Updated over 8 years ago on . Most recent reply
Quit Claim Deed Divorced Situation
Hello Fellow BiggerPockets members,
My brother Jason and I found a lead from our bandit signs. The owner's situation is that he is divorcing and wants to get rid of the property. He has only lived in the home for about a year. The home is in a new developing city and the property itself is fairly new. The home looks as if it does not need any type of rehab or repairs. He has been working with an agent for about 3 months now and still has not landed a buyer. The owner said he is frustrated with his agent and is looking for another way out.
He owes $318,000 to his VA loan and WANTS to BREAK EVEN. I spoke to my broker and he said that he would most likely sell the home at $340,000. In the area, comps has been sold within 1 month after listing. I did the math, and its not a deal, but As I was speaking to the owner I picked up that he would be willing to go as low as $300,000. If sold at $340,000, That gives us $40,000 to play with. It still doesn't sound like a deal, or very little profit for us.
What cost should I factor in?
- Realtor's fee 3%
- Closing cost (How much does closing cost look like? I am putting $2,000)
- Behind Penalty Fee - I'm assuming around $2,000
- Behind mortgage - ~$13,000
- Holding cost - $2,250/mo mortgage + HOA
- 3/mo x $2,250 = $6,750
With all of the above factors.. I got it to $6,050 as a ROI. Yes I know its tight, but the point of this is to see what cost did I miss that I should factor in and the cost that I did factor in, is it accurate (IE closing cost/buying cost)
Since the numbers are real tight, my option would be to offer him a lower number. I believe to make the numbers work, offering him between $283,000-$290,000, that the deal can work. Would he take that number? hmm I do not know. But its worth a shot to negotiate. He is behind mortgage by 4 months, and looking into falling into pre-foreclosure and had a bad experience with an agent.
If he does not like the deal, the next offer I have for him is a referral fee and send in my broker. Which I will make 20% of whatever he makes.
Lastly, if I were to make this work as a quit deed, do I need to get approved by their current lender to claim the property under my name?
Most Popular Reply
@Justin Aguilar You say "The owner's situation is that he is divorcing" and California is a Community Property State. You need to talk to a Title Company before you do anything else. If you do a Quit Claim Deed with the divorcing spouse, you could have Title Insurance problems that will be a real bear to get over. If a Divorce proceeding has been filed, I'm betting you need a court order to buy the property. I think you might have a deal here but do the smart thing and pay for an hour's time with either a divorce attorney or a real estate attorney and get their "sign off" on the way you propose to proceed. The seller can ask the agent to release the listing and then simply use escrow and an attorney for closing. The real estate agent doesn't have to release, but likely will since the property is in arrears.