Posted by MMNC on May 31, 2006 at 18:09:38:
Thanks again.
I NEED HELP!!! EXTREMELY MOTIVATED SELLER!!! - Posted by jmeyn
Posted by jmeyn on May 30, 2006 at 19:33:53:
I just got off the phone with an EXTREMELY MOTIVATED SELLER. He was a lead from my agent. He is not listed, she told me that all she wants from the deal is to have me continue to work with her. Anyways, here’s the deal:
He has a 3 bed, 1 &1/2 bath home in an area with mostly owner occupants.
ARV is approx. $75K-$80K.
Repairs, approx. $3.5K-$7K.
Amt left on loan, approx. $68k
Payments are $850/mo.
Rent rate approx. $600-$700
He was charging $500/mo. rent
He is in the beginning stages of FORECLOSURE. He made the last payment in Jan. The lender is Ameriquest. He does qualify as part of the class action suit filed against them, but the Nebraska Atty Gen. is giving him the runaround. He said he would accept $50K, after he speaks with the bank. His wife has also passed away in the house, and so he had rented it out for $500/mo when he could have gotten at least $600-$700/mo. He has stated that he’s willing to do ANYTHING to get out from under this monster. I suggested L/O, and he was ok with that, or Sub2. He was going to attempt a Short sale himself. I’m leaning towards the L/O myself, but the neg. cash flow would kill me and he probably can’t refinance with his past due payments on his credit. He doesn’t want to owe taxes or get a judgment against him from a short sale, and I can’t get funding for this deal.
Could I pull off a short sale and not have him penalized, possibly have them restructure his mortgage so that rent would cover the payments since the lender is in hot water with the law? Any help would be appreciated.
Motivated is overrated . . . - Posted by Joe Kaiser
Posted by Joe Kaiser on May 31, 2006 at 01:54:08:
I’m sure there are all kinds of motivated sellers who would love you to
take over their problems. That doesn’t mean you should. The fact
someone is motivated is meaningless if they don’t have anything you
want.
First, find a deal that makes sense.
Joe
Re: I NEED HELP!!! EXTREMELY MOTIVATED SELLER!!! - Posted by Kevin - WA
Posted by Kevin - WA on May 30, 2006 at 22:01:11:
Hi,
I am kinda new, but I am missing something here. He owes $68K, it is worth $80K, and it needs $7K in repairs. Are the back payments included in the $68K? I don’t think I would offer anything until I knew a short sale would be approved. You don’t know what you can pay until you know what the bank will short, right?
K
Re: I NEED HELP!!! EXTREMELY MOTIVATED SELLER!!! - Posted by jmeyn
Posted by jmeyn on May 30, 2006 at 20:54:33:
I guess I should rephrase the part about him not wanting to do a short sale. I had informed him that he COULD POSSIBLY have a judgment against him, or the bank could file a 1099 for earned income should he just do a short sale. It was his idea to do a short sale, he just didn’t know what it was. I told him I would try to structure something that would keep his credit intact, and relieve him. He doesn’t want to do it, but he will if need be.
Re: I NEED HELP!!! EXTREMELY MOTIVATED SELLER!!! - Posted by MMNC
Posted by MMNC on May 30, 2006 at 19:59:22:
I would tie it up under a non-exclusive option and market the home for 850.00 per month under lease to own terms. Take it over SUB 2, Find a TB and deed the property to a 3rd party Land Trust for 36 months. Find a partner to bring the payments current and split the deal with them. Share 50% of your future appreciation with the T/B in 36 months. No money out of your pocket. Obviousley more to it, but very possible and as far as I am concerned the best way to handle these. You can email me with any other questions. I’d be happy to help. Good luck none the less.
Confused - Posted by Skip
Posted by Skip on May 31, 2006 at 03:35:49:
Hi Joe,
I agree this deal is a stinker. Pee-yuu! But one thing confuses me: aren’t most foreclosure situations low or no equity like this one? If the owner had equity, why wouldn’t they sell or refi and get themselves out of the jam?
Re: I NEED HELP!!! EXTREMELY MOTIVATED SELLER!!! - Posted by Sean
Posted by Sean on June 02, 2006 at 09:39:16:
Man, I wouldn’t do this at all…
You are banking on future appreciation to dig you out of someone elses mess… this is the set up for a PERFERCT STORM.
3 years is NOTHING in terms of appreciation in my area… 3 years from now that house is likely still only worth 75k, maybe 79k, and that’s after you’ve fixed it up.
Sub2 always has the intrinsic risk of being called due.
Banking on appreciation for your payday is always highly risky… even moreso today where re is clearly overpriced in most of the country due to loose money policies… that are already tightening.
There is a reason others are passing on these “deals”, you are playing with snakes with this model, big time.
nah… - Posted by lukeNC
Posted by lukeNC on May 31, 2006 at 08:41:17:
I would not do this, no way I’m taking over those payments…
tie up the house, offer ameriquest $40k to payoff the loan in full and see what they say…never know till ya try…
Get in, pick up a check and get out…move on to the next one…
Huh? - Posted by Joe Kaiser
Posted by Joe Kaiser on May 31, 2006 at 01:49:32:
Are you serious?
How did something like this thing become a doable deal? What
happened to doing deals to capture equity that can be turned into real
dollars?
I’ll take old school any day of the week.
Joe
Re: Confused - Posted by Max-Va
Posted by Max-Va on May 31, 2006 at 08:26:36:
Skip,
“If the owner had equity, why wouldn’t they sell or refi and get themselves out of the jam?”
