First Motivated Seller!!!!! (VERY LONG) - Posted by Valerie PA

Posted by Valerie PA on November 08, 2001 at 07:43:45:

WOW! Tarun, what great ideas. I am going to print out these posts and keep them. You have more ideas? Geez… send them along would you???



First Motivated Seller!!! (VERY LONG) - Posted by Valerie PA

Posted by Valerie PA on November 05, 2001 at 10:36:12:

To all Newbies and Gurus:

First to the Guru’s… I have read here so many times that when you find your first motivated seller, you’ll know it. Well, thanks for the heads up because yesterday, the call came. To all you newbies (from a newbie), this is a motivated seller.

Mr. Seller called yesterday from one of my bandit signs. They have a 4/1 in a blue collar neighborhood they want to lease and wanted some info on my sign. OK… no problem. I asked them what their situation is and was told that they are moving mid-november into a rented house in an upscale neighborhood and they were thinking of renting out this property for a monthly income. I told him that I only rent-to own and would he be interested in selling the property within the next two years? Well, tell me more, he said, so I explained how I can purchase his property on a L/O. He like the idea so I asked him for the mortgage amount, etc. He gave all info without hesitation. Here is what the numbers look like:

Mortgage Balance - $97k, bought in early '98 (BK in '96)
Monthly Payment - $985 (P & I only) 11% Interest rate due to BK
Monthly Taxes - $200
Monthly Ins. - $40
Total Monthly Expense - $1225

This property will only rent for approx. $1100 TOPS! He wanted me to come and see the property yesterday afternoon but I told him that I needed to talk to my partner and I would call him back. So we hung up and I told my husband that the numbers just wouldn’t work and that it was a no deal but I had to call him back. So a little while passed and I said to my husband… The people who make the most money in this business are the ones who can be the most creative and told him that I was going to ask the seller to refinance and see what he says. My husband thought that it was a longshot but well worth a try.

I called Mr. Seller back and told him that as it stood now his numbers are too high but through a process of elimination, I may have solved his problem. I told him that some of my suggestions may sound off the wall but to remember that I am only trying to help him out of a jam. He does not want to make double payments on this house. This is what I told him:

  1. You do not have enough equity to sell conventionally thru an agent. Your closing costs and commissions will eat all the equity and you will walk away from the sttlement table with $0.
  2. You will not be able to lease this house without going into the red on rent payments. If something breaks, you won’t have any extra income to fix the property and if the tenant’s wreck the place, forget it.
  3. How about refinancing? Lower your interest rate and I will buy your property.

What did Mr. Seller say? OK, we can do that. How long does it take? I had to be honest and tell him that I really didn’t know but it is better to have to make an extra payment or two than kick yourself in 6 months when you are struggling to make a payment or the heater goes and you have to fork out money you don’t have or your tenant’s will freeze to death. He seemed a little nervous about the time-line on the refi so he hit me with the bomb…

“Valerie, what if I just signed the house over to you for what I owe and you refinance it?” Hmmm, get the deed? Hmmm. NO, numbers are still too high and his problem would become my problem. NO! So I told him that I do not buy a house knowing that I will be in the red before I even get a tenant in the place.

“OK Valerie, I can understand that. You would be in the same boat that we are in now. OK, you’re right, I will start calling tomorrow to get the refinance going and I will call you Tuesday to let you know how I made out. Thanks so much for shedding some light on this situation.”

“Mr. Seller, thank you so much for calling and I will wait to hear from you. If you have any questions in the interim, call me. I will come and take a look at the house when it gets closer to the refinance date. Take care of those beautiful little girls of yours (small talk that I left out of this post) and I’ll talk to you soon.”

My husband almost fainted when I told him what happened. I realize, it’s not rocket science but I helped someone and that’s what counts. I know I’ll hear back from him. He was that type of guy.

That’s my motivated seller story. I’m sorry it was so long but I think it’s important that newbies know what to look out for and to stop trying to “make deals work.” Those sellers are out there and if you market properly, they’ll find you.

