foreclosure - Posted by Tery

Posted by Beth on July 14, 2001 at 15:17:01:

Thanks for the prompt response.
In your example, how do you get the $25000 into your pocket or available to split? If the property were refinanced or buyer gets loan, typically 80% of value or 80000-75000 purchase price, leaves $5000. Don’t banks or money lenders only allow home equity or refinancing 80-90% of value?

I guess my original question should have been if there’s a way to help someone who owes equal to or more than the property’s worth “as is” or 75% of market value after fix-up. In particular, I’ve located a distressed seller who contacted me the first day I had a magnetic sign on my car stating “I Buy Houses.” (A real head turner and conversation piece in smalltown PA, by the way. Also a rush that someone responded, then that uh,oh! now what do I do feeling as a beginner.) She wants out of the area and is ready to just leave the property…after seeing the property, it too is highly distressed due to neglect and pet romper room. This is a half-double in low-moderate income area. Specifics: Retail-~$25000; As-is comps selling ~14000. Owner owes $13900. Appraised 1998 before “fix-ups” (paint) according to owner was 18,500. Other half sold last month for 25,500 after fix-up. Fix-ups are required in every room (3BR/1BA).(Not sure of fix-up costs, estimate ~$5000).
Is there a way to help this person? I feel a sense of obligation with advertising “I Buy Houses” (not just the pretty ones, ha!ha!). I’ve read to look for great deals (distressed seller and/or distressed property). This is a combination that is problably common in pre-foreclosure that the owner has neglected the property to the point that the balance due is equal to or greater than the current property value and cost of fix-ups reduce the profits needed to quick flip to another investor.
In your experience is there much success in approaching the bank financing the property to see if they’ll accept less than her mortgage? I’m thinking this is the only way I’ll be able to help her.

Rents go for ~$350/month, so would not generate $100 cashflow monthly when consider 5% vacancy and $500 yearly maintenance, plus W/S, taxes and ins.

One thing I like about this real estate business is the opportunity to help others while helping oneself. Any insight would be greatly appreciated.

foreclosure - Posted by Tery

Posted by Tery on June 16, 2001 at 07:21:19:

Hi everybody I got a friend who found a owner wanting to sell,because she is losing the house and want to sell it before it forcloses and mess up her credit.How should my friend move on this should she buy it for the equity,or the balance of the loan or what Help me. what steps should she take.We are both new at this and trying to get started.This is the first good oppertunity we have find after calling and looking at 30 house this month. Terry

Re: foreclosure - Posted by Ronald * Starr

Posted by Ronald * Starr on June 16, 2001 at 23:58:58:


You need to atate in which state you are operating. Some states have special laws related buying properties from homeowners who are in foreclosure.

I live in CA. If you are in CA, do not proceed until you have read the law related to “Home Equity Putchase.” I believe it is section 1695 of the civil code.

In some other states there may be special restrictions about what you can do. Read your law first. Or else consult with a KNOWLEDGEABLE attorney. Few attorneys will know this detail.

Good InvestingRon Starr***

Re: foreclosure - Posted by Stu Silver, WIN Trainer

Posted by Stu Silver, WIN Trainer on June 16, 2001 at 08:38:04:

Hello Terry,

You have just asked a powerful and serious question. I love asking this question when I teach pre-foreclosure.

The question stated differently is, “What is the right amount of profit when dealing with someone in foreclosure distress?”

Do you just get a quit-claim deed (thereby assuming the mortgage)and keep all the profit yourself, or do you offer something more? If more, how much more?

The right answer is … offer whatever is in your heart.

You can offer nothing … or your can offer moving expenses, first month’s rent, pay for utilities, plus anything else needed to start a new life … or you can offer to split the equity, after the property is sold … or you can give them all the equity, less a commission for youself (which is what a broker would do for them).

The answers differ from person to person, and there is no right answer, except, again, to do what is in your heart.

I will also add, that now, having wealth, I often help people in foreclosure and get nothing for myself, other than the satisfaction of helping someone who really needed my help. I have many religious people in my classes at the Whitney Organization, pasters, ministers, preachers, etc. They attend the classes because they need to supplement their income - contrary to what many people think, many religious positions do not pay well. I love seeing their eyes light up when I show them ways to keep people in their homes and stop foreclosure, without any risk to themselves … but that is a different subject.

I prefer to buy vacant properties on the steps, or deal with the banks after the sale, because I now have the money to accomplish this, and I find it difficult to make money off of other people’s misery. Many times, in pre-foreclosure, I am face to face with a single working mother who is trying the best she can, and her children are scared, and when she looks into my eyes, well … you get the picture.

I hope I have helped you, because, really, what you asked was a moral question, not an investment question.

Stu Silver, CCIM
Lead Trainer at Russ Whitney’s Millionaire U
Licensed Broker, Mortgage Broker, Appraiser
Auctioneer and Cert. Exchange Consultant

Re: foreclosure - Posted by Beth

Posted by Beth on July 12, 2001 at 21:35:33:

Your response to Tery is reinforcement as to why I am getting involved in this business. My question is how to help someone in pre-forclosure or that wants out of a property when they still owe over 75% of the property value?
Russ mentions that he never walks away from a good deal that comprises distessed seller and/or distressed property. What happens when you have that combination and the distressed seller just wants out but owes 75% or more of as-is value? How do I help these people with their problems (as Russ trains to be a problem solver)? I am a new recruit, fresh from wholesale camp, mentor coming next month and looking forward to coming to MU in near future. Also, this is my first attempt at posting questions…Thanks for any insight!

Re: foreclosure - Posted by Marty

Posted by Marty on June 16, 2001 at 10:40:02:

What a great mentor you are! Thank you.

Re: foreclosure - Posted by Stu Silver, trainer

Posted by Stu Silver, trainer on July 13, 2001 at 17:47:12:


I’m not sure I understand your question. If you can find pre-foreclosures at 75% of market value, why is there no opportunity to make money for yourself, and to help people?

For instance, if the house is worth 100,000, and the mortgage is 75,000, there is 25,000 in equity floating around. Even if you split it with the former owner, it feels like a $12,500 payday, which ain’t a bad payday!

Perhaps you need to explain further …

Stu Silver, CCIM
Lead Trainer at Russ Whitney’s Millionaire U