Avoiding a short sale through creative financing

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Avoiding a short sale through creative financing

Chris Pontello
St. Clair Shores · Member since 2017 · 8 posts · 0 votes

Hi BP community!

Have an interesting situation, looking for ideas on the best way to solve a problem for a distressed homeowner.

The family purchased a lakefront property in a nice area three years ago but then ran into a series of issues, and have abandoned the place because of them.

They are hoping the bank allows a short sale (asking for roughly $20,000 under what is owed)

Here's what's made them so unhappy:

Anytime they used the laundry it was dumping into a dry well, which would back up into the house forcing them to take their laundry to a laundromat instead!! The family has three kids, could you imagine taking all that to a laundromat!

In addition to that, the septic tank is undersized for the size of the home. They were getting it flushed several times a year!

Because of the frustration, when asked to purchase the large lot in front of their house which leads to the main road, they turned it down. This has created a "shared driveway" with the neighbor making an ugly curb appeal, not to mention cutting their lot in half. Who bought the lot in front of their house for $20,000? An auto body shop across the street that "stores" cars needing work there.

Since abandoning the home, major landscaping would also be needed to clean up the walkway to the water.

There are no pictures of the inside, yet, but no major interior renovations were mentioned.

- My first thought is offering cash, but the home owner would most likely just let it go to foreclosure because of how low the offer would be.

- My second thought is offering some cash and taking over the loan - there are no liens on the property yet.

The agent turned down a seller financing option - although it was not ran by the seller - because the agent said the seller is so done with the property that she wants nothing to do with it at all. However, I didn't lay out what that seller financing offer would look like because I'm really not sure if a deal can be made or how that financing would look.

I'm hoping to find a way to get the home owner some money in her pocket if possible, although I need room for an investor to fix the issues and hopefully buy the lot back from the auto repair shop.


Please share any ideas you have!

Thanks!

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Chris Pontello:

Hi BP community!

Have an interesting situation, looking for ideas on the best way to solve a problem for a distressed homeowner.

The family purchased a lakefront property in a nice area three years ago but then ran into a series of issues, and have abandoned the place because of them.

They are hoping the bank allows a short sale (asking for roughly $20,000 under what is owed)

Here's what's made them so unhappy:

Anytime they used the laundry it was dumping into a dry well, which would back up into the house forcing them to take their laundry to a laundromat instead!! The family has three kids, could you imagine taking all that to a laundromat!

In addition to that, the septic tank is undersized for the size of the home. They were getting it flushed several times a year!

Because of the frustration, when asked to purchase the large lot in front of their house which leads to the main road, they turned it down. This has created a "shared driveway" with the neighbor making an ugly curb appeal, not to mention cutting their lot in half. Who bought the lot in front of their house for $20,000? An auto body shop across the street that "stores" cars needing work there.

Since abandoning the home, major landscaping would also be needed to clean up the walkway to the water.

There are no pictures of the inside, yet, but no major interior renovations were mentioned.

- My first thought is offering cash, but the home owner would most likely just let it go to foreclosure because of how low the offer would be.

- My second thought is offering some cash and taking over the loan - there are no liens on the property yet.

The agent turned down a seller financing option - although it was not ran by the seller - because the agent said the seller is so done with the property that she wants nothing to do with it at all. However, I didn't lay out what that seller financing offer would look like because I'm really not sure if a deal can be made or how that financing would look.

I'm hoping to find a way to get the home owner some money in her pocket if possible, although I need room for an investor to fix the issues and hopefully buy the lot back from the auto repair shop.


Please share any ideas you have!

Thanks!


 why would you pay a homeowner money who is upside down on a property by atleast $20k?

If it can go short sale then have it go short sale. Or let it go to foreclosure and try and grab it then. 

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  • Joel BongcoBusiness Member
    Investor · Honolulu HI & Los Angeles, CA · Member since 2018 · 375 posts · 181 votes
    1y
    Quote from @Chris Pontello:

    Hi BP community!

    Have an interesting situation, looking for ideas on the best way to solve a problem for a distressed homeowner.

    The family purchased a lakefront property in a nice area three years ago but then ran into a series of issues, and have abandoned the place because of them.

