Little or no money down means different things to different people. To some, it means tying up a property with a purchase agreement for $1.00 consideration and then finding someone who will pay you $XXX over and above your purchase price for an assignment of that agreement. That is the true NMD deal. It’s also called a flip.
Another, method is to use your own money to buy a property in foreclosure that has a significant amount of equity, by paying the owner something for his equity, bringing the mortgage current and taking over payments. This is called little or no money down, i.e. anywhere from $2,000 to $20,000.
No money down also means none of YOUR money. You find a backer for the deal and borrow the money or take in an investor-partner.
There are any number of combinations of the above. The main idea is finding the deal that someone with money would want to buy into. (The deal that was originally posted isn’t one of those IMHO.) You do this with the knowledge in your head, not the money in your pocket.
Hope this helps you get started.
In a nutshell, how do you approach someone going into foreclosure, say $5-$6K behind on their mortgage on ahouse worth $90K, with little or no equity with little or no money. L/O, wholesale/flip etc. I know I have read postings on this but can seem to remember how it goes.
Re: One more time? (I know this has been asked before) - Posted by B.L.Renfrow
Posted by B.L.Renfrow on October 03, 1999 at 11:51:57:
Depends upon what the seller needs and what they’re willing to do. For example, are they willing to deed the property to you in exchange for making up the arrears, do they need a little cash, or are they unrealistically looking for an above-FMV offer?
If they have little or no equity, no access to the money to pay off the arrears, and don’t want to be foreclosed on, they often become very motivated, especially as foreclosure nears, and many times will just give you the thing to avoid a foreclosure if you can take it off their hands and solve their problem.
Best advice is to talk with them and find out what they need and what they expect that you can do for them, and if practical, structure an offer based on that (assuming, of course, you do all the usual due-diligence stuff before taking title to a property.
Thanks for the response. What do you do when all the owner wants is traveling money, say $500 to $1,000. If I was to take the house subject to and look to L/O, it does not seem as though anyone would pony up $7K-8K as non-refundable option consideration on an $80K ARV house that does need some minor. This would give me max $1K front end (arrearage + traveling money = approx $7K) with a fairly slim backend potential. I was called on this opportunity a few weeks back and could not figure how to make it work.
Re: One more time? (I know this has been asked before) - Posted by Dilbert
Posted by Dilbert on October 03, 1999 at 19:16:00:
There is an easy answer to this question but I don’t know what it is…if the property is deeded over by the homeowner, how does one get the mortgage company to take the property out of the previous owner’s name and change over to the now new owner?
Re: One more time? (I know this has been asked before) - Posted by B.L.Renfrow
Posted by B.L.Renfrow on October 06, 1999 at 11:58:13:
You are right: With an $80k option price, you’d be fortunate to get more than $4k in up-front option consideration.
If the seller wants $500-$1000 above and beyone the amount for the arrears, it might be a deal-breaker here, since it looks as if you’re pretty thin on this one anyway.
Perhaps instead of selling on a L/O you could owner-finance it, get 10% down from your buyer, then if you need cash out, sell a note at closing? (Sorry, I don’t remember the details of your original post, so I apologize if I’m off track here.)
Sometimes, not being able to figure out how to make a deal work, indicates that you might be trying to make chicken salad out of chicken droppings and it’s time to move on to the next deal.
Posted by B.L.Renfrow on October 03, 1999 at 19:40:21:
Yep, there is an easy answer: you don’t.
What you do is purchase “subject to” the seller’s loan, meaning the loan stays in the seller’s name, you make the payments and hold title until you either sell or refinance the property.
By taking this course, you do run a small, though real, risk that if the lender discovers the transfer, they will call the loan due.
That can be prevented by using a land trust or PACTrust, where the seller transfers the property to a title-holding land trust, then quietly assigns beneficial interest to you.
So, why would a seller ever go for this? Desperation make people mighty motivated. Along you come with a way to save their house from foreclosure and save their credit…end of discussion.
Much has been written about these topics. There are several articles in the how-to section (top left side of this page). You can also read all about the PAC Trust by clicking on the appropriate banner above.
I was asking the question because there are people who make nice livings I am told by buying houses from opwner’s facing foreclosure and somehow (I thought) were able to do it with little or no money down. I am by no means an expert. In fact, I don’t have even one deal under my belt. I really look to this site as an educational source and was looking for an answer to see if there is any opportunity under a scenario like the one described. “It can’t be done,” is a pertfectly acceptable answer to me, especially if it is the right one.