House do I buy this house in pre-forclosure?

Question

Hello everyone! So here's the deal. Me and my girlfriend are currently living in a house that her mother owns but apparently it's in pre-foreclosure. I would like to somehow buy this house and possibly rent it out. Her moms idea is to let it go into foreclosure then buy it back when it goes to a short-sale with a private lenders money (which I have) but I think this is a huge risk because, correct me if I'm wrong, but once it goes into a short-sale anyone can buy it and I'm sure we would be going up against experienced and knowledgeable investors that would get it before us. Then we would be in quite a situation  and lose everything and I don't want to risk that. Is there any other way I can get it maybe before it goes into foreclosure? I guess she said she owes way more than its worth now. Please any advice would be greatly appreciated. Thank you and sorry for the multiple posts. I didn't realize they would be posted in the same place

Deborah Townsend · Answer

Im looking at three homes in one area that I found,  one just went on the foreclosure list and the other two are just sitting empty. I have looked up the taxes and have found two owners, one has no forwarding address.... my question is how do I go about finding out more information on them as I would love to have them as rentals or even a quick sale?? Right now in the area I live in they are building new homes and selling then around 149,000.Plus this is a military area ,where they come and go every three to four years. I am new to this and any information you could help me with I would appreciate it, Thanks for all your time

Jon Holdman · Answer

Sorry, but there's some serious confusion here.

If it "goes to foreclosure" a short sale is off the table.  You can only do a short sale before the foreclose auction.   After that, it belongs to someone else.  If its sold to a high bidder, its theirs.  If not, the foreclosing lender takes it back and it becomes a REO.

So, before the sale, you could buy the house from your future mother in law.  However, you will not be able to do that if its a short sale.  The lender will require the buyer of a short sale to be an arms length party, and you're excluded from that.  Well, you might get away with it because you're only the boyfriend.  If you guys were married, you would definitely be excluded.  Since you not, it might work.  But if the bank finds out about your relationship, you'll likely be excluded, too.  And you will sign forms to the effect there is no relationship.

If it goes to the auction, you may well be bidding against savvy investors with cash in their pocket.  Not sure how auctions work there, but in many states they require cash right on the spot.  Do you have enough cash?  Many times the lender sets the opening bid at what they're owed.  If the property is underwater, it certainly will be after all the foreclosure costs get tacked on.  So, there will be no bidders and it will become a REO.

If it does get to that point, you might still be able to buy it from the bank.  They usually list them on the MLS.  That process takes months, though.   And if they price it well, you'll be going up against other buyers for that, too.

Wayne Brooks · Answer

Neither the owner nor any family member will be allowed to buy it in a short sale, period.  Either you buy it by yourself in a short sale, buy it outright or through a sub2, or kiss it good bye.  In a short sale the lender will be looking for current FMV.