Behind in payments, but with equity

[M A.]

A seller contacted me yesterday with the following problem:

She owns a property that is worth 170K
Her remaining mortgage balance is 100K
She is 5 months behind in payments.

She wants to sell, but doesn't want to lose all her equity.

I normally only do short sales, I dont really know how to proceed with this one. How can I help the seller and still make a profit. Advise needed!

Thanks in advance!

[Bryan Hancock]

Offer her some options for her equity and buy subject-to. Her equity is roughly the true market value less closing costs, fees, holding costs, repairs, how much she is behind, etc. From what you have written I suspect this is roughly 20% of the FMV, or $34k. It could be more or less…you need to provide the details for us to know.

That would leave roughly $136k of the $170k less $100k owed for net sale proceeds of roughly $36k. You can then give her options for her $36k:

Option 1 – All $36k goes to her when your new buyer obtains new financing

Option 2 – $5k now and $13k later when your new buyer obtains new financing

Option 3 - $15k cash now

I just made the numbers above up for the options. You would have to figure out what the seller needs to make better offers.

You can also play with how many payments she makes, but that doesn’t seem to be an option if she is late. I generally try to get a $2 in equity for every $1 in cash paid up front. The exit strategy would be a wrap sale.

Is this a fixed-rate note? Any idea on the term or the rate?