how to make an offer on property not yet foreclosed?

Asked by Rbuchanan, Richmond, VA Sun Dec 16, 2007

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Ian A. Wolf, Agent, Morristown, NJ
Sun Dec 16, 2007
A short sale would only be necessary and likely considered, if the mortgage amount is more than the home is worth. The banks aren't necessarily giving the homes away. The best place to start is to contact the owner. We do this all the time to both list and invest in preforclosure.

Tax records will tell you the owners address. If you do have a short sale situation, just make sure you get the seller to sign a letter giving the bank permission to disclose all details of the loan to you. It should include the seller's name, SS#, house address, and loan#. Once you have that, call the bank and ask them where to fax it. That will make your life much easier, and you can deal directly with the bank regarding any short sale. When you talk to the bank you will want to asertain not only the default amount, but also the arrears, fees, interest penalties, etc. Add them up to get the appros pay off. You can even order a payoff, which would be helpful in determining how you will need to buy the home.

Also make sure the home isn't on the docket yet. It would be a shame to start trying to buy the home only to find out it was foreclosed right out from under you. Good Luck.
0 votes
Don Tepper, Agent, Burke, VA
Sun Dec 16, 2007
Serena has accurately described the short sale process, and that's likely the route you would/should take. You make an offer and provide some very specific documentation; the offer is sent to the seller's lender (again, with some very specific information--hardship letter, copies of past tax returns, W-2s, etc.), and then (with some negotiating) it's up to the lender to decide whether to accept, reject, or counter your proposed purchase price.

Again, a short sale is the "traditional" way of buying a property not yet in foreclosure. However, just for fun, here's another: Buy it "subject to" the existing financing. Here's what you do and here's what happens. The owner of the property transfers ownership of the property to you; you receive the deed. You, in turn, make up any current deficiency (any late mortgage payments, penalties, interest) and you promise the seller to make the future mortgage payments. At some point, you will get new financing on the property in your own name.

Advantage to you: You own the property right away. And you don't need to get new financing on the property. Disadvantage to you: You very likely will be violating the lender's "due on sale" clause. Worse case scenario: The lender could require you to refinance the property immediately. That doesn't happen often; usually the lender doesn't know or doesn't care. All the lender cares about is that any deficiencies are paid and that future payments are coming in on time. Also, you have to come up with enough cash to take care of back payments.

Advantage to the home owner: They quickly have a resolution to their problems. Disadvantage: A major one: They've transferred the ownership of the property to you, but they're still legally on the hook for the mortgage. So they want to make sure that you'll keep paying the mortgage until you refinance the property in your own name.

There's also a technique using a land trust that accomplishes something similar. Ownership of the property is transferred to the land trust, with the seller and you both as beneficiaries to the trust. The trust documents specify the details of the transaction. A land trust actually protects the buyer and seller more than a "subject to," and eliminates the "due on sale" problem. However, don't try doing a land trust yourself; properly constructed, the documentation can run 60-80 pages or more.

Hope that helps.
2 votes
Jeff Mays, Agent, Richmond, VA
Mon Jan 21, 2008
Find a real estate professional to do the work for you. There's great advice out there and it may not cost you anything for their assistance.
0 votes
Serena N. Br…, , 46408
Sun Dec 16, 2007
If the property is still owner occupied and the property is not listed. The owner can contact the loss and mitigation department of their mortgage company and let them know they have someone that will like to purchase the home before it goes into foreclosure. At that time, the homeowner will have to do a short sale package and the buyer will have to provide a purchase agreement and proof of funds ie letter of credit, pre-approval letter, etc. Once the package is received by the mortgage company. It can take 6 weeks before you get an answer on whether or not the offer is accepted.
0 votes
Rbuchanan, Home Buyer, Richmond, VA
Sun Dec 16, 2007
I'm not sure if a court has taken action... going to check with the county on Monday. There are other warrant in debts taped to the front door though.
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