Stumbled upon Motivated Seller, Now what to do?

Question

Hey BP,

I have stumbled upon a family friend who is about to lose their house to the bank. I know that they owe 58k on the house and I would guess it is worth somewhere between 90-120k. I have no properties but long term would look to go into buy and hold. However, this house is outside of where I am looking to do buy and hold (pretty rural area).

I imagine this has to be a great deal but I am not sure what to do. Does anyone have any advice on what to do. I realize this is very time sensative so I am trying to come up with a plan quick.

My thought would be to try and either try and take over their financing or offer them 60-62 for the house so they have a reason to walk away. But I do not know what to do after that.

Any help would be greatly appreciated.

Thanks,

Tyler

Account Closed · Answer

You have a great opportunity and a problem (or two.) The normal split with a partner on things like this is 50/50. Or, you can stumble along and try to make it work before it goes to sale. These are the hardest types of real estate to do and takes specialized knowledge. And yes, it can be done long distance.

Anthony Dooley · Answer

@Tyler Hull if you can solve their problem, then both of you would benefit. You can discuss selling it back to them once their financial situation improves. This should give them hope and they retain the dignity of not being forced out of their home. Hopefully, you can rent it to them for less than they currently pay and still make a profit. Keep in mind the repairs would fall on you after the purchase, so there is a need to make money on this deal above simply helping friends.

Anthony Dooley · Answer

@Tyler Hull their current house payment is based on the original loan amount, which I assume is more than what they owe now.  If you buy it for $60,000, your mortgage payment would be around $480. It would cash flow if they pay you rent over that, plus some expenses. I'm not sure what the going rate for that property is. If they can't afford that, they would need to move and you would rent it to someone else at market rate. You may need to remind them that if they are foreclosed, they will be moving anyway.

Tyler Hull · Answer

They are losing the house now because they can't make payments. For it to cash flow they would have to pay more then they are now but they can't make the current payments so how would that work?

Anthony Dooley · Answer

@Tyler Hull Step one is to get it under contract to purchase with a quick closing date. Step two, take it to a lender to underwrite the deal. Step three get a home inspection. The bank will also request an appraisal. Step five, close on the property. Your friend will lose their equity, but avoid foreclosure. I would consider leasing them the property. This way they don't have to move, you don't have to do a renovation project, and your deal cash flows immediately.

Casity Kao · Answer

@Tyler Hull 60-62k may not even cover all the fees and assuming the mortgage is going to be a procress that they have to really want to sell.  If motivation is an issue then offer them cahs and quick sale with 2-3 weeks and offer to help them move. If its a deal you will only need a week to reassign it but make sure you are straight forward with them you may not be end buyer.