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This week's Pre-Foreclosure Deal #1
| | Thursday, September 04, 2003 @ 08:08 PM EDT
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Contributed by: Sharon Meltzer
Sharon Meltzer Properties
Read more archived articles about Foreclosures
I run into so many interesting deals, that I thought I'd start a series of how to structure a deal, creatively.
Hope This Helps! -Mrs. Meltzer
SITUATION: Mr. P owns a property. His wife passed away and children are living in the property. Mr. P doesn't want to lose his $40,000 equity in property. The daughter, her husband and her 3 kids want to purchase the house from her father, but can't for another 5 months until their bankruptcy is discharged. The daughter has grown up in the home and it's very important that she stay there. The daughter missed making a few of the mortgage payments. The foreclosure sale is in 3 weeks.
HOW CAN WE MAKE EVERYONE HAPPY, HELP THESE PEOPLE OUT AND STILL MAKE A PROFIT ?!?!?!
SOLUTION: After a little research, it seems that Mr. P doesn't actually own the property. He and his wife quitclaimed it to another child. ALWAYS RESEARCH THE PROPERTY TITLE !!! This is easily solved by quit claiming the property back to Mr. P.
We find that there are 2 mortgages on the property. The first mortgage is foreclosing. We have the homeowners sign a "loan authorization form". We'll give them to the lawyer or the trustee (depending upon which state you live in) and ask for the "reinstatment fees" (the amount of the back payments to make the loan current).
We get the mortgage companies phone numbers by asking the homeowner for their mortgage coupons or monthly bills. It's usually listed on there along with the loan number, mortgage balance and monthly payment amount.
Since the owner doesn't live in the property, we can Lease Option it to the daughter. Typically, when purchasing a pre-foreclosure, it's best (and in most states the law) for the homeowner to move out. This case is different, the people living in the property do not own the property. This scenario works well with properties that have renters.
We tell the father that if he sells us the house, we will take part of the equity for our services and pass the rest along to his daughter. We write up in the Sales and Purchase agreement and specify that one of the conditions is that we Lease Option the home to his daughter for a pre-agreed price and a pre-agreed monthly Lease Option amount.
Mr. P gets the added tax benefit of passing money in the form of equity to his daughter without her paying gift tax (or estate tax if he passes away).
He sells us the house for $1000 and we take all of the loans subject to. If we use a title company or lawyer, we pay all the fees. We make up the back payments and keep the loans current.
We charge the daughter's family the amount of the mortgage payments (they know how much the mortgage payments are) plus $400.
$200 a month goes towards their downpayment when they purchase the house and $200 a month is our "fee" for solving their problems.
For an extra bonus, we can refinance the loans with a better interest rate and make another $200 a month!
Another bonus is we can contact the 2nd and offer them a discount. After all in 3 weeks they are going to lose ALL of their interest in the property. The mortgage company is happy we are taking a BAD LOAN off of their books. There's a good chance we can purchase the mortgage at half price. This will create additional equity for us in the property.
If the daughter buys the house, then very little work was done by us! An easy profit!
If the daughter doesn't pay her monthly Lease Option rent, then we evict and get ALL of the equity in the house and get to keep all of their "down payment" monies.
EVERYONE IS HAPPY !!!
Mr. P doesn't lose all of his equity.
Mr. P does get to pass on part of his equity to his daughter.
Mr. P will not have a foreclosure on his credit.
Mr. P will not have to ruin his credit by filing bankruptcy
The daughter, her husband and kids gets to stay in the house
The daughter, her husband and kids still gets to purchase the house in 5 months after their bankruptcy is dismissed, as planned.
We are helping the daughter and her husband save money for their down payment.
The daughter and her husband don't have to move their kids to a new school.
We make a nice return on the money we invested.
We sleep well at night knowing that we've helped out another family.
YAY!
THE END
Word Cloud:
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mr. title will lose daughter. monthly happy loans take have company there mortgage payments
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