Friends foreclosure ?

Question

I have a friend going through a divorce house is being foreclosed . Is there an opportunity for me to try and buy from the bank before it hits at a deep discount for a flip?

Doug Smith · Answer

It's not impossible, but highly unlikely you'll get a discount on the deal. With Castle Rock, we routinely buy loans at a deep discount, but we are buying the loans that lenders are wanting to give rid of. If the lender comes to us and says "We have these 50 loans that we would like to sell...what will you give me for them?", we can usually get a reasonable discount off of the value of the underlying collateral. If we go to the bank, however, and say "I want to buy the loan on 123 Main Street," they will likely come back and say, "sure, here its he payoff including interest, late fees, and legal fees." Banks, particularly large institutions, will usually not budge if you approach them about a specific property. Sometimes you will be lucky enough to speak with a knowledgable Special Assets Officer that actually has the authority to negotiate a discount, but those are few and far between. The way we usually get a discount is from specific portions of a portfolio that an institution has already marked down on their books and they put it out for sale. Unfortunately, the prospects of buying it at a discount aren't great. I would, however, try to find out from your friend who the person is that is handling the collection of the asset. I would try to climb the ladder a bit and find out who that person's boss's boss is and reach out to them directly. It is highly unlikely that a collector on a consumer mortgage has negotiation authority. If the loan has been transferred over to a foreclosure mill, it's even more difficult. These foreclosure mill law firms get paid more if they complete the foreclosure, so it is normal for them to ignore attempts to pay a loan up to date or to buy the loan. There have been many firms in the past 15 years face legal action over ignoring requests to work out a solution in favor of jamming a foreclosure through, which is normally more lucrative for the law firm. In this case, your best bet is to still reach out directly to the institution that owns the loan to seek someone up the ladder that has the authority to make a deal. I hope that helps a bit. It might not be the news you are looking for, but that is how it works. Good luck!

Brett Goldsmith · Answer

Yes, there may be an opportunity depending on what your friend wants to accomplish. Depends on the total amount owed and what you and your friend are attempting to structure. I work on these type of transactions all the time. Something may be here but would need more information.

Todd Rasmussen · Answer

@Allison LevineWhere in the foreclosure process is it and are you willing to pay the outstanding mortgage balance?

Ron S. · Answer

Have your friend list it for sale with an agent and sell it to you before sale. He can discount it all he wants before it goes to sale, as long as that agreed upon discounted price pays the note off. If it isn't enough to pay the note off, well, it's still going to have to be listed for sale on the MLS and it has to be arms length, and your still gonna have to pay for it if you want it.Attorneys/trustees don't stall attempts to get a loan out of foreclosure. That may have existed in the past, but not today for any attorney, trustee, or bank that wants to stay in business. I'm sure we've all heard/experienced/read about it to the contrary but again, i'll say that was the past and not today. The penalty for not promptly responding, just for a couple of extra hundred dollars in proceeding to the next stage of default, far outweighs any small monetary gain.

Mike Cumbie · Answer

I will agree with @Doug SmithI get asked all of the time about a specific place and banks just don't offer a discount before it has gone through the process. They have an item that they are not sure of it's actual market value. They know they are owed 100K for example. Is the house worth 25K or is it actually worth 250K? The bank in another state has no real clue at this point. If it's worth 250K they can sell it at auction and get back what they are owed plus all fees and charges. Why sell it to you for less than them breaking even. So yeah I have had no luck except playing the banks waiting game.

Roman M. · Answer

It depends on if: 1.financial sense 2. If your friend would not mind you profiting from his distress. If it was my friend then I would clear it with him/her first. if they are friendly with this idea you making money off their problems then you better off try to see if you can get the deed from them before the foreclosure, continue making mortgage payments then sell for a profit and their mortgage gets paid off.