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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: JBB Buyout vs. Short Sale Posted by SeanW on August 22, 2003 at 6:43 PM In Reply to: Re: JBB Buyout vs. Short Sale posted by Tammy on August 22, 2003 at 5:19 PM The biggest advantage to buying out a junior note, is that it gives you multiple ways to make money. You can reinstate the senior, and keep the existing financing in place. That's usually easier than going through a traditional lender's approval process later, if you buy a foreclosure at an auction. You can sell the house for a profit, or keep it as a rental (since you have the financing already set up.) You can also buy the 2nd as a "hedge". Suppose a house is going to sale at 70 cents on the dollar. That's about what most investors will pay, but you want to be sure to get it-- (and not overpay, in case some newbie investor shows up.) You can buy the second on the cheap, then bid as high as you need to at the sale. The overbid after paying off the senior loan will simply end up in your pocket. It's possible to make money without even taking title to the house. If there's enough equity in the property, foreclosure speculators at the courthouse may bid high enough at the auction for you to recover your purchase of the 2nd, and yield a profit to boot. There's even the possibility the debtors get their finances back in order. They'll make payments on the second again, and you can dish it off to another investor (note buyer). But all of this comes with some risks. You're going to be making payments on the senior loan for as long as you hold the house, so you've got to be sure your cash flow can handle unexpected delays in your plans. And you have to make up all the arrears on that senior, which could be more than you think. Debtors can sometimes fight a foreclosure for a year or more, and the arrears in principal, late fees, and interest can be substantial. Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : The biggest advantage to buying out a junior note, is that it gives you multiple ways to make money. : You can reinstate the senior, and keep the existing financing in place. That's usually easier than going through a traditional lender's approval process later, if you buy a foreclosure at an auction. : You can sell the house for a profit, or keep it as a rental (since you have the financing already set up.) : You can also buy the 2nd as a "hedge". Suppose a house is going to sale at 70 cents on the dollar. That's about what most investors will pay, but you want to be sure to get it-- (and not overpay, in case some newbie investor shows up.) You can buy the second on the cheap, then bid as high as you need to at the sale. The overbid after paying off the senior loan will simply end up in your pocket. : It's possible to make money without even taking title to the house. If there's enough equity in the property, foreclosure speculators at the courthouse may bid high enough at the auction for you to recover your purchase of the 2nd, and yield a profit to boot. There's even the possibility the debtors get their finances back in order. They'll make payments on the second again, and you can dish it off to another investor (note buyer). : But all of this comes with some risks. You're going to be making payments on the senior loan for as long as you hold the house, so you've got to be sure your cash flow can handle unexpected delays in your plans. And you have to make up all the arrears on that senior, which could be more than you think. Debtors can sometimes fight a foreclosure for a year or more, and the arrears in principal, late fees, and interest can be substantial. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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