How to determine the right way to approach a good deal and how to recognize it?

5 Replies

I havve the opportunity to purchase a property. The MV is approx. 180K the owner will accept 140K. The remaining payoff bal. is 110K. The prop. is in preforeclosure. The owner is motivated by gettin a divorce, and is building another house. However, he is still making half payments which keeps the servicer from completing foreclosure. He wants to sell though. The prop. is listed with realtor for 159K, but the man can sell it himself if need be, as that is the understanding. The payments are around 750/mo. The owner wants 30K dn. and will carry the bal. for up to 1 yr. and pay the taxes monthly and 750 will go to mortgage. Is this a good deal? I need the confidence to know that I can either rent it or sell it to someone for more than the payments are in order to make anything. As I am really new to this, can someone give me some good advice on how to structure this deal if it is good. Thanks Steven

First, you need to look up the definition of market value on an appraisal site, not some guru site.

After you understand what "market value" is, this listed property as a pre-foreclosure, even if some payments are being made is a red flag. There are federal laws relating to pre-foreclosures and penalties for those who advise, attempt to help and owner or cause delays or interferes with the process. That means wholesalers need to stay away as they usually are not actually buying and paying off the loan.

The owner will not be able to get permission to seller finance, 97% sure, the lender/servicer already has that property in their crosshairs.

I suspect the agent listed the property at or perhaps slightly below its expect market value, just thinking an agent will have more experience in valuations than someone new to RE.

If you need financing, get that lined up, then make an offer subject to financing and go from there. I have no idea how you know what an owner will take with a listed property, I won't ask, but don't circumvent the agent, not good practice. Good luck :)   

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

This Could be a good deal but it would take more detailed analysis to know for sure. 

The cost to buy, hold and resell a property can easily be 10% but more likely 15% and can be as much as 20%. So to buy this to simply resell it at your projected "Market value" of $180K could be tight. More importantly though if it is really worth $180K why hasn't already sold? My guess is it is not worth $180..It might be worth that with repairs and upgrades but then the $140K price simply does not work at all.

My guess is with a $750 payment it will not work as a rental either.

I suggest you check out the Ultimate Free Beginners Guide

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

If he has a mortgage be VERY careful about doing owner financing. "Most" mortgages forbid this, so he is technically in violation of his mortgage. 

Originally posted by @Bill G.:

First, you need to look up the definition of market value on an appraisal site, not some guru site.

After you understand what "market value" is, this listed property as a pre-foreclosure, even if some payments are being made is a red flag. There are federal laws relating to pre-foreclosures and penalties for those who advise, attempt to help and owner or cause delays or interferes with the process. That means wholesalers need to stay away as they usually are not actually buying and paying off the loan.

The owner will not be able to get permission to seller finance, 97% sure, the lender/servicer already has that property in their crosshairs.

I suspect the agent listed the property at or perhaps slightly below its expect market value, just thinking an agent will have more experience in valuations than someone new to RE.

If you need financing, get that lined up, then make an offer subject to financing and go from there. I have no idea how you know what an owner will take with a listed property, I won't ask, but don't circumvent the agent, not good practice. Good luck :)   

Bill,

I agree that circumventing the agent is not a good idea. However, if the property is not under an exclusive right to sell contract then what would actually happen if the seller sold the property behind the agent's back other than the buyer/seller getting black listed by most agents?

Seller would most likely be paying a commission, you get dinged on your reputation with Realtors, there is a reason people list a house, they might chase your off and say see my agent! A newbie going to a listing agent isn't a good idea, that's all been covered on BP. Basically, there is no up side unless you know how to use a listing agent as a buyer, totally different approach for a buyer. :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

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