In casual conversation with my dentist the other day I mentioned that I was looking for someone who needed to sell their house so that I could flip it. My dentist told me he is that person. He is going through a nasty divorce. He and his soon-to-be ex own a late 1960s ranch in a nice family neighborhood in Barre, VT. His ex has run up around $50,000 in contractors' liens on the house, in addition to having maxed out their $50,000 home equity loan. He told me he would need to do some research to find the total owed on the house. Today he told me there is $190,000 owed on the mortgage, in addition to the amounts owed on the home equity line and the liens. The mortgage was originally with Chase, but has been sold to Caliber Home Loans. He says the bank will finalize taking the house on July 28th (he is unclear what this means or what the process is called. I have no experience with this sort of thing, either, but I assume this means the loan will go into foreclosure at that time. Does that sound right?).
The house appraised at $215,000. It needs updating. It's on a hillside in one of the good neighborhoods in a small Vermont city which has had a lot of hard times lately. There are some very nice new houses going in further up the street that seem to be selling well in the $250,000 range. This house would have to play up its mid-century-modern card pretty well to compete. It has an in-ground pool in the backyard which may or may not be an asset in this area. It has three bedrooms and 1 3/4 baths on the main floor. It has a fully finished basement with a full bath and sauna. I haven't been in the house yet. The bank told my dentist that if he takes anyone into the house he is then responsible for all the maintenance and anything else that happens to the house. He is fine with that as long as he knows I am serious (and is that really something the bank would have said? Did he misunderstand? What does this mean about the current legal status of the house?)
My question is, is there a way to negotiate buying the house for less than is owed on it? My dentist had thought the bank might forgive the liens on the house, or the home equity line, but now he isn't getting the sense from the bank that they want to negotiate at all. Is there a way to for me to approach the bank? What would I offer? Does my dentist have any options other than listing it with a realtor and hoping it sells before July 28th (pretty unlikely in this area) or letting it go up for auction as a foreclosure? I feel like there may be a way I actually could help him while making some money on the deal, but I don't have the experience to see it. So far, my real estate purchases have been through realtors off the MLS.