Good luck!

You could try this… - Posted by Tarun_MD

Posted by Tarun_MD on November 07, 2001 at 21:08:01:

On a deal such as this, you could simply tell the seller(if he can’t get it refinanced) that his payment on his mortgage is too high for the market to bear. You are in business to make money are you are not willing to take a monthly loss on his house. Therefore you can only pay him $X/MONTH and he will have to cover the rest. I have 3 deals right now(2 lease options and 1 subject to) where I am paying less than PITI. The sellers pay the difference. The good thing is that even if the sellers stopped paying me(Never happened to me so far) I am still making a good cash flow on these deals.
If he cannot get it refinanced, another way to cover the PITI would be get the deed and then owner finance it at 12% or so.
I pulled off a deal a couple of months ago where I got the deed and the interest on the loan was about 11%. I sold it on a land contract with 12% interest giving me aprox $200 in cashflow. Plus I got a nice down payment on it.
You could also assign your lease option agreement to a tenant/buyer for whatever you can get. That way you are out of the deal and will make 5-6k hopefully.
This way you will not be stuck with the high payments.
Heck, you could even assign the agreement and split the cash flow with him if you are able to get more than PITI from the assignee.
Hope this helps!!
Take care

You are welcome!! - Posted by GL

Posted by GL on November 06, 2001 at 17:16:47:

And congratulations, you winner you!!!

Your story should go in the permanent file of success stories. This is the sort of thing that makes this site fun, getting feedback from successful growing people.

Re: First Motivated Seller!!! (VERY LONG) - Posted by SueC

Posted by SueC on November 06, 2001 at 09:20:51:

Valerie one more thing, could you have directed him to one of the DIG vendors who could refi him quickly? like Brian at Warrington Mortgage - this would be icing on the cake.

BTW, good to at least put a face to your name at the October meeting, maybe in November when I’m not doing a roundtable I’ll get to actually talk to you!

you’re new at this? - Posted by eric-fl

Posted by eric-fl on November 06, 2001 at 08:35:28:

It’s hard to believe from your post that you’re new at this, because you sound like a pro. Maybe you’re a natural. You are so, so right to be keeping an eye on your exit strategy on the way in, or as Covey says, “begin with the end in mind.” Many don’t, and pay for it. I completely agree with your assessments regarding the interest rates, financing, and rental. There has been way too much sentiment that, if the rents or interest rates are high, just make 'em higher, and someone will come along and pay it. Well, that’s called the “greater fool” theory, and it doesn’t work. Yeah, you could probably find someone to pay 13%, but someone willing to pay that in this market would almost certainly cost you more in the long run. People aren’t as clueless as some might think, and even buyers/renters with bad credit know that rates are around 6.75% right now. They know that they might have to pay a slightly higher rate if they have credit problems, but certainly not double. Too many times I’ve seen the sentiment that offering “no bank qualifying” will have people lining up in droves to pay whatever you want to charge. My experience indicates that “no bank qualifying”, by itself, is not enough. You still have to be offering a quality property, at a reasonable price. The refinancing strategy is about the ONLY way this deal could fly, and you were wise to stick to your guns on that. Especially the way you handled his suggestion that YOU refinance it yourself, as if!

The only thing I might suggest that you do differently is, do not wait for him to call you. Followup is key. I may be cynical, but I always assume that everyone is lying about everything, and go from there. It might be a good idea to write up an agreement, effective on such and such a date, contingent upon his refinancing at a rate of not higher than X. This would also help you gauge his seriousness.

Re: First Motivated Seller!!! (VERY LONG) - Posted by JohnB_NJ

Posted by JohnB_NJ on November 05, 2001 at 18:13:43:


What was the current value of the house? Maybe getting the deed when “the getting is good” would work. Have the seller pick up some of the costs (maybe a payment or two…I have had a seller pay me to take the deed).

