Foreclosure in 8 days - Can I help this seller?

Question

A homeowner called me today and says that auction has been scheduled next Tuesday, September 7.

Here's the scoop:

$92000 (includes $14K in arrears, bank and attorney fees)
Delinquent HOA $1000
Delinquent Property Taxes $2100
Delinquent water bill $1,200

Comps aren't really strong...could probably sell for around $100K.

Is there anything I could do for this homeowner.  I'm thinking subject 2 or short sale.  I don't fully understand lease buybacks so I'm nervous about that.  Don't want to put her in a worse situation.  Thoughts, anyone?

Thanks!

Don Konipol · Answer

Bankruptcy or a Temporary restraining order will postpone the foreclosure sale, but what's the point?

I see too many people go crazy trying to avoid foreclosure, but if your credits already shot, so what?  The house has no equity in it - they need to move on.

You need to decide upfront if your an investor or a social worker, trying to do both does not work.  If a deal has no profit in it move on.

Jon Holdman · Answer

A lease buyback can be a horrible deal for an investor.  You "buy" the house from them.  You lease it back to them with an option to buy it back from you at some future date at a specific price.  They don't pay their "rent".  You try to evict.  A judge says "hey, wait a second, you didn't buy their house, you loaned them money (paid off their loan).  You collected payments (rent), you have a balloon payment (the buyback price).  That looks like a loan to me and I think they still own the home.  You must foreclose, not evict."  Even worse, the judge does the math and figures out you're charging a usurious interest rate.

The opportunity here is a short sale, but the owner's MUST move along.  If they are determined to stay, YOU must move on to the next deal.

Curt Davis · Answer

Stephanie,

There is something you can do to help them.  You can tell them to pay all their unpaid bills and bring the note current like they should or you can tell them to get out of the home!!

A mortgage note on a $90K loan is $800 monthly?

You could also help them find a place to rent if they can afford rent, just find a property management company who will rent to them.  Good luck

Stephanie T. · Answer

I will definitely follow up, Edward.  I've got an aggressive and highly experienced short sale negotiator (my sister who's a broker agent in Nevada) on the job and a great listing agent who turned on a dime for me today to get it listed, etc.  I'm optimistic and do feel I made the right choice, even if I have to step aside in the end and let a retail purchase happen.

Bill Gulley · Answer

Just to expand a bit on Jon's post;

When a notice of demand and foreclosure is served, any contract that the owner enters into is basically invalid as the owner's interest is encumbered. Entering into a lease will be dismissed. For the lease to be valid it must be made prior to notices. If there is a valid lease at market rate rents, etc. they tenant now has six months as most of you are aware.

Good points above, the best way to help is to probably find them anouther home before they have a foreclosure of give a deed in lieu of foreclosure, which by the way might be thier best option...give them the deed, avoid the foreclosure and any deficiency!

Jerry Puckett · Answer

Fantastic. Will you let us know the results?
I am glad you chose to be helpful.

Stephanie T. · Answer

We've submitted a short sale package and are hoping for the best.

Stephanie T. · Answer

Good advice, Jon, all.  Thanks!

Barry O. · Answer

The short sale also depends on the bank. If they want to deal and you can get them an offer soon. In next six days, they "may" postpone the aution to try and get the short sale.
I have had them go both ways, some banks will work with you others don't care how much money they loose.
Still haven't figured out how it works, but if you have an offer, send it to them and they may work with you. Also, as mentioned, you need an aggressive short sale expert to handle the negotiation with the bank!

Jerry Puckett · Answer

I agree with Don. As I said, we don't do short sales. Someone may profit from a short sale, but not us. However, if I pass off the lead to those who do profit, I generally get enough consideration to help pay my marketing costs. So it;s worth it to me, and maybe I still help some folks along the way.

Foreclosure in 8 days - Can I help this seller?

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