They very well could have. The thing most people in foreclosure do is hide and do nothing for a while until about a week or so before the sale date. Then their credit score is terrible because of late payments on the credit report. Their score is so low and time too short to refi. They only have 4 choices then; family & friends, sell, work with an investor doing a loan, or the foreclosure.
Re: Huh? - Posted by MMNC
Posted by MMNC on May 31, 2006 at 05:18:38:
I guess that’s the beauty of creative RE. I certainly don’t claim to know everything and I am sure there will always be a “Better” way for someone else. These were just my thoughts and opinions. In the name of “Old School” I am always open to learning as well. How would you go about this? In what way. What am I missing? Not being sarcastic here. Just wanting to see another side of things. Thanks for the feedback in any event.
Re: Confused - Posted by Skip
Posted by Skip on May 31, 2006 at 18:49:38:
Thanks, Max!
That makes more sense. So equity deals do exist. Are they hard to find? But aren’t most situations little or no equity as described above? It seems that many new investors get in trouble because they suck all the equity out of their properties. It may get worse when there isn’t huge appreciation to save them. While all other investors will be searching for the equity deals I was thinking it would be great if I could find a way to make money on these deals.
I’ve been reading the thread below, and I agree with Joe that I wouldn’t want to hold these properties sub-2.
What you recommend to someone starting out in foreclosures? A good course? What about Joe’s?
Re: Huh? - Posted by dutch
Posted by dutch on May 31, 2006 at 07:24:16:
“How would you go about this?” Joe and most of us would just walk away, that’s how we handle this. Not that you couldn’t make money doing what you are suggesting. Just after you build your business and get much better deals flowing in, one like this just isn’t worth trying to squeeze a few bucks out of.
Just my 2 cents
Dutch
OKHomesavers
Re: Confused - Posted by Max-Va
Posted by Max-Va on May 31, 2006 at 21:26:30:
Sucking equity out of a property is not a bad thing. It depends on what you do with it. If you leverage it into several more properties it could be good. Reserves and Cashflow are what you are looking for. A large amount of equity sitting in a property is like money sitting in a safty deposit box, it is not working for you.
Now I am NOT saying to have all your rentals properties 100% financed. But at 80% and a good cashflow allows for alot more options to make a profit on another deal.
When working pre-foreclosures be careful, you hold the future of the sellers lives in your hands and you really have to know what your are doing or you will make things worse than it would have been.
As far as recomending a good course, I like Bronchick’s material and I like Richard Roops marketing material, also get Deals on wheels by Lonnie Scruggs to open your eyes on what is possible with small amounts of $$$
Re: Huh? - Posted by MMNC
Posted by MMNC on May 31, 2006 at 11:30:51:
I totally respect that. I am just at a point where it is very easy for me to process and execute these deals. Plus I can halp the homeowner just as fast if not faster than doing a short sale. I just market for a quality T/B, triple net lease, split the profits in 3-5 years, pass on the tax deductions etc. It’s an awesome deal for the T/B. So far 2 have re-fi’d out in less than 18 months. Minimal time and effort on my part. Even if I pick up $50.00 a month CF, $2500.00 up front profit and $10,000.00 in 3 years…that’s good enough for me. I may have 24 hours into the deal over 3 years. Not counting if someone is evicted or leaves. That’s OK. I start it over again and make more money for my time and energy. Again…I’m not claiming to know it all and I still learn new things everyday. I do one of these deals a month on avg. I have control over 14 properties right now(not counting 2 that have cashed out) since I started this 20 months ago. I put some money in my pocket upfront, some money in pocket every month and I plan to cash out in 3-5 years with some good equity. Most of these homes initally had no equity in them when I found them. They were there for the pickins because every other investor passed them over. Minimal risk. Just my take everyone. As I grow and become a more seasoned investor I’m sure I will learn more ways to diversify my decisions. Oh…BTW…Joe had a great point about Motivated sellers being overrated. I totally agree. The cool thing is, I set the terms that works for me and hopefully the seller, if the seller can’t comply for whatever reason…then I do walk. But if it works then I wouldn’t pass a doable deal because I may only squeeze out $5,000.00. That’s still good money in my opinion. Ok…I’m done:)
Re: Confused - Posted by jmeyn
Posted by jmeyn on June 01, 2006 at 18:45:41:
I should also mention this guy has a house that he currently lives in, he owns it. The house I’m looking at was him and his wife’s, but she passed away in it. He moved out, to this new house, and rented it. After a number of unsucessful landlording attempts he gave up and just stopped paying on it. Could I have him refi his new home, and somehow use the extra from that in this deal? How would that work if I did that? I was also thinking that he could just make up the difference between the “rent” and the payment amounts until the option is exercised. He was doing that with an actual renter, but they split and he gave up. He is open to anything. I just want to do the easiest, fastest, and best thing for everybody involved.
Re: Huh? - Posted by Joe Kaiser
Posted by Joe Kaiser on May 31, 2006 at 12:28:08:
You should pass on these deals because they come with fangs
attached, fangs with you apparently are not aware of.
We haven’t seen Sub2 issues for the last dozen years at least, but we
will soon enough I imagine and the last place I’d want to be is
“controlling” 14 Sub2 properties.
Way too much risk for me, especially with so little to gain. You’re
sticking your neck out for very little in return and there’s simply no
reason to be doing that when you can take a more reasoned approach
and do deals that are (1) less risky, and (2) much more rewarding.
Joe
Re: Huh? - Posted by Eric (MI)
Posted by Eric (MI) on June 01, 2006 at 24:25:29:
I do something similiar (probably the exact same thing) and it isn’t your typical Sub-2, take the deed in your name sort of thing.