    They are hoping the bank allows a short sale (asking for roughly $20,000 under what is owed)

    Here's what's made them so unhappy:

    Anytime they used the laundry it was dumping into a dry well, which would back up into the house forcing them to take their laundry to a laundromat instead!! The family has three kids, could you imagine taking all that to a laundromat!

    In addition to that, the septic tank is undersized for the size of the home. They were getting it flushed several times a year!

    Because of the frustration, when asked to purchase the large lot in front of their house which leads to the main road, they turned it down. This has created a "shared driveway" with the neighbor making an ugly curb appeal, not to mention cutting their lot in half. Who bought the lot in front of their house for $20,000? An auto body shop across the street that "stores" cars needing work there.

    Since abandoning the home, major landscaping would also be needed to clean up the walkway to the water.

    There are no pictures of the inside, yet, but no major interior renovations were mentioned.

    - My first thought is offering cash, but the home owner would most likely just let it go to foreclosure because of how low the offer would be.

    - My second thought is offering some cash and taking over the loan - there are no liens on the property yet.

    The agent turned down a seller financing option - although it was not ran by the seller - because the agent said the seller is so done with the property that she wants nothing to do with it at all. However, I didn't lay out what that seller financing offer would look like because I'm really not sure if a deal can be made or how that financing would look.

    I'm hoping to find a way to get the home owner some money in her pocket if possible, although I need room for an investor to fix the issues and hopefully buy the lot back from the auto repair shop.


    Please share any ideas you have!

    Thanks!


     Aloha Chris, we've helped many homeowners in this situation.   I think that a Short Sale would be the best option to get some discounts/concessions from the lender - however you would need to have a knowledgable Short Sale agent on the seller side. Secondly, the homeowner would need to cooperate as she would need to submit a bunch of paperwork including income statements, tax returns, etc. for the Short Sale application to show that she is insolvent.   Is there just 1 lender or is there a second? BTW, it is illegal for a seller to receive any proceeds from the short sale,  however,  they may be qualified for relocation $$$ or other reimbursable expenses.   Please DM me if you need further assistance.  Mahalo!

    [email protected]808-427-2444
    Inspired Life Investments LLC.
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  • Chris Pontello
    OP
    St. Clair Shores · Member since 2017 · 8 posts · 0 votes
    1y

    Thank you, Joel. I sent you a DM. 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Chris Pontello:

    Hi BP community!

    Have an interesting situation, looking for ideas on the best way to solve a problem for a distressed homeowner.

    The family purchased a lakefront property in a nice area three years ago but then ran into a series of issues, and have abandoned the place because of them.

    They are hoping the bank allows a short sale (asking for roughly $20,000 under what is owed)

    Here's what's made them so unhappy:

    Anytime they used the laundry it was dumping into a dry well, which would back up into the house forcing them to take their laundry to a laundromat instead!! The family has three kids, could you imagine taking all that to a laundromat!

    In addition to that, the septic tank is undersized for the size of the home. They were getting it flushed several times a year!

    Because of the frustration, when asked to purchase the large lot in front of their house which leads to the main road, they turned it down. This has created a "shared driveway" with the neighbor making an ugly curb appeal, not to mention cutting their lot in half. Who bought the lot in front of their house for $20,000? An auto body shop across the street that "stores" cars needing work there.

    Since abandoning the home, major landscaping would also be needed to clean up the walkway to the water.

    There are no pictures of the inside, yet, but no major interior renovations were mentioned.

    - My first thought is offering cash, but the home owner would most likely just let it go to foreclosure because of how low the offer would be.

    - My second thought is offering some cash and taking over the loan - there are no liens on the property yet.

    The agent turned down a seller financing option - although it was not ran by the seller - because the agent said the seller is so done with the property that she wants nothing to do with it at all. However, I didn't lay out what that seller financing offer would look like because I'm really not sure if a deal can be made or how that financing would look.

    I'm hoping to find a way to get the home owner some money in her pocket if possible, although I need room for an investor to fix the issues and hopefully buy the lot back from the auto repair shop.


    Please share any ideas you have!

    Thanks!


     why would you pay a homeowner money who is upside down on a property by atleast $20k?

    If it can go short sale then have it go short sale. Or let it go to foreclosure and try and grab it then. 

