Potential Screaming Deal... Not sure how to proceed.

38 Replies

So I'm new to REI. I have a relative who I overheard talking about a prior employees mother whose house was filled to the rafters with junk and the didn't live there anymore. I drove by the house and there is trash on the front porch and when I looked in the back yard trash and junk in the back yard as well. However.... house is probably got about $200,000 to $250,000 equity in it if it is in good condition so I could possibly get a great deal. I utilized list source, zillow, trulia, amortization-calc. and other methods to determine this. Its right next to a few schools, a park, and crime is low in the area. I asked if he had her phone number and he does and I'm trying to make sure my ducks are in a row before calling.

Benefits I planned to market(Let me know if there is more or if these are wrong):

  • Close on whatever date is best for her
  • I can worry about the repairs and hauling the trash
  • No Agent commission on closing

Here is what I don't know:

  • How to propose an offer
  • If she bites on the offer what to do next
  • Well pretty much everything else as far as actually acquiring the property. 

I'm sure there a lot more things as well I don't know but this is what is my current road block to calling this owner. 

Any help would be much appreciated!!!!Thanks!

The first things you need to know in order to determine your offer are the ARV and the rehab costs.

The first thing you need to do is find out if it's even for sale lol

Right, yeah I know that. I'm think ARV is $380,000 but I haven't called the woman yet to see if she is interested in selling as I'm trying to make sure that I have everything in line that I want to accomplish in the phone call down. But provided the conversation goes good.... i don't know where to go from there and I need to understand what the timeline in these type of situations...

Like:

Me: Hi there. I was told that you may be looking to sell your house but were concerned with its current state and getting it sale ready. Well, you dont have to do that. I am someone that will buy your house in as is condition provided we can agree on price. 

Her: Oh wonderful! You're my hero!

Me: Yes mam! Now I just would like to go look at the property to get an idea of what it will take on my end to get it cleaned up repaired and move in ready.

Her: Okay Monday meet me there.

Monday comes around and say its not in bad repair and I estimate $25,000 in repair, paint, junk removal.

I offer $230,000 she says okay. 

Then what? What is the type of agreements I need to get from an attorney or can I make myself. Thats the part I don't get. 

Be sure to use whichever BP calculator works for you on this property.  (brrrr, rental, fix and flip, etc.)  See what that tells you.  They work very well.

Contact the appropriate contractors and find out costs for removing the trash, rehabbing the place, etc.

Write up a contract using your state's approved RE contract and BE SURE to put in a good escape clause in it.  (such as subject to outcome of inspections and approval of your business partners and attorney) 

Your offer is based on about 70 to 75% of the after repaired value, minus repair costs.  Because there are some repair costs that cannot be determined at this point due to the hoarding, you probably have to assume the worst case.  

If she bites, go for it.  That's it, in a nutshell.

If she's a hoarder the more realistic outcome is she won't want to sell you the house. If she does she'll probably want to much and will be offended when you low-ball her. Or she'll have no idea the value but be cautious of you and likely not accept lol...

Does the house need to be rehabbed? That's the first thing to find out. So you'd probably want to view it. Then make an offer and negotiate it out. You can use a standard real estate contract you get at a stationary store or have an attorney draft one up for you. Then you need to find how to finance it. Do you have money to put down? If so, talk to a bank about getting a loan. If not, they you'll probably want to look for a private lender or partner on the deal.

Originally posted by @Brian Garrett :

The first things you need to know in order to determine your offer are the ARV and the rehab costs.

No that is certainly not the first thing you should do and is HORRIBLE ADVICE. I think it will be best to not listen to Brian Garrett.

Originally posted by @Nick Britton :
Originally posted by @Brian Garrett:

The first things you need to know in order to determine your offer are the ARV and the rehab costs.

No that is certainly not the first thing you should do and is HORRIBLE ADVICE. I think it will be best to not listen to Brian Garrett.

Really? That's horrible advice? LOL.

Please tell him how to analyze a deal without that information. I'll wait...

Someone is salty that I called out their fake social media following in another post I see.

Yeah so, I am trying to contact her so I can see:

  1.  Is she interested in selling
  2. See if I can gain access to property to walk it. (Should I bring a contractor with me... Inspector... )
  3. Find out what would be motivating factors that I can tailor my offer to.

Once I get that far I will update every one... 

My plane is hangered at aurora so I am there often.. happy to run by and take a look for you.

you don't need an attorney you can use a title co.

@Andrew Syrios   I have never bought a Oregon Hoarder house that did not need extensive remodel or torn down

I bought 5 of them last year and had to bull doze each and every one of them. 

Also the state is nutso on asbesto's and lead paint removal.. these are little gotchas if you have major work to do.

@Brian Garrett   I did not think your advice was off base.. not sure what that back and forth was about.. 

although Hoarder houses in Oregon are a special breed.. 

Another interesting thought. If she has any mental issues that could be a ghost later. Like if she has dementia or other cognitive impairment. If she’s a hoarder good chance she has some mental health problems. And if she signs a contract it could possibly be deemed elder abuse that we took advantage of her.

Also if family later on decides they want the house it can cause headaches. I’m in the same situation with a property I’ve been looking into. I might call a RE attorney to see what my options are

@Jay Hinrichs That's awesome. My wife use to work for Columbia Helicopters right there and we're not much further than all the antique shops down 99. If it is a bulldoze situation... how much room needs to be in the deal for it to make sense. 

@Gary F. Thats interesting is that a real issue. Have others ran into that problem? Good looking out though.

Is there a good place for a template if I need to mail this woman a letter asking to buy her house?

