what do i do with a house that is under water

10 Replies

not literally. i dont know if there is a different way of wording it....

basically, he has 80k left on his mortgage. the market crashed and now the comps are running about 65k (without looking at repair costs)

he really just wants to get rid of it. but is this something i can work with? or is he screweed

@Derek LeBlanc you have a few options:

1. Contact to the bank and see if they will do a short sale on the property. Have all of your information together such as purchase price, repair cost etc. If the loan is behind on payments, know if taxes have been paid etc. This way the bank will know you are serious and they may do the deal if they know that they will not have to foreclose on the property.

2. You could do a lease option for two-three years and rent the property out for more than the lease payment - you keep the difference between rent and payment.

3. You could also do a subject to; often you may not need to put any money down to control the deal.

There are a lot of great post here on BP and highly recommend you understand all of these options further. Also ensure you run the numbers prior to making any offer and get a local mentor to help you through the process!  

Good luck, and please remember to VOTE on reply's you think have helped. This validates respondents posting and lets readers know that this information was valued.

Hope you have an excellent future!

- Dave

depending on your buyer, u may be able to wholesale a deal structure where you take over his payments. This strategy has some risks so make sure you understand the subject to /wrap setup. Based on the numbers above, it seems like this house might be too under water for even that strategy to work.


If the house is in good shape and rent-able...why not lease option for 2-3 years, keep the difference between the mortgage, PITI and whatever your renting it out for? Just a thought.


Hi @Lawrence Sarpong  that is option #2.  Some people would like more control over the deal so why I indicated other options.  The nice thing about doing RE transactions sometimes you have more than one option and give the current owner the flexibility to choose.  But giving the owners too many options is counter productive as well, so be careful.

If the current owner just wants out; he may not even consider the lease option, whereas it may be better to try purchase with no money down.

Hope this helps, and I hope you have a successful future!

- Dave

@David P. Yes, totally. Options are better for the owner. I didn't think about it in that sense. Thanks!

The advice given above is better than what I'm going to say, but my life became simpler when I just started marketing to prospects with equity. I pass the other stuff on if I get it, but there is money to be made if you are ready to employ multiple strategies.

Thanks guys for the information. I'm in the same boat as @Account Closed (pun intended since we are talking about water). I'm looking at getting into the market without the MLS and somewhat nervous of how I can provide solutions for the seller. The options are great because it will give you instant credibility to the seller because you're not projecting your own agenda with only one option. Keep up the good work!

@David P.

thanks david. i did some of my research on that stuff.

shortsale- it doesnt look like he is behind on any payments. i just read that if he isnt behind, it is very unlikely that a bank would accept a shortsale

lease option- i dont think the property is good for rent. i dont really know what i would gain from it. ( i could be wrong?)

subject to - do i need a lot of money for this? i dont have much money to work with and from what i am reading it seems as if i would be paying off hist mortgage

@Account Closed  subject to can be a good option, but the underling numbers must work; you don't want to force a deal to work.  Your self imposed hurdle of "not much money" to work with is just that... self imposed.  If the numbers work, you can get the money; start talking to a hard money lenders and most will charge points and high interest rate, but they will also ensure the deal works for them too.

I would suggest you find a mentor in your area to help you though this process.  They will also know the local laws, how to help structure the deal etc.  This is why having a good team - at least people already set-up to help you do deals is important aspect to getting deals completed.  You should know a good RE lawyer that can close the deal as well; this should be high on your priority list tomorrow morning; start calling around, ask others in your area for who they use, etc.

Good luck Derek, and hope you a successful future!

- Dave

If the seller does a short-sale he should be aware of the consequences that can vary by State. His credit will be trashed, but not as badly as a foreclosure. He will be taxed on any amount forgiven as income. And he may be sued for the deficiency if the deal is not properly done. This is why a real estate attorney should handle the short-sale.

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