November 28th, 2006 3:58 am
Borrow 50 Grand to Stop Foreclosure and Sell My Houses Creatively
This is one of the burning thoughts that I came up with during the facing foreclosure fast: I really want to sell all those houses ASAP and stop foreclosure! I’m sick and tired of having all this non-performing inventory continue dragging me down for so long. I need to be moving forward towards my goals of becoming a successful real estate investor.
The hope: I do have some buyers from my creative marketing efforts who are willing to take over the mortgage payments. This is a good thing because I won’t have to do a short sale. The buyers will assume the current mortgage balance and refinance later when they improve their credit (and when the market recovers so the house would appraise).
That’s great because the lenders will not loose any money on me and the credit-challenged buyers will get their dream of home ownership. We have the makings of a WIN-WIN here.
The Problem: the buyers don’t have enough of a down payment to bring my loans current, which is about $15k per house by now.
The Solution: borrow some money, bring the loans current and factor the payments on that new debt into the payment on the house. So I would pass the cost of borrowing the money on to the buyers, so I’m happy. The buyer is happy because they are getting a no-money down deal without having to qualify for a loan. Pretty good heh?
Well sort of….
Another Problem: since the buyers don’t have any skin in the game, what stops them from defaulting? They are “credit challenged” for a reason. People tend to stick with their patterns. So if the buyer defaults I’m back to facing foreclosure. But hey, it’s worth a shot. Better than nothing.
The Protection: to do this smart, I should probably sell via a lease option (a.k.a. “rent to own” ) instead of an All Inclusive Trust Deed (a.k.a. “wrap around mortgage” ). This way if they default, I can evict instead of having to foreclose. Plus it avoids the due-on-sale issue.
Also, I should borrow a little bit of extra money so that I can invest into additional marketing. This way I will have more buyers to choose from and can pick “the cream of the crop” instead of acting out of desperation. Christmas is coming up and I need to get those houses MOVED!!
How much do I need? I want to do this strategy on my California houses (I’m still hoping for the raffle idea for the New Mexico model home). So I will need $15,000 per house to re-instate the loans and stop foreclosure. Times by three houses = $45,000. Add $5,000 for additional marketing. Total needed: $50,000.
Where am I going to get $50 grand in 3 weeks?
I need something creative… I have an opportunity but I’m still checking it out. Will share it shortly.
What do you think of my idea to borrow money, stop foreclosure and sell the houses creatively?