Originally posted by @Jay Krietzman :

@Jay Hinrichs That's awesome. My wife use to work for Columbia Helicopters right there and we're not much further than all the antique shops down 99. If it is a bulldoze situation... how much room needs to be in the deal for it to make sense. 

@Gary F. Thats interesting is that a real issue. Have others ran into that problem? Good looking out though.

we are mid field in the hanger condo's just south of the control tower...  happy to help if I can.  Hoarder houses are one of the few remaining type of properties in the N. Willamette valley that have margin light to medium fixers have tons of competition. 

Originally posted by @Gary F.:

Another interesting thought. If she has any mental issues that could be a ghost later. Like if she has dementia or other cognitive impairment. If she’s a hoarder good chance she has some mental health problems. And if she signs a contract it could possibly be deemed elder abuse that we took advantage of her.

Also if family later on decides they want the house it can cause headaches. I’m in the same situation with a property I’ve been looking into. I might call a RE attorney to see what my options are

ya know in my experience that just has not been the case in the Portland area.. just plain ole hoarders  I suspect they have some issue but mental capacity to contract is not one I have personally seen..  

However good point.. if one suspects that then you need to have them be represented by a lawyer preferably that takes all your responsibilities out of the transaction.

I had one that was not so much hoarder but  disabled people and children crowded into a home that was a horrible situation.. I made them lawyer up and we did the deal that way..  

I have had in my timber days very elderly that we also made lawyer up..    no one wants to take advantage of someone who is not of sound mind.

@Jay Krietzman  I can send you a template of a letter to send to her if you need. Although, if you have her number that is a MUCH better contact point. If you need some guidance on handling the cold call send me a PM we deal with these all the time.

Unfortunately it really sounds like you aren't ready to even begin this, too much you haven't thought through and you are assuming a lot.  Are you able to estimate rehab costs???  If this is a hoarder house, do you think you will even be able to see all the needed repairs?? Do you have financing available to purchase the property in as-is condition?

If you aren't able to estimate rehab costs and don't have financing or cash available you better hold off, you don't want her itching to sell when you aren't ready to buy.

Your best bet is to try and find someone with experience in the area to coach you through or split the deal with you. This should be a pretty simple transaction, you contact her to see if she is looking to sell.  You view the property and make her an offer, could be verbal but if you can agree to terms write it down and sign it.  Talk to a title company and show up with cash to close.  

@Jay Krietzman  Welcome to BP sir! 🤗

First thing first: Is there a motivation to sell

After you gauge their motivation level then you can move to the operationalizing the sale phase. 

Now to answer your questions: 

  1. How to propose an offer | Write a Letter of Intent [google it (this is not contractual)]. Send it to the seller (or relative)
  2. If she bites on the offer what to do next | Find an offer that works for both parties
  3. Well pretty much everything else as far as actually acquiring the property | Determine your real estate strategy [Wholesale the deal | Flip it | Rent it

Basically, these situations require someone who can come in and ADD VALUE 

2 ways to add value

  • Solve their problems | Low hanging fruit is, for instance, you can get a dumpster to clear out the house after you buy it, so they don't have to worry about that (people are already talking about the junk in the house)
  • Make them feel good | There is something called flow in real estate. Find ways to make them trust and that requires authenticity and really trying to help them not just close on a deal 

Hope this helps, Jay. Goodluck. Thanks! - Ola 

@Jay Krietzman  The most important thing you can do is pick up the phone and call today.  Stop overthinking it.  You're going to fumble on your first call.  That's ok.  The most important thing to do is call.  

I was in the exact same boat as you a couple years ago.  I'd get a potential lead, spend hours researching, finally call and fail miserably.  One thing that helped me finally close a deal was listening to Michael Quarle's live seller calls on his website.  I liked his phone work and wording when talking with leads.

Also I would take any help I could get from Jay Hinrichs.  You'd be lucky to have someone with his experience in your corner.  Good luck!

@Jay Krietzman I would consider getting the ball rolling, but maybe looking for a local person to help mentor along the way. @Jay Hinrichs would be amazing, but I'm sure that he's busy with big deals and may not have time to guide you along for a small slice of pie. Check locals in your area on BP, local REIA's or Meetups. Just ensure that whoever you are working with is really experienced and connected and not full of hot air, there are tons of overread tire kickers in this industry. Offer them a cut off of the back end with no skin in the game but time and reputation. Myself, I love working with people. I learn as much running people through deals as I do working the deals myself... and I don't mind making an easy $1-2k just putting pieces together and keeping it on a timeline. All of us had to start somewhere and most of us remember the hard knocks and the people we've met along the way that helped us out. Everyone finds RE Investing fascinating, but I promise you... it's not for the faint of heart. Build your network and your knowledge base and it will make a lot of things progress more easily and quickly.

@Jay Krietzman 1. get the owner's number 2. call the owner and find out if she would be willing to sell the house.  3.  If she would be willing to sale the house express to her how interested you are in purchasing the house as is.  4. View the house with your contractor or an experienced investor that has done multiple rehabs.  5. Calculate your cost, the value of the house after rehab, and your desired profit to come up with an offer.  6. Call the owner back and present to her your offer and if need be why you came up with the offer you made.

After she agrees to sell and you have determined repair costs, then agree verbally on a price.  Be sure she has the legal authority to sell the house.  Stop by a local title company and ask them to help you fill out the contract (which they should have).   Make  sure you have an option period or inspection period where you can renegotiate or walk away without losing your earnest money. Make sure you have a period of time to get loan approval that gives the option to back out if for some reason you do not get approved for the loan--without losing earnest money.  Get the loan completed.  Close. Do repairs.  Hire a realtor to sell it.

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