Potential quick-turn deal

[SC2007]

Hello,

I have a seller who is 6 months behind the payment. I wonder if the bank already take over the property? can he still sell his home in this case?

If there is a deal, I am going to buy through AFS. Besides the area contract and AFS financing schedule, anyone knows where I can find the AFS document for buyers that stipulates assignability, insurance, taxes and repairs etc.? Barry said that there is a 20-page custom-drafted AFS document in his office, should I get this document before I proceed?



Thanks,
Shawn

 

[RedlineBrett]

If they`re six months back on payments they will be foreclosed on soon and your agreement for sale doc will be worthless in a forced sale situation. Any cash you pay as a `deposit` will only get paid back to you if you have a lien on title and even then only after everyone else gets paid out.

The arrears will need to be made up at a minimum so you or the seller will need to find the cash for that.

Once the arrears are made up you can do an AFS, but I`d be careful in case the seller stops making payments again and you end up in the same place you are now!

 

[SC2007]

The seller contacted the bank`s lawyer, and the bank is trying to get an appraisal on the property. It will proceed as follows:

• 1. if there is no equity in the home they will be filing for an order for possession.2 if there is equity in the home they will have to grant a period of redemption of up to 6 months.

Actually the property has $40k-$50k equity, does that mean we have enough time for the transaction?

Here is the detail:

Asking Price: $240,000
ARV: $270,000
First Mortgage: $140,000
LOC : $70,000
Payment: $1,150

I think of 2 options:
1. Make a cash offer $210,000, but it takes time for arranging new mortgage (good to get a lower interest rate)
2. Buy it at @210,000 through AFS, take over the debt and give him deposit to cover the overdue payments.(the financing is not good because of the high interest rate on the first and LOC)

Any insights on this deal?




QUOTE (RedlineBrett @ Jan 12 2010, 11:19 AM) If they`re six months back on payments they will be foreclosed on soon and your agreement for sale doc will be worthless in a forced sale situation. Any cash you pay as a `deposit` will only get paid back to you if you have a lien on title and even then only after everyone else gets paid out.

The arrears will need to be made up at a minimum so you or the seller will need to find the cash for that.

Once the arrears are made up you can do an AFS, but I`d be careful in case the seller stops making payments again and you end up in the same place you are now!

 

[RedlineBrett]

In most cases if the seller accepts an offer to purchase and the purchase price is enough to pay out all lien holders the foreclosing lender will work with the seller until the deal closes.

More than likely you will have to buy the property rather than AFS it. The lender may call the loan in favor of cashing out during the redemption period and refuse to take repayment of the arrears. If the seller has missed six months of payments they would definitely be in this category.

If the numbers are as you say they are I would make that offer at 210, work quickly to remove your conditions and then close in a reasonable amount of time. The bank won`t go any further once they see an unconditional purchase contract with a decent deposit and a decent possession date.

 

[GaryMcGowan]

Shawn,
At the end of the day, what do the sellers want/need to have happen? With that answered work backwards and provide a couple of solutions.
May be you take over control/ownership of the property via a JVA or AFS with option to purchase. Keep the mortgages that are on the property, open up a joint bank account that you have control over and pay the mortgage payment from there.
Have the sellers move and you put a tenant in the property at a rate that will cash flow. Of course you could sell the property at the FMV. Pay off the lenders and cover any costs but at that point it will be close, 6 months of payments, realtors com. and holding the property until it is sold.
I like the buy n hold aspect with a RTO tenant or a tenant

As Bret said,
The scenario the Banks will favor is an unconditional purchase contract.