The original borrower had left the state, and, for all intents and purposes, the house was abandoned. After taking possession of the property through foreclosure, we had to deal with overgrown weeds and other issues like code violations and two years of unpaid property taxes. We could see the potential in the property, but we were a bit overwhelmed by the sheer amount of work it needed. Since the property is in such a remote area and was not easily accessible to all our vendors, we found ourselves with the challenge of what to do next. It was at this time that we received a phone call from the newly elected mayor of the city in question. She indicated that she had learned about us being the new property owners. Then she informed us that she wanted the property cleaned up because she was not going to tolerate any outside investors who did not take care of properties in her city. She had been newly elected and was very aggressive in her approach to keeping the city clean. This is when, in a move of desperation, and resourcefulness, I adroitly suggested that if she could work with us in cleaning up and rehabbing the property a little bit, we could have a positive outcome. The house could be a functioning tax-paying property in the market again, with a deserving buyer purchasing the house from us. A once toxic asset could be turned into re-performing one, resulting in a win-win-win situation.
The mayor agreed to our proposal and sent city workers to clean up the place. They cleaned the inside and even power washed the facade.
A week after the crew had cleaned up the place, we received a call from the mayor. She stated that she believed she had found a buyer. She said this potential buyer was a single mother with two teenage children looking to buy a place she could call her own. Even though she had a 530-credit score, the mitigating factor was that she had a steady job working at the local hospital. We immediately retained the services of a RMLO (Residential Mortgage Loan Officer) in order to be compliant with the Dodd-Frank act. After evaluating her ability to pay, we made the decision to sell her the house with seller financing.
Implementation of the Exit Strategy
We sold the property for $45,000 with a $4,000 down payment. The balance of $41,000 is being financed over 20 years at 9.9 percent interest. The monthly payment, after servicing fees and other miscellaneous charges, is $495.00. The borrower has been making her mortgage payments for over a year without any problems.