Then find a buyer with some cash down and sell on a contract for deed. I understand 11% is high but I am sure you could get someone for 13% since you will be providing No Qualifying Financing.
Again, I am not sure what the FMV of the home is now but I would venture a guess it is more than what your “motivated seller” paid for it in 1998.

Again, I am just thinking out loud.

Good luck and the best of success to you.


Great post - Posted by JHyre in Ohio

Posted by JHyre in Ohio on November 05, 2001 at 10:48:22:

Great post…great to see “how it’s done”.

John Hyre

Re: First Motivated Seller!!! (VERY LONG) - Posted by Dave W

Posted by Dave W on November 05, 2001 at 10:43:52:


It Makes our job so much simplier when we have a motivated seller, CONGRADULATIONS on your finding as you now have the knowledge of a truley motivated seller. Dave W.

One more thing… - Posted by Tarun_MD

Posted by Tarun_MD on November 07, 2001 at 21:15:22:

If you do sell on a land contract and it seems like the payments are very high as compared to what the market will bear, this is how you explain it to you land contract buyer. You tell them that you are giving them a chance to own a house despite their bad credit. Even though the payments are high, they will save approximately 1/3rd of the interest payments in taxes since they own the house. Also, point out that once they fix their credit, they could refinance to lower their payments.
I have a few more ideas, but I have to go for now. Maybe later.
Hope this helps!

Re: You are welcome!! - Posted by Valerie PA

Posted by Valerie PA on November 07, 2001 at 07:30:35:

I hope to make it to the success stories but I want the deal to be completed first!!! I spoke with the seller last night. So far, he spoke with one bank and they can reduce his payment by $125 (just enough to do the deal). I called a mortgage broker from my local investment group and he will be contacting the seller today to see if he can do better.

Wish me luck!


PS - I will be running a rent-to-own ad in Sunday’s paper to see what kind of responses I get.

Re: First Motivated Seller!!! (VERY LONG) - Posted by JohnB_Nj

Posted by JohnB_Nj on November 06, 2001 at 23:08:07:

Hey Sue,

I am a member of DIG as well. It is a drive (over 70 miles) but well worth the drive.


Re: First Motivated Seller!!! (VERY LONG) - Posted by Valerie PA

Posted by Valerie PA on November 06, 2001 at 09:34:11:

Sue -

GREAT IDEA! I know Brian from the meetings. I will call my seller and see if he’s interested.

Thanks so much and it was great to meet you too finally!


Re: you’re new at this? - Posted by Valerie PA

Posted by Valerie PA on November 06, 2001 at 09:25:55:

Thanks so much for your wonderful reply. I am trying very hard to learn as much as I can without falling into analysis paralysis with each phone call. I think you know what I mean. If the seller is willing to work out a “workable” deal, then fine. If not, NEXT!

I cannot go on with this post without thanking the experienced investors that visit CRE every day. From reading thru their hundreds of posts, and the welcomed replies to my dilemma’s with REI, I have learned so much. The fact that they take the time to help others become successful is great. Thank you guru’s, if your reading this!!! REI has been my dream for 10 years but I didn’t know how to get started until I found this site back in March. I discovered that a dream is nothing but a set of goals to be met. And if you break up those goals into smaller goals and meet them one at a time, nothing is impossible.

I agree with you that I should follow up. I always wonder when is the best time to do this? I think I will wait until wed. night if I don’t hear from him by then.

Thanks again and happy investing!


I thought of that… - Posted by Valerie PA

Posted by Valerie PA on November 06, 2001 at 07:29:50:

I thought of that too but I really feel that I would have a hard time in this area going with 13% (even 12% would be a stretch). I could resell for $125k, maybe $130k.

I am not familiar with selling (or buying) on CFD. Can you give me some info? Maybe it would work but I just ran an amort schedule on a sale price of 125k at 13% for 360 months and the payments would be over $1622/month. Seems really high for this area.