Opportunity to buy a First position note

[Michael Wagner]

I have an inside line on a SFH that the bank has initiated foreclosure on. They have not yet finalized that process however. The homeowner's have vacated the property and it needs roughly $25K in work. They owe $70K on the first mortgage and did open a second mortgage in 2006 for $20K--remaining balance unknown. The home would retail for $80K. The bank has (through an agent I know) offered to sell the note to me and as per the agent (this could be in the $0.15-20 on the dollar range. Looking for any insights you all might have regarding this tentative plan.

I would buy the first mortgage for $14K and then foreclose to take ownership .  Alternatively I could buy first note for the 14K, negotiate with second to buy for say $1000 and then approach owner with  option for Deed in Lieu of Foreclosure.  Setting aside $3K for cash to owner and or foreclosure as well as $3K for taxes and insurance, Im looking at $21K to buy plus the $25K to rehab(including carrying costs). That puts me all in at $46K.  Alternatively, I could opt to see where the foreclosure sale bids go and elect to let it go to another high bidder and collct the margin.  I have experience in rehabs and short sales but never in acquiring a property through buying a non-performing note directly from the lender and then foreclosing.  Wondering if anyone could give me insight (speaking very generically of course) into the feasibility of the above.  Feel free to poke holes or mention sticking points. And yes a title search will be done before the note purchase and an experienced attorney will be leading the way:)!