Creative Ways To Purchase a Distressed Property

[Josh Mills]

Hi all! 

Looking for creative ways to buy a pre-foreclosed property, the situation is below. 

The owner owes in the 400's on a property that is zoned 2 fam but they converted back to a 1 fam. Listing talks about the meticulous maintenance that was done on the property. Well after viewing the property it is in shambles to say the least. I would be surprised if 50% of the property is actually livable. The house is half painted half original siding, 3 bedrooms of the 4 are not livable and the stairs to the basement feel like they could collapse at any second. Bathrooms are old and outdated but functional. The asking price is priced as if the house was move in ready and the owner does not want to to entertain any offer below what is owed. Rough estimate to renovate is in the 175-225k range meaning that buying the property at the listing price would put you upside down very quickly. The owner has stated they just want to pay the bank and move on. 

The question is, is there a creative way to get the owner to sell it to me? Do I try to assume the mortgage? Any insight appreciated!

Thanks!

[Kevin Sobilo]

@Josh Mills, there is no guarantee that there is a deal to be made here but if you can get MORE information maybe you can figure that out.

You describe this as "pre-foreclosure". Is the owner behind on the mortgage? Was the property a primary residence? Is it currently occupied at all? What is the mortgage balance?

Sometimes you can estimate the mortgage balance by looking at when they purchased the property and for how much. If you have MLS access it will often have clues too like the type of financing. If you see FHA financing, then 3.5% down would be common for example.

Most mortgages are not assumable, but if the owner is distressed you could consider a "Subject-To" deal where they basically give you a deed and authority to manage the loan on their behalf. So, the loan stays in the sellers name but you have ownership of the property.

A short sale is another option where the lender knowing a foreclosure is imminent accepts the loss so the seller can sell for a price below what is owed on the mortgage.