I am in the process of looking to buy a pre-foreclosure. I am trying to understand the fundamentals of subject to. If the owner has no equity, then what would be a fair offer? However, if they do have a good amount of equity, say 20 or 30% then what would a good offer be? I am meeting with the owner to understand his situation, but I want to make sure that I have a basic understanding walking in what I am in for. Any and all help would be appreciated.

Originally posted by @Tammer Fakhry :

I am in the process of looking to buy a pre-foreclosure. I am trying to understand the fundamentals of subject to. If the owner has no equity, then what would be a fair offer? However, if they do have a good amount of equity, say 20 or 30% then what would a good offer be? I am meeting with the owner to understand his situation, but I want to make sure that I have a basic understanding walking in what I am in for. Any and all help would be appreciated.

What is the property worth (ARV) and what is the balance on the mortgage?

The ARV on the property is $245 - $250K. The current owner owes $160K outstanding on his mortgage and is behind 4 payments. From my estimates, I see that there is $75K needed to get the property to the $245 - $250K level. I would like to walk in with $25K in equity on the property, so what would be a fair offer to make to the owner? The owner is out of state already and is looking to sell the property, and thinks he can get $245K for it, which there is no way with the condition it's in. Any help with what a fair offer would be is appreciated. My intention is to go in, buy, fix it up and get it to the $245 mark.

Originally posted by @Tammer Fakhry :

...The current owner owes $160K outstanding on his mortgage and is behind 4 payments... The owner is out of state already and is looking to sell the property...

Its sounds like you need to talk to the lender. The note holder is out of town, missed last 4 payments, they should have an idea where things may be heading.

Agreed, we would talk to the bank to see what is going on, but what would a fair price be to offer? Should I just offer to assume the mortgage and not give anything to the existing owner, or would it be better to offer them something so they are not losing all of their equity as well as ruining their credit?

Thanks,

Tammer

Originally posted by @Tammer Fakhry :

... or would it be better to offer them something so they are not losing all of their equity as well as ruining their credit?...

I am trying not to get nervous by this statement. You aren't in the credit repair business and if this is a flip deal, most investors typically deduce the 30% of ARV + repair cost from the ARV to get an offer amount. Try not to let 'feelings' determine your offer.