Upside down, what to do?

[Morenita]

Does anyone have any suggestions on what to do with a house that is UPSIDE down?

Owe 70K
Repairs needed 40K
Worth 98K

Seller is almost to the point of walking away.  Mortgage is current at $610/month.  Seller is willing to sell for what's owed. ???

[Mdhaas]

If the house is upside down "flip it" over : ha, ha,

Sorry, I had to do that.  :    Seriously.......

Why are they selling it?

What are the repairs that need to be done?

Why is seller walking away?

[Morenita]

They refineanced, took cash out, and did not make all the repairs.  

Need a bathroom. There are some rooms where there the floor is plywood and the walls are studs.  

A contractor started to put in a bathroom in the basement.  He jackhammered the floor, and never finished the job.  So there are piles of dirt and concrete in the basement.  The house is in need of some major repairs.

[Morenita]

BTW, seller can't stand to look at the unfinished house any longer.  She is living in a mess and doesn't have the money to fix it.  

She refi'd last year.  Mortgage payment is killing her.

[Mdhaas]

O.k. You say it is worth 98k  and that they owe 70.  That by my calculations is approximately 72% LTV.

Drywall, carpet, paint are not that expensive, if you do it yourself.

Is the current owner selling or looking to refinance?

If you are looking to purchase this you would need to take into account the surrounding market area and recent home sales. It would not be the best deal that I have ever seen.  However, with the immediate equity you refi it and take cashout to 80% giving additional 8-9k to finish repairs ???

If the current owner is looking to refinance, again, Depending on their credit score and other criteria they may still have room to get some cash out.

I guess I am not exactly sure what it is that you are trying to conclude?

[Morenita]

The current owner wants to SELL.

I'm trying to figure out if this deal is worth pursuing.  I'm also not quite sure of how to deal with the bank.  How can I pay retail (70K) for this home and the ARV is 98K. The work is going to run between 30-40K.  

 Is a bank willing to take less than owed on a mortgage that is current?  Is it possible to negotiate a lesser payoff when the homeowner is not in the foreclosure process?

[rhm76384]

Hey,
     I'm with Mark - repair sounds really high. Where did that figure come from?
Peace,
Richard

[NoMoneyDown]

If the ARV is truly $98k, repairs $40k, and existing loan of $70k then I would pass.  Rule #1: Don't make someone else's problem YOUR problem.

[vfig]

Heres a thought
What if you put the home under contract with a clause that allows you to show the house. Advertise the home as a handyman special and ask for 5K over what she owes. Because no agent is involved, closing shouldnt be that expensive (Maybe assign the contract to the new buyer for 5k so to avoid any fees)
OR
How about doing a lease option. Do just enough work to make it livable and then lease it out. Get 5K down and charge $900 per month ($610 for mortgage-tax-insurance $100 rent credit and $150 for your monthly fee). The 5k down payment can cover the cost to make it livable, so no money out of your pocket. Do a 1 to 2 year lease and set purchase price any where from 10 to 20k (plus the amount you spent to fix it up) more then what you can buy it for.

yes/no/maybe ?

[reoconsultants]

Could not agree more VFIG!!!

[Morenita]

Great advice. I will post on how things pan out.  

I think I'm going with putting it under contract and selling it as a handyman special.  I hope this thing moves FAST

[Zin]

Not sure how the original 3o to 40 grand repair estimate can be coverd by the 5 gand.

Zin

[howste]

The 5 grand isn't used for repairs, it goes to you.  Someone else buys the house and takes on the repair job.

[DefaultDoctor]

Here's another thought.

If the owners are ready to just walk away...and you think the house is upside down...just hold off for a while.  After a month or two of missed payments the bank will be eager to work out a short sale.  From there you can work your hardest to convince the bank that the value is substantially lower than what is owed.  You will likely be able to get a lot better deal after the short sale.  On the other hand, it is quite possible that the bank will not be willing to budge, in which case you could possibly lose the deal.  

Its not a sure fix, but it beats getting into a deal that your worried about.  Just make the deal better.  You can do it.

The Default Doctor