How To Get Paid To Avoid A Duplex Foreclosure

lemonsDo you know how much the bank bid on your Minneapolis duplex at the sheriff’s sale?

You should, because it could make you money.

In the midst of this sour housing market, many lenders have begun to realize the duplexes they hold mortgages on are lemons, and no longer worth the amount that’s owed.

And as difficult as it may be to believe, they truly don’t want the property back as a foreclosure. After all, foreclosed properties typically net the bank far less than short sales do.

What’s more, they are in the money business, not the landlord business. It costs them even more money once they have possession of the duplex to evict and/or manage tenants.

So some banks are getting smart. They’re bidding far less than what’s owed at the sheriff’s sale. Some are even bidding at or below current market value.

What does that mean? If the delinquent duplex owner can come up with the amount bid, they can redeem the loan and have neither a foreclosure or short sale on their credit report.

For example, I am working with an owner who owes $300,000 on his mortgage. We learned today that the bank bid just $153,000 for the property at the sheriff’s sale. If my client comes up with that money and pays the bank before the end of the six month redemption period, the debt will be considered paid in full; the only hit to his credit will be a result of the payments he missed or was late on.

Of course, the bank needs to be paid some additional interest and penalities on top of this. However, I am confident we can sell the duplex for at least what the bank bid at the sheriff’s sale. I knew we couldn’t sell it for the full amount he owed.

What if we sell it for more than the bank bid? My seller pockets the difference.

For example, if we were to sell it for $180,000, estimating $20,000 in penalties and selling costs,  he would have $160,000 left over. After he paid the bank the $153,000, he would put $7000 in his pocket.

Incredible.

Unfortunately, this is not true for all duplex owners facing either short sale or foreclosure. And, as always, you know and explore all of your options before letting the property go back to the bank (which could result in tax and employment consequences to you).

However, if you’re one of the lucky ones, your bank may have just given you the opportunity to make lemonade.