Investor · Spokane, WA · Member since 2012 · 71 posts · 24 votes
Alright, I'm the guy from this thread. I'm looking to get an investment snowball going- I've got a decent amount of cash but I'd like to get in to even more houses than I could buy with 20% down + fix up costs.
A younger friend of mine who recently moved when her parents did has told me that her dad is letting the old house go in to foreclosure and has started making payments. She also thinks he owes around what is a fairly small number, considering that this is a large house in a nice neighborhood, though it was a bit scuffed up last time I was over.
Might it be possible to work out some kind of financing deal for me to buy this at a great price while keeping him from getting a foreclosure on his record? I know he has terrible credit so it's likely I could refinance to a lower rate and then rent it out for a profit. How would it work? Please let me know any ideas I might use; I bow to your experience.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
When you say, "buy at a great price," are you talking about buying less than he owes on it? If so, your only real option would be to help negotiate a short sale with his lender.
If a "great price" would be what he owes on it, you have several options -- the first two that come to mind would be purchasing it subject-to the existing loan or purchasing it outright with a new loan.
I'm sure there are other options, but those are the most obvious (to me, at least)...
Investor · Spokane, WA · Member since 2012 · 71 posts · 24 votes
14y
No, I'm thinking about what he owes on it, if what his daughter told me is accurate.
If it's not, if he owes a lot more, how would I go about this?
A great price would be what he owes on it (I'm told ~30k). I believe the house- judging from the excellent neighborhood (antique, beautiful homes in a quiet neighborhood surrounding a park), and current comparable listings- is worth quite a lot (comparables are ~200k). However, it needs work as it is right now. If I remember right, there were some foundation issues. I'd definitely get an inspector and a contractor to give me an estimate before buying anything.
I have 40k available to me through a HELOC.
So, if I'm understanding this right, the options available to me are:
* Take over his loan (purchase it subject-to), fix it up, then refi the whole thing cash out with a portfolio lender. Can I do this? If so, how do I go about it? I google'd purchasing it subject to an existing loan, and read up a bit, and it sounds interesting, but there's not so much of the "how" aspect. I really want to make sure I understand what I'm doing before I get in to this.
* Take out a hard money loan, buy it outright from him for the remaining value of his mortgage, then fix it up, then refi
Investor · Spokane, WA · Member since 2012 · 71 posts · 24 votes
14y
So, I'm trying to get a feel for what purchasing subject to the existing loan really means (reading links from Google). If I understand right, I make a contract with the owner that gives me ownership of the house but obligates me to make payments for the loan outstanding- but the loan stays in their name for the duration, right?
Or is there a way I can just assume the loan and put the property in my name?
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
14y
I'd start with a title company and get a history of mortgages on the property. It is unlikely (not impossible) that he only owes 30k on a 200k and he is letting it go. If he is then you need to understand why he is being so dumb.
If there is opportunity there then the bank is your friend and I'd work with them. I would not try to buy a property that is being foreclosed w/o personally dealing with the lender and having all cures for default in writing.
If you have, or can get, a very experienced RE attorney you might be able to work around the bank, but without a lot of experience I would not attempt a subject to w/o help.
Good luck.