Pre-Foreclosure (Purchasing from Family Member home needs repair)

[Kerry Arm]

My elder Aunt has a home that is in the Pre-Foreclosure stage and she would like to sell it to me. Found Multiple issues after little research. The house needs about $70k to $100k in repairs  and the current mortgage balance is around $245k. The home value seem to hover around $270k to $290k. My understanding is that she can sell me the home while it's in the Pre-foreclosure stage but my problem is, would the bank accept a selling price of $120k? Has anyone had a similar experience or knows how the Pre-foreclosure process works?  Oh and she is willing to sell me the home for the above mentioned price with no gain to her. 

[Minna Reid]

In a short sale the property gets listed at market value, a buyer is secured and contracts executed, and then you would go to the lender for short sale approval on that sale. It is a complex process and you will definitely need assistance. The lender will also require that the property was listed, so you will need to get an agent to help you with this (I've been specializing in CT short sales since 2008 and can help if needed. PM me if you like). However, whether the lender knows you are related or not, mortgage fraud is mortgage fraud. Signing an arms length agreement and lying on it is fraud. I do not recommend committing mortgage fraud. Whether an arms length agreement will be required is unknown at this time, but it is likely. It is very specific to the investor on the loan. If you can find out who the investor is, I can tell you whether you will be required to sign one at close.

During the course of the short sale, the lender will order an appraisal of the property. Having documentation on necessary repairs to give that appraiser would certainly help towards having an appraisal support a lower price. What the lender will approve will be a percentage of the value the appraiser reports back to them.