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  • Chris Pontello
    OP
    St. Clair Shores · Member since 2017 · 8 posts · 0 votes
    1y

    Hi Chris,

    Correct me if I'm wrong as I'm still learning creative financing solutions, but paying them some money would be if I could take over the loan. Instead of a traditional down payment, I would give them some money (maybe just to bring the loan back to even).

    The upside if taken over the loan at the current balance, with some rehab and hopefully getting the front lot back would be a nice ROI.

    To me at my current knowledge level, this deal only works if taking over the loan - to limit the out of pocket money to acquire the property since the outside reno and new septic would take up the bulk of rehab costs. 

    Current balance of loan is around $380k. They are asking $375K but not getting it - so not quite $20k underwater from asking but they're offers so far are around $350k and lower. I'm not sure what the current appraisal value is, but comps in the area range from $600k to $1M+. This is as goofy lot, especially since they let the front lot go. Plus lots of landscaping needed. 

    I've been doing some studying on short sales but still working to understand it better. Hoping to avoid added competition in auction haha. 

    Thanks! 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Chris Pontello:

    Hi Chris,

    Correct me if I'm wrong as I'm still learning creative financing solutions, but paying them some money would be if I could take over the loan. Instead of a traditional down payment, I would give them some money (maybe just to bring the loan back to even).

    The upside if taken over the loan at the current balance, with some rehab and hopefully getting the front lot back would be a nice ROI.

    To me at my current knowledge level, this deal only works if taking over the loan - to limit the out of pocket money to acquire the property since the outside reno and new septic would take up the bulk of rehab costs. 

    Current balance of loan is around $380k. They are asking $375K but not getting it - so not quite $20k underwater from asking but they're offers so far are around $350k and lower. I'm not sure what the current appraisal value is, but comps in the area range from $600k to $1M+. This is as goofy lot, especially since they let the front lot go. Plus lots of landscaping needed. 

    I've been doing some studying on short sales but still working to understand it better. Hoping to avoid added competition in auction haha. 

    Thanks! 


     If they are asking for short sale that means property is worth less than is owed. Great you take over a loan but why?

    That is like walking into the store to buy juice that is for sale for $5 and paying them $7 for it because you want to pay more than what the juice is worth. Why would you do that?

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  • Chris Pontello
    OP
    St. Clair Shores · Member since 2017 · 8 posts · 0 votes
    1y

    When you put it that way, it doesn't make sense. 

    I've listened to some "internet gurus" talk about being able to pay more for a house (through subject to) than its currently worth because of how much the backend value would be. 

    So paying the $2 extra for the juice, but being able to portion it out in cocktails that you can charge much more for... 

    Paying more to guarantee getting the product versus jumping through hoops (short sale) or possibility of now owning it at all (auction).

    I'm only asking questions to understand! I appreciate all the wisdom! 

    0Reply
    • Stephen MoralesBusiness Member
      Jacksonville, FL · Member since 2025 · 402 posts · 205 votes
      1y
      Quote from @Chris Pontello:

      When you put it that way, it doesn't make sense. 

      I've listened to some "internet gurus" talk about being able to pay more for a house (through subject to) than its currently worth because of how much the backend value would be. 

      So paying the $2 extra for the juice, but being able to portion it out in cocktails that you can charge much more for... 

      Paying more to guarantee getting the product versus jumping through hoops (short sale) or possibility of now owning it at all (auction).

      I'm only asking questions to understand! I appreciate all the wisdom! 

      Hey @Chris Pontello  

      Just wondering what you ended up doing with this deal. If it were me, a shortsale through the seller is the way to go. It may be a bunch of hoops to hop through and a lot of waiting around... but if it's worth the upside then I wouldn't have any complaints. 

      You also seem like a pretty compassionate person, which I applaud you for. But at the end of the day, we are not a charity...we are running a business. 

      And the best thing you could've done for her here is helping them offload the property and avoid a foreclosure on their record. 

      [email protected]
      PrimeTracers
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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    You probably need to find new “comps” as well. There’s zero chance the comps are $800k ($600k-$1m) and they can’t get $400k. Unless you mean comps after adding $300k or more in renovations. Those aren’t comps. 

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