2 Yrs left on Mortgage - 44k

10 Replies

Hello Everyone,

I'm looking for some guidance from any seasoned investors, attorneys, lawyers, wholesalers, flippers, buy & hold, or any active forum members.

I am trying to find my first investment deal and what to make sure I'm going about things the best way possible and avoid any rookie mistakes. Any feedback would be appreciated!

Here's the deal: my mom's neighbor is abandoning her house on the 25th of this month & moving out of state. I immediately took this as an opportunity to find out what's going on. Per the homeowner here is the story.

-I have 2 years left on my mortgage

-There's about 44k left on the note

-I'm two months behind Oct 1st it'll be 3 months

-I claimed bankruptcy in 2011

-My loan mod wouldn't go thru

-I can't find a job that pays what I use to make in this state

-House needs a lot of work

With that being said, I asked if she'd add me to the house & have me take over payments and I'd handle repairs. No issues, didn't seem to want any compensation. Was leaving anyway, willing to do the favor.

I asked if there was a payoff amount & how much to get current. She wasn't sure, said she can find out. This was Saturday. I'm going to be following up shortly.

What I would like to do is call the lender on 3 way, find out what the note is & how much to get current. I also want to see if I can be added to access the account & get bill mailed to my house. But I don't wanna shoot myself in the foot if there's a smarter way of doing this.

I talked to a friend who said I should get a "lease to" option drafted & a power of attorney to make decision for the home. I added that I should get a quick claims deed as well in order to have rights to the property. Am I right?

Are these the 3 documents I should gather?

This is the information I've researched & come up with so far:

The city has assessed the home (btw it's a 2 bed 1 bath duplex) for $116

Zillow assesses it for $135

There's an identical duplex (needed no repairs) two houses down that sold for 83k in '98 & 80.5k in '12. Recently it sold, price unknown.

Rent-o-meter estimates $638 – $837

If I were to buy & hold this property I would make it section 8 ready.

Tax assessor says it sold for $143 in 2002 then $192,750 in 2004 to the current owners.

Record Deeds Info / aka Red Flags:

'05 Well Fargo Mortgage 207k

'05 Mortgage Discharge Mers Inc (3x)

06 Lien Municipal (City) 2.6k due

06 Wells Fargo Mortgage 228k till 11/2036

06 Wells Fargo 207k Released

08 US Bank National Assignment

'11 Intent to Foreclose (03/25/11 Auction Cancelled)

'11 228k US Bank National Citigroup Mortgage Loan

(Common sense is telling me they refi-ed about 30k a year after buying & I'm thinking in 3 years they couldn't have paid their mortgage down from 228 to 44k) but my real estate knowledge is limited. This is as far as I've gotten myself.

I am about to call city for more info on the lein, owed taxes, water & sewer companies as well for balances.

Any other suggestions?

The balance is not $44k.

Was the BK chapter 7 or 13, and was the loan included and discharged in the BK?

You are walking into a minefield here.  This is what I refer to as a "shiney object of distraction".

This could be a great deal, but for an experienced investor.  Too many moving parts for a first timer.  The lenders are not just going to let you take over her payments.  If, and that's a big if, if they are interested in that happening, you'd have to be approved yourself first.  What you are really going to be doing is a Short Sale.  You're going to have to get approved to buy the house from her.  Having said that:

first...you need to get some type of title work done to see exactly what is on record in the form of liens on the property.

second....you need to contact each of them to find out what they will do for you if you take the house over.  Keep in mind that your work backwards from the last position to the primary lien holder, since the further away you are from the front of the line, the less likely you are in getting anything.  So start with them and make your deals.

third....analyze the numbers for what you intend to do with it using the real numbers (Zillow is great for a number of things, but NOT their Zestimate.  NEVER USE IT)

last...but most important.  Be prepared to walk away...no matter how far you've gone into it, or how much time you've spent.  The only thing worse than no deal is a bad one, that you make because you want to make the deal too bad.  It's like playing poker.  Folding is better than staying with a bad hand an bluffing.  As long as the money is still on the table, and you're still in the game, you haven't lost it...it's just in a different pile.

The actual solutions as I see it, is just buy the house from her for what she owes...don't make it more complex than you need to make it.

Joe Villeneuve
REcapSystem
A2REIC

Hello @Wayne Brooks  

Great question! I contacted the homeowner immediately and was able to gather more information. She filed a Chapter 13 and the loan will be discharged in 2 years as long as she makes payments and stays in the house. She will owe the house free and clear. The mortgage payment is $1759 a month. They were garnishing her wages getting $879.50 biweekly from her account. The home was appraised at 75k. She thinks the money goes into a trust because her Wells Fargo statements don't show payments. She is responsible for her taxes separately and last year Wells Fargo paid them, she's not sure why but didn't question it. Water & Sewer current bill is about $900 combined. I am also making a full list of all the repairs in order to continue to asses the deal. Also the last payment on record is from June 30th.

