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Updated almost 6 years ago on . Most recent reply

User Stats

143
Posts
120
Votes
Brit F.
  • Rental Property Investor
  • DFW
120
Votes |
143
Posts

Options to help a neighbor in foreclosure?

Brit F.
  • Rental Property Investor
  • DFW
Posted

I'm looking for creative ways to help a neighbor.  Here's the situation:

While perusing foreclosure notices yesterday, I found one posted for a long-time neighbor.  The outstanding loan balance is only ~10% of the value of the house.  The couple is about to file for divorce (wife living in the house - hubby moved out a couple of months ago), two kids out of high school, and college money is tied up in the house.  Wife has been unable to work for the past several months because of a nasty car accident.  The divorce will likely force the sale of the house.  Going through with the foreclosure would destroy so much for this family, and I'm determined to prevent that. 

The question is how to do this with compassion, create a win-win, and limit our risk.  Here's what I think I want to do since the house would likely make a good flip:

  • Pay the 10% to clear the bank loan and ask for no repayment from the family in the short term.  In return, they would theoretically agree to sell us the house when they're ready.
  • Mom & sons continue to live there until they decide to sell (likely soon to pay for college) or until the divorce forces the sale.
  • Once they are ready to sell, we buy it at a discount & flip it.
  • Alternatively, maybe we buy out the husband's equity in exchange for part ownership in the property, then buy out the wife's portion when they are ready to move.  This option provides the most relief, but ties up more of our $ and increases our risk.

What are some other ways to attack this?

Most Popular Reply

User Stats

75
Posts
55
Votes
Bryan Lyde
  • Wylie, TX
55
Votes |
75
Posts
Bryan Lyde
  • Wylie, TX
Replied

If you have a relationship with the ex-couple, meaning they know that you know they're splitting up but not perhaps they're in trouble, and they also know you are an investor then have a conversation with both and see if they will open up on the finances and what they would like to happen. Best approach I would think is purchase at numbers that work for you and lease back to the mom so she doesnt have to moveout. Get the lease to cover your holding costs at a minimum if you're in the flipping game, or offer lease to own if she wants to stay until she's back on her feet.

The best solution is probably the one that causes the least stress and upheaval which is the last thing that family needs right now. 

I would move quickly whatever you're going to do, the house has 90% equity so it's on a list, and if they've filed papers already they're on another list which will make the sharks salivate. Perfect storm of high equity and motivated seller

Good luck and let us know how it turns out.

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