Tips for Buying a Home Before it goes to Foreclosure

[Steven Crosby]

Hi all,

One of my neighbors is a crazy old lady/hoarder and she is some $13k behind on her HOA payments. The POA Board has placed a lien on her house and she is about to go into for foreclosure.

I want to make her an offer on her house, but would like a little advice on what I'm about to get into to formulate strategy. I have a friend on the Board and they've given me a little bit of detail on the case. 

• In May 2016 the initial demand letter was sent and a lien placed on the home
• The lawsuit was sent to the court in August
• On January 11th the attorney for the Board will be filing a Motion for Service by Publication

The house is worth at least between $150 and $200k. She owes $17k between the Assessments and fees, and has a $4,424 tax bill pending for 2016. 

I'm assuming the Motion for Service by Publication is to initiate the foreclosure proceedings. My questions are as follows:

• When should I make an offer? Right now or wait until she's further pressed? 
• Do I need to close before the foreclosure hearing starts? She has 30 days to file an answer with the court, so as long as I close in that period could it be closed out? 
• Would $90k be good initial offer? That's 70% of an estimated value of $144,900 ($100/sq ft)
• I know the house is a mess inside (hoarder). Outside it's in really good shape. It's in an awesome neighborhood. 

[Rick H.]

There three (3) msin plays here::

Buy the asset, the debt or the equity.

Buying the asset requires you to have a seller who has control over marketable title, either because it's currently bpvested in her name or she has capacity, powers and authority to sell as a fiduciary for a Decedent's estate, for example.

Buying the debt (HOA lien) only entitles you to the maximum amount of the debt, including cost of collection (foreclosure) but no more. Theoretically, you could buy the debt for $1.00 and the upside is $18,999 because someone will likely buy at foreclosure sale.

The equity play is to buy the position of the equity holder, the crazy daughter. 

If it were me, I'd take off the market and control the equity with seller financing of some sort. If there's an impaired to title transfer, I'd fix it within the scope of the note and payment for her equity.