In my eyes. Breaking even and paying the mortgage til she is free and clear for 2 years and then reaping the equity, resale or buy and hold benefits are worth my time.

Hey @Joe Villeneuve thanks for your feedback. I am attracted to complicated matters, I think the best deals are birth from the things people don't want to deal with. I don't know that there's a magic number that she can pay the mortgage off for. I also don't want to necessarily go through a lender for a conventional loan. 

Any experienced investors that you know out there interested in this deal? Let me know!

@Blue Azul  

Again, I don't believe the house will be paid off in 2 years.  You can join pacer.gov and research the BK, along with getting permission to talk to the bank.

Hey @Wayne Brooks , I registered but won't get immediate access. Is there anyway you can help me search for it? What info do I need for searching? Address, First and Last Name? I'm trying to get in contact with them now to see if they can expedite my access. Thanks for the tip!

Well I'm kinda with Joe, this is a complicated deal for a first timer, and the numbers don't make a lot of sense.  

First thing you want to do is get an authorization from the seller to talk to the bank(s) and get copies of their statements so you can do your own research.  There's a lot here to get straight. 

The 13 can do a lot of things to the loan, but if she's getting discharged in 2 years and the house will be free and clear there may be a deal here if the duplex has a $130k ARV (not that you can go by Zillow, but it sounds like you've at least got a good feel for things) and you can get it for $44k. If that's the case it sounds like a cram down to the bank- they valued the house when she went in say at $75k, so they did her 13 as $75k secured and the rest of the loan unsecured paid as a percentage of what she can afford, many times this is as low as 1% and the bank has to write off the rest IF she gets discharged. If she gets dismissed, the entire amount is owed again. This is just a theory, I'm just guessing from the numbers you presented.

There are a few problems here, mainly her BK.  You're going to need to see the terms of her 13 and the balance at the bank, what they did in the 13, etc.  If they did a portion of the debt as unsecured, especially a large portion, there's the risk of you making all those payments at $1700/mo and then she gets booted from her BK and all of a sudden that $45k debt goes back to the $200k debt.  Again, I'm guessing there, just trying to give you some insight to the dangers of not knowing EVERYTHING about the BK and loan.  

The other thing is that legally she can't sell the house while its in a 13.  You'd have to get court permission to buy it and I'm not sure how they'd treat the unsecured portion of the debt if that is indeed the way that went down.  $1700 seems pretty high, though, its possible that they wanted her to pay the balance in the plan or or something.  They can range in time frame, but are usually 36-60 months I think.  Been a while since I worked them regularly, so dont hold me to that.  Anyway, $20k/yr x 5 years could very well pay it off if it was valued when housing was depressed.  Usually its the normal payment, plus whatever she was behind spread out over the term of the "repayment plan" for the monthly, then once they are discharged they just keep paying on the 30 year loan, but who knows.    On a 13, they make payments to the trustee and the trustee sends out the money to the creditors so that $1700 may be her whole BK13 payment.  

There's really just still a ton of unknown information here to say anything definitively, but if you'll get the other info we can help guide you through it.

When you say "the loan will be discharged in 2 years",,,that doesn't mean it will be paid off,,,you need to get a payoff from the bank before you go any further to see exactly what is still owed,,,that is the first thing to check

Thanks @Darrell Shepherd   & @Andy Collins  

I spoke to a couple of lawyers & one asked to see the court order before advising me on how to proceed. You both have made great points. I will have a hard copy in hand by 5pm in order to further research this situation.

She did mention not being able to speak to Wells Fargo and having to do everything via her lawyer ( who's name I have for further inquires as well.

Researching this information has been exciting & learning what I have access to is also exciting. Whether this is gonna work out or not, I'm definitely learning and building confidence to find deals. Thanks Biggerpockets' @Joshua Dorkin   

I agree with @Wayne Brooks  : most likely the balance of the loan is NOT $44K...so most likely this is a DEAD DEAL. Get an authorization to release information from the owner of the property so you can talk to the bank to find out the real number.

Hello Everyone,

I appreciate everyone's feedback thus far. Here's my latest update.

I got a nice referral from a realtor I know (who I convinced to join this site) Welcome @Bryant Da Cruz  ! He referred me to an attorney who use to do real estate and now does bankruptcies. He researched the case for me & came back with this:

-About 293k is owed to Wells Fargo

-They appraised the property @ about 88k

-Agreed to have the sellers re modify the loan to that price as long as they made payments of $1,700 for the 5 years

-They will owe the house free & clear if they continued to make payments

-However they can't & are in over their heads

With that being said, this is what the lawyer is saying is my option & I wanted to check in with the community to see if it's worth it or not

A short sale

-have the bankruptcy dismissed

-sellers list the property

-we sign a p&s agreement

-bring offer to bank

Could take 3-4 months or even longer

This would be my first investment deal & I still have to get quotes on all repairs, I started but am still working on it...

Is this worth my time or should I place my energy elsewhere?

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