Posted by IB (NJ) on November 29, 2002 at 24:28:06:
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Negotiating Preforeclosures - Posted by IB (NJ)
Posted by IB (NJ) on November 28, 2002 at 05:58:21:
How do you negotiate the price of a preforeclosure when initially alot of the numbers are based on what the seller tells you he/she owes on the house?
For example: House looks to be worth $150k ARV. Judgement is about $25k. Seller tells you total, with late fees and penalties,interest should be about $30k. You later find out that total owed to mortgage co. is actually $40k. What do you put into your contract to protect you from having to pay more than the initially agreed upon price? How do you negotiate this with the seller when you initially agree on a price?
Is there a course out there that goes into this in good detail?
Re: Negotiating Preforeclosures - Posted by Craig (IL)
Posted by Craig (IL) on November 28, 2002 at 19:40:11:
You’re right not to trust the current owner’s numbers. Such owner’s often don’t have a realistic idea of what they owe on their property. Some of them never learned the value of honesty and clarity and aren’t straightforward with you. There’s three strategies that might help you depending on what you want to do and whether or not you have cash available: the straightforward subject-2 acquisition, the get-the- deed-then-buy-the-loan, and the assume-the-loan-at you price and terms-with the lender.
With the straightforward Subject-2 acquisition, all you need to do is add protection in your contract so that you can get out free and clear if the loan amount is too high or the terms or not amenable. Something like: ?If the amount on all loans and liens on said property are below___ the purchase price shall be reduced the full amount of the difference between the stated purchase price and the actual amount(s) owed; if the amount on all loans and liens on said property are higher than ____ the buyer shall have the right to cancel this contract and any and all amounts given by buyer as part of this contract shall be immediately and promptly returned upon such cancellation.? I have this written as a standard phrase in my contract; my lawyer has seen it; approves, and I used it once to get out of the contract. Of course, this doesn’t help you if you still want the property but the total amounts owed or terms don’t’ work for you. And this happens a lot.
If you have cash available or can get it quickly the get-the- deed-then-buy-the-loan is a method is one described by Ron Legrand and is taught in detail by the team of Dwan Bent-Twyford & Sharon Restrepo. I won’t go into details, but, basically: take the property Subject-2 but don’t record the deed just yet. Get a release to allow you to talk with the lender(s) a the same time the seller signs the property over to you. Contact the lender and negotiate to buy the loan. You’ll need good solid evidence that the loan is not gonna be paid and the property is worth less than what is owed. So you have to work the buyers for info and take pictures of problems with the property in support of your bargaining. Sometimes you can lenders to agree. So, You have the deed and have paid less than the amount owed. If the lender doesn’t agree, you can just walk away. Remember, you don’t record the deed and your free and clear.
The third idea, the assume-the-loan-at you price and terms-with the lender is similar to the above except that if the lender wont discount the note or if there is sufficient equity in the property that you don’t mind payment the full amount of liens to get it and you don’t have or don’t want to use ou8r own money. You may get lenders to let you formally assume the loan at little or no out of pocket costs to you and place any late fees, etc on the back end of the loan.
Re: Negotiating Preforeclosures - Posted by Chad
Posted by Chad on November 28, 2002 at 06:25:51:
I suggest that you include a clause in your purchase agreement that states that any net differences between the approximate balance of the existing encumbrance listed in the purchase agreement and the actual balance shown at the closing will be adjusted to the purchase price at the closing. There’s a whole chapter on negotiating and an excellent sample purchase agreement in Thomas Lucier’s book, How To Make Money Buying Pre-foreclosure Properties Before They Hit The County Courthouse Steps, that’s available at amazon.com. I hope this helps. Good luck!