BiggerPockets

Doesn't sound motivated to me.

Why did he call you?
And what did your postcard say?

If your seller was willing to discount the property according to your wholesaler's formula (60-85% of ARV-Repairs-your fee = maximum price you will pay) then you can still flip it regardless of the condition. If not, and he's at least willing to discount it $15-20k, maybe you can still flip it retail via traditional funding.

Originally posted by Stephanie T.

EdwardP - I did mention seller financing and he was amenable to that. I'm trying to come up with a scenario to present to him on how this would benefit him. I haven't done this before, so any suggestions are welcome.

Ok, good, now you're working with something. The benefit to him is a quick and painless sale with no fees. He's going to get his retail price without retail hoops. If I understood you right, sounds like he's asking over retail. Which is fine if the terms are right.Now, What's your exit strategy?

We mostly buy and hold, so our seller financed properties are either rentals, or have tenant buyers. Our tenants pay our seller down until either we are ready to refi into a conventional loan, or the tenant buyer is. So our deals are structured like this: Mr Seller, I'll give you 2000 down and 250 a month as a hassle free income stream for 5 years and then a balloon payment of x dollars at the end of that term. Thing is there are costs you'll have to come out pocket for, but structured right you'll be getting an interest free loan while the house appreciates and cash flows.We typically get a private money loan to cover costs and pay ourselves.

Option 2 is to get that house under contract with the terms you want and then find a buyer to assign it to who can make at least a 10% down payment from which you will take your fee, the down you agreed to seller and the closing costs.

I'm sure there are options 3 and 4; there are a lot more creative people than me on this forum. Negotiate and get the terms you want, then get it under contract.
:kewl:

Edward basically covered the options you have.

There is only one reason to consider near-retail sales. Financing. If the seller can offer financing this could more than make up for the difference in price. After all what is any property if you don't have the power to acquire?

Make darn sure the terms favor your business process. I wouldn't pay anything over 8% APR for amortized private notes. Expect to put at least 15% down.

If you want to wholesale or flip the deal it should look pretty enough to entice an investor. In that case it wouldn't even have to be your money.

What is your strategy? Are you just looking to hook anything that walks by? Honestly I wouldn't be wasting my time with "Make Me Move" types. You said it yourself - he's trying to unload without paying commission. He's lazy and picky. Not my kind of seller.

Originally posted by Ryan A.

Make darn sure the terms favor your business process. I wouldn't pay anything over 8% APR for amortized private notes. Expect to put at least 15% down.

I don't offer interest when I negotiate. It's imputed into the price. I tell them that if they wan't their price, these are the terms I can give it to them on. I also determine their cash needs before offering a down. Some one who needs to move needs moving money. Someone selling an investment property as above usually doesn't. Taking care of all closing costs, stopping their holding expense, and garunteeing monthly income is usually enough.

Originally posted by Ryan A.

What is your strategy? Are you just looking to hook anything that walks by?.

My strategy is to be a transaction engineer. I spend enough on my marketing to make it worth my while to see what I can do on each call. Like I said above, not every call is a lead, not every lead is a deal. But in this case, Stephanie has action with seller financing, so it;s worth pursuing to the next step IMHO.

Thanks to all for the various posts.

As an update, I spoke to the sellers about owner financing. Somewhat surprisingly, when I explained that the comps for a similarly-fabulous home were about $15K below what they had in mind, they were not defensive. They now seem to understand that they won't recover everything they've put into the home.

They'd never considered seller financing, but seemed intrigued at the idea and are willing to weigh the benefits.
I presented them a sample scenario that involved full market pricing with 15% cash down payment, 5 yr balloon, 5% interest rate. As soon as they "got it", they asked whether they could adjust the interest rate, balloon period, etc. So, it's looking hopeful.

This is my first go round with this type of financing, so I'm reading everything out there on how to approach it. Mostly, I want to be able to explain to the owners both the pros and cons of this type of sale. I also want to make it easy for them to collect monthly payments, so I'm looking into loan servicing (any ideas on this are welcome). I've also offered to use my resources to run credit and background checks on potential buyers. I am doing this because they are concerned about what they'd be left with if they ever had to foreclose.

I don't see this as a "next". For me, it is educational and I'd love to figure out how to apply this as a tool in my RE arsenal. I do agree that some deals aren't worth the time (e.g. short sales where buyers won't cooperate with info, paperwork, etc.), but I'm not yet convinced that this is one of them.

[b]Bryan[b], can you please explain a bit more about the WHOF option? I've been trying to figure out how I get my fee in with this kind of deal. Can you, or anyone else, explain how this works?

Cheers!

It really isn't that hard, but you need an attorney to draw up some docs for you. A WHOF is really just substituting the seller for you so that you aren't stomaching the downside risk in the event the buyer defaults. You set everything up like you would with a subject-to purchase and wrap sale, but you just assign the contract to the buyer at closing in trade for $. Depending on the terms you agree to with the seller this may or may not be the right option.

The initial contract can be structured with a standard TREC contract with an option.

If you PM me I can put you in touch with our attorney in Austin that does these. There are also some good attorneys in DFW that some of the local RE folks here in Austin use.

Originally posted by Bryan Hancock

Can you tell us more about that deal Edward? It may be instructional for us to poke potential holes in the deal.

I'll tell you what I can without the file.
ARV 130k
Sale price 115k
Terms: no down, but we will pay all closing costs, 300 a month for 10 years,balloon of 79k at end of term
Special clause saying we wont pre pay (unless his wife passes, which releases us from the clause
Market rent 1200-1300, currently rented for 1275 with 7 months of a one year lease remaining.
Taxes 3200 per year, Insurance 900 I believe.
I don't have any more info on the expenses at the moment. I don't know the 50% rule. I do know that we expect to be able to sell at more than 115k 10 years down the road.

Oh, one other thing. The seller lives out of state, and his sister who was managing this property for him has moved away. He no longer desires to be a landlord.

Yes, property is free and clear. 1700 sq ft, 4 bedroom 2.5 bath in a decent part of Farmer's Branch. The only thing about it that has given me any pause is the fact that there are quite a few homes for sale in the area. I'm thinking that there are quite a few folks around here who have lost their jobs.