OfflineI'm new to REI. I'm reading Dean's books and I've watched the RBBP webinars. I'm taking steps everyday to get my REI career happening. I found a deal--at least I think it might be a deal--that I'd like to hear some thoughts on from the more experienced investors in this forum.
I found a house that needs a lot of work but it IS the worst house in one of the best neighborhoods in my city. In fact, I used to live in this very neighborhood. The FSBO sign out front said "Free House" on it and had contact info.
I contacted the owner. The situation is that the owner filed bankruptcy a couple years ago, there's a lender lien on the house for about $45,000, and the house is not yet being put into foreclosure. The owner doesn't want any money for the house, she just wants to sign a quit claim over to someone and cut it loose.
My questions are:
If I took this house, would I automatically owe $45,000 because of this lien?
What is your gut reaction to hearing this scenario?
Thank you for any input!
~C
Also, if a lender put a lien on the house, is the owner even able to make a quit claim offer that puts the property into my hands? Wouldn't I have to get the lender to agree to let me take over the property as well?
Thanks!
Hi Chris. I am also new to REI but my guess would be that if you got the quit claim then all the problems attached to that house would be yours including the 45,000 lein. Usually a free anything is anything but free. I would pass on this house. It sounds like too much money in repair and the lien. Your profit would be eaten up or you might end up owing more than you make. Just an opinion tho. I hope the experts can tell you for sure. Good luck!
between a mortgage and a lenders lien? I'm not sure, but my gut instinct is to say "Yes," you would owe the $45K. That might not be such a bad thing if the house is worth $85 to $100K. Why don't you get your realtor to run the comps for you. See what properties are selling for in that neighborhood.
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Thank you for the feedback.
I've bought a house in bankruptcy in this similiar condition. I negotiated with the lien holder to reduce the amount. I provided comps, repair estimates( at least 2 or 3)and pictures of the home . The home I purchased actually had 2 notes. They both agreed to take less based on the pics, comps, and repairs estimates I provided. 1St note was for about 35k they accepted 17k, second was 23k they took 7k! Second position knew they would be wiped out at foreclosure because 1st position lien takes priority. This was my FIRST DEAL! (8 years ago) I knew I was more than likely over my head and most investors advised in all the books I had read not to do deals like this (bankruptcy or rehabs) as a new investor, but I am a go-getter, needed money and I worked my tail off and made it happen. The homeowners were shocked they had been trying for a few months to work it out with the bank. Sellers were not expecting any money (can't make a profit if your in banckruptcy anyway). The bankruptcy attorney could not get a response from the lien holders as well. Just takes a go-getter. Negotiate and get the lien reduced. Do the numbers, due dilligence and make sure the deal works if you decide to go through with it. Seems like I always get those deals that take work....whew
. Good luck! I hope this helps you out.
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