Can I do anything with this request from seller?

Question

A seller called me on one of my We Buy Houses signs.  Here are the quick details:

Owes $170k (1 mortgage)
Worth  $25k-$30k
3 months behind, no NOD yet, $770/mth

Her mom, who co-owned the home with her, passed.  She called me hoping I could just give her $2k to help with her move.  She is going to walk away in 3 weeks, regardless.

She implied that she knows of this taking place.  I'm still fairly new to wholeslaing and only deal with properties with equity.  I refer the others.  Can someone explain what the seller is expecting--what strategy is this that investors are using??  Is it reccommended?

Joel Owens · Answer

There are a few points that need to be cleared up.With certain types of short sales such as FHA they give sometimes up to a 1,500 relocation assistance to the owner to move.

I had one with the credit and it was used by the seller to cover back HOA dues so the seller still didn't get any money but would have if they didn't have the HOA cost.

If she only owes 3 months of mortgage she can milk another year of free rent if she knows what she is doing.

She can also do a loan modification to see if the new interest rate would give her a lower payment.

Is she just on tile for the home or is also  co-responsible  for the mortgage note??

If she doesn't need that much space then even with a modification a cheap apartment might be the the answer.What everyone cares about is monthly payment and what's left over to live FOR THAT MONTH.

I get this save your credit spiel all the time.If you haven't been paying for months your credit is already taking a big hit.True if it forecloses you will have to wait longer to make another financed home purchase in the future so there is some benefit to it.

I have had credit agencies tell me once you are so many payments behind on the credit report with a M-9 rating ii is almost as bad as a foreclosure to them.

If the seller has a ton of debt a bankruptcy might be better.All of these options help her but do nothing for your investing.

You could try buy the note from the bank but
then have to go through the foreclosure process and worry about the owner filing BK and tying up the property for awhile.

The seller will get something if it forecloses.They will get cash for keys.If they don't get cash for keys they will get free rent they would have been paying elsewhere if they did not stay there.

So I am not talking right or wrong but a seller that is knowledgeable  can work the system for a long time.

no legal advice

Jon Holdman · Answer

She's going to get nothing if it goes to foreclosure, either.  Lots of places in the country have taken major hits in values.  Don't know of anywhere, though, that's taken an 82% hit on values.  So, its hard to believe the house was worth $170K at one point and now its only worth $30K unless its wrecked.  This house was sold long ago when it was mortgaged for $170K.  Keep an eye on it and maybe you can buy it as a REO.  In the meantime, next!

Bill Gulley · Answer

Did you say the owner owes 170K and it's worth 25 to 30K?  Is the property destroyed? As Steve rightly pointed out, she needs to walk away, with you if that's the case

Nemi W. · Answer

I gave you a vote, Joel, because you made some great points.

But like you mentioned, none would help me as an investor.  I do plan on calling her tomorrow to share options I haven't already shared.

Thx!

Nemi W. · Answer

yep, I think I've decided to leave this one alone.  I will look for it as an REO, though.

thx guys!

Bill Gulley · Answer

I meant both of you walk away from the house, you can walk with her and look forsomething else. As Jon suggested, keep an eye on it and look at it later as REO.

J M. · Answer

The motivation for the home owner should be to avoid a foreclosure on her credit report and to be able to live in the home for as long as she can. If you can make her see those benefits, then you can get paid as a realtor for completing the short sale. If she is not cooperative, run as fast as you can. It will be a pain to work and at the end she might just move or not sign at closing and leave you hanging with a buyer and a lot of time and effort gone to waste. 
I don't think the bank can negotiate with you anything in order for you to buy it at a discount or less than what is owed... you can't buy it either unless you have another realtor represent the seller with the bank. My .02

Nemi W. · Answer

Justin, she'll end up with nothing with a SS so she won't cooperate.

Steve, is there some strategy to try other than a SS?  She's behind $770 x 3 if she's being honest.

Financexaminer, the property's in decent condition.  What do you mean by "walk away with me"?

Do any of you know of some strategy I don't know about?

Steve Babiak · Answer

This seller will end up with $0 (yes a big fat ZERO), so they are hoping that some sucker might just give them something more than that!

In a short sale, the seller gets nothing because the bank is taking a loss.  In a foreclosure, this owner (no longer a seller) will get nothing as well.  They stand to get nothing in any sensible outcome.

You will also need to know how much they are behind in payments if you are going to try anything else (other than a short sale) ...

Justin Morgan · Answer

If your a real estate agent... do a short sale for her to an end buyer.
You could "try" and work a deal with the bank and buy the home yourself direct from the bank.

Can I do anything with this request from seller?

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