2nd Foreclosure for a Family Member

[Barrington Duncan]

One of my family members house haves gone back into foreclosure for the 2nd time . The first time I suggested to file for bankruptcy to stop the foreclosure and it stop it and I got her a lawyer to handle the repayment plan. I don't know what happen yet, but I hear its back in foreclose, what can I do on a investor side of it. It has $40,000 left on the note but the value is $140,000.

[Jon Holdman]

Tell them to sell it. Its silly, if not downright stupid, to let a house with that much equity be taken away by foreclosure. They will get back the overage when it sells. But lawyers and the lender will rack up a bunch of fees. The selling price will be much less than if they sold on the MLS. Effectively all those costs and the cheap selling price come out of their pocket.

Interview three agents. Tell them that they need a quick sale. Get it on the MLS ASAP (i.e., interview agents today, get it on the MLS before the weekend) and get it sold. Sell it as-is if it needs work and they can't afford to do it.

Be realistic about the value. If its worth $140K in good condition, but it needs $10K in work, its not worth $140K now. Or even $130K. Put it on the MLS at $120K and it will move. They can pay off the $40K they owe and walk away with $80K to start over. And no foreclosure or short sale on their credit record.

If you're asking "how can I make a buck" I would say "don't". That's the sort of thing that generates never ending animosity that come out every time you see the friend. Do what you can to help them out of the situation. But don't try to make any money on the deal. Anything you make, in a very real sense, comes right out of their pockets.

They clearly cannot afford the place. They need to take the $80K and walk away and figure out living arrangements they can afford.