I feel the writer has a good plan but lacks knowlege and experience. For example, if the owner of the house has committed to an auction, advertised, signed an agreement with the auction company they are committed to go to auction. They can’t change that plan without a lot of hassle. So they won’t sell before the auction except possibly if someone offers far more money than they can get at auction, which isn’t going to happen.
So the answer is, go to the auction but don’t bid.Houses usually sell for more at a well publicised auction than they would if you seek them out.You must put down a subtantial cash deposit (like 10%) and you must pay the rest in a short time, 15 to 30 days. I don’t think he is ready for that. My advice is go to the auction for experience and see what happens. Then go look for your own deal by advertising, calling FSBO ads etc.
My first deal just dropped in my lap. A house has been for sale for 2 months. Vacant for one month. Market price is $175K, asking price is $165K. I won’t know the sellers’ motivation until tonight. They probly need cash. It is going to auction in a couple of days. This is not a foreclosure, they are setting up the auction with some type of Help-U-Sell company. Market rent is about $1195/mo. This is in Mesa AZ. My guess is that they purchased it new 3 years ago for $145K. Their PITI would be approximately $1200/mo. The remaining mortgage may be approximately $141K…This is what I would do:
Offer $165K with $3000 down, paying $1200/mo with a 3-yr Option. Line up an optionee willing to put $5000 down and rent for $1500/mo. with $200/mo. credit for a 1-yr. option to buy at $175K. I would allow a 1 time option renewal for $5000 at the end of the first year.
$2000 - up front
$100 - per month
$10,000 - at close of 1st year.
Do these numbers work???
Do I have to commit to the seeler before I get a buyer???
What if I can’t find a buyer?? could I get stuck with the payments??
Do I have to commit to the seeler before I get a buyer???
No. In fact, I wouldn’t commit to the seller unless you have found a buyer or are sure you can find a buyer. It would leave a bad taste in your mouth if you dropped 3k, and blew 1200/month for 2 months to find a buyer. You’ll be way in the hole at that point.
What if I can’t find a buyer?? could I get stuck with the payments??
Absolutely… that is if you want to retain your l/o. If not, you leave your 3k on the table.
If you were someone who has done a few of these in your area this would not be bad for a sandwich l/o. If your a newbie, (which you are, tread carefully)
More importantly, if you are considering negotiating this deal, how can you say:
“My guess is that they purchased it new 3 years ago for $145K. Their PITI would be approximately $1200/mo. The remaining mortgage may be approximately $141K…”
Why are you guessing? Don’t go to battle loaded with blanks. This stuff is easy to find out. It’s much less a waste of time if you find out that they are over financed instead of meeting with the seller.
And more importantly, what if you find out that there is much more room for negotiating and you volunteered 3k and 1200/month, when only 1k and 1100/month was needed to close the deal?
Research it a bit more.
Sounds like your just kicking a tire here. If you’re not, then do a little more homework and get back to us.
Do you have cash available if things don’t go as planned?
Posted by Rob G. LI, NY on October 17, 2002 at 21:20:01:
GL, can I ask why you say he isn’t ready to buy yet? Just being nosy. I thought the deal looked okay except for it going to auction in a couple of days. Can you please enlighten me, or am I just reading too much into it?