Need strategy advice

[Nnamdi Obiako]

I have a neighbor who lost both parents a few months ago and is now clearing out the parents' former home. We had a conversation about what he plans to do with the property and it sounds like his parents did a cash out refi so they still owe about 290k on the property. The house is not updated so there is room to force appreciation to an ARV of $360- $380k. From what he tells me, the bank will take possession of the house soon.

My question is how can I creatively structure a deal that allows me to purchase the property before the bank puts it on the market while providing a solution to the neighbor?

[Joe Villeneuve]

On the surface, This doesn't look like that good of a deal.  If there is debt of $290k now, that means in order to have what would be equal to a DP/equity of 20%, the house would need to be worth at least $360k now.  There's can't be any forced appreciation to $360-380k if it's already worth $360k now.  Just because you spend, let's say $20k on repairs, doesn't mean the house is automatically worth at least $380k after those repairs are done.  It just means you spent $310k on the house.  The surrounding market's sold comps dictate what the house is worth.

Now, what you're asking to do, as a process, is pretty simple.  You need to get permission from the seller to talk directly to the bank with the lien on the property, so that you can negotiate a restructure of cost/terms with that bank.  I said the process is simple, not necessarily the getting the actual results you are looking for.  If you do take this route, don't just accept the terms the bank gives you.  Make sure the terms are what you need to have in place to make money.  Just because the terms are better than the current ones, doesn't mean it's a good deal.  All squares are rectangles, but not all rectangles are squares.

[Nnamdi Obiako]

Thanks for that detailed response. The house is definitely not worth $360k in its current state. There is a newly renovated property on the same street listed for $360k and properties in the neighborhood have recently sold in the $360k range. The neighbor told me his parents took a reverse mortgage against the property and that's where the $290k debt comes in. They passed away before paying it back. Of course I'll need to get more information on this but thanks for the response. It helped. 

[Eliott Elias]

Open title and get a third party authorization signed by the seller to give you access to communicate with the bank directly