schedules the hearing and both sides plus the Trustee get to discuss it. The court decides and usually will sign within a few days if all sides agree otherwise it could take a month or two for the judge to decide.
4. The solution is to pay off the chapter 13 early, get the bankruptcy discharged which can take two or three months, and then take over the property Subject To. Another possible option, depending on the judge, the bank and the circumstances is to bring the mortgage current, get the house released from the bankruptcy, make a couple of payments on time to the bank and then do a Subject To.
Austell, GA · Member since 2017 · 21 posts · 1 vote
6y
@John Farady Thanks, I wasn't suggesting doing both short-sale and sub2 on the same house (should've made that clearer). I was asking either-or. Your 4th point is exactly what I was thinking was the solution. Thanks for your help
Austell, GA · Member since 2017 · 21 posts · 1 vote
6y
Thanks! Most all of my rentals I've acquired sub2. As far as paperwork for this particular situation of bankruptcy (I plan to have Seller discharge) that I've never dealt with, do you have any insight on any specific clauses or terms to add?
Hi @Dara Abasute! Congratulations on connecting with a seller who seems to really need some help!
First, let's talk short-sale: Not gonna happen! There's ZERO incentive for the lender to accept anything less than the full loan amount in this case. They'll foreclose long before they'll accept a short-sale.
Regarding sub-to, I would urge you not to attempt one without basic training and also excellent paperwork. The penalty for getting these deals wrong can be severe and career-ending!
Regarding the seller's request for $5K, just keep in mind that they have been living in this house for over a year and paying nothing toward the mortgage. And now they need money to move? Perhaps this deal could be done with a more reasonable amount paid to the seller. Just sayin'.
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
6y
You won't be able to close without a motion to sell or the case closed for the BK. That isn't a big deal. Not sure why you'd want to do a sub 2 if the home has no equity. The only way you buy into equity on an upside down home is attempting a short sale. What is the AS-IS value of the home?