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how can i buy a house from owner when owner owes more than current value?

My friend owns a home that he wants to sell and i want to buy. The problem is that he bought it for too much and though he paid down 100k he later took out a HELOC.  he paid around 225 but the house is only worth 145 today, however, he owes 185. I think I want to buy "for sale by owner" 
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February 18 2013 - Portland
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For a little more on short sales, check my blog [Hotlink removed by Zillow moderator. Please see our Good Neighbor Policy.]
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February 19 2013
The answers you received are all valid.  In this case, the seller should work with someone experienced in short sales.  There are several considerations the seller should make and these can have consequences to his financial well being and credit score.  As a buyer, you also need to be aware of the short sale process.  Short Sales can take time and be frustrating for both buyer and seller.  This isn't an easy transaction to navigate... lots to consider.  Best of luck!
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February 19 2013
I agree with the responses. No sense in paying more for a home than it is worth. You can, there is no law against it, but I wouldn't recommend it. The seller has to pay off their mortgage to give you the deed.
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February 19 2013
You can't; it's not going to happen. Your only option is to buy the house, cash, for $145,000 and pay off the $40,000 he owes on top of that.

Or. You can wait for him to list it as a short sale, and be the winning bidder.

All the best,
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February 19 2013
I agree with previous two posts and also would counsel against 'For Sale by Owner."  The liability in any home sale is real.  In a short sale it is even greater because there is a third party involved who is losing significant money.  Your friend needs a listing agent who specializes in short sales.  I'm not one who does, but there is a two-person team in my office who is.   They've done well over 100 and if you drop me an email I will get you together with them. 
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February 19 2013
Would you be asking this question if it wasn't a friend? Don't let the relationship cloud common sense. Ask your friend to get an appraisal so that both of you know what its really worth. But don't overpay to help a friend out or you'll end up in the same situation.
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February 18 2013
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Your friend will either have to bring money to closing to make up the difference between what he owes and market value, or if he has had a financial hardship he may be able to qualify for a short sale with his lender.

Do not pay more than appraised value.
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February 18 2013
 
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