Bankruptcy property question in Georgia

[Morris Lucas]

Hi BP, has anyone had experience(preferably in Ga) with properties where owner was in Bankruptcy? I had a wholesale lead, and the owner wanted to sell the house, and has recently been discharged from Chapter 7. Of course, the bank still has an open mortgage on the house, which now, is double what the property is worth in present condition. 

Is this pretty much a done deal, or is there still an opportunity? The homeowner still has the home in their name, had almost went through tax sale multiple times, and the bank never stepped in. Homeowner wants to walk away from the house altogether(needs new AC and Heating as well as maybe 15k cosmetic work) and agreed to sign over the deed for a few thousand in moving expenses. 

The mortgage holder has agreed to short sale or even work out payments to stay in the home, however the homeowner still wants to move on.

Any thoughts? Shortsale? Pass altogether, too much headache?

Thanks!

[Davido Davido]

Hello @Morris Lucas, Here is a thought.   Rent it out until it is foreclosed.  Give the current owner what it takes to move on, but inform him there is no equity and you can not stop the foreclosure.  Get the owner to sign over a Quit Claim Deed from him to "The Holder of this Deed".  Hold the quit claim.  If the property is going to be foreclosed there is no sense putting it in your name, but having the owner sign away his interest adds helpful finality to his move.

When you have possession, or know you will have possession, advertise the house as a month to month rental making clear it is in need of work.   Consider holding a "rental auction", looking for the prospective tenant who will and can pay the most rent or who can and will do the improvements you want.  Get the best price you can for the condition it is in.  Include in your rental agreement a clause specifying that the mortgage is delinquent and the rental agreement must terminate if the property is foreclosed.

Then decide whether you want to rent the property until it is foreclosed, or perhaps you can renegotiate the mortgage amount or terms to suit you.   If mortgage terms become profitable, then manage the renter so that he/she makes the necessary improvements.  Improving the property will likely require budgeting a percentage of the monthly rent for the materials.  If your rental process focuses on finding a tenant who is willing and able to do the work, then your renter will be providing the labor to improve your property.  

[John Teachout]

Is the lender local or a national company/bank? If it's a local bank, maybe having someone that can actually come and view the property in its current condition could help them come to an equitable solution. Often times lenders are only looking at pieces of paper with numbers on them and not inside a property seeing the condition and realizing the status.