In still looking for my first deal, I've come across a pre-foreclosure with the sheriff's auction coming up in just over a week. I stopped by the house today and discovered that the owner (wife) was still living in the house. My partner and I knocked on the door and she answered. We went about asking her if she was interested in selling her home. We didn't mention anything about it being in foreclosure; we talked about looking at it for ourselves to live in. She immediately said yes and when asking what she wanted for it she said to come in and take a look at it first and see what we think, that it needs a lot of work. Major smells and dirty too. The foreclosure notice says that the balance owed is $65,533 and the tax assessment is $127,800 which is think is high for the condition this house is in. It was last sold for $103,000 in 2001. Other homes in the the area are priced around $115-$130,000. She did make a comment that they were wanting to get around $75-80,000 which I think is too high given the repairs needed. I'm estimating around $15,000 or so. I wanted to offer her something around $67,500 so that it would cover the outstanding balance and give them a little in their pocket and I would pay the closing costs. Is that a fair offer? I don't want to offend the owner but I want to make sure I get a deal too given the amount of work involved. I want to get this house under contract before the sheriff's auction and it will be a cash deal but my question is did I make a mistake in making her think I wanted it for myself? My thought was if I approached her as an investor she wouldn't be so willing to talk to us about it but I'm wondering if that will come back to bite me in some way. I have formed an LLC for flipping properties that I would normally put the house in but if I told her it was a personal residence I can't really put the company name on it. Can it be transferred by quit claim deed after purchasing it? Thanks for your help.
IMHO dishonesty is NEVER a good practice. If you didn't intend to live in the house you should not have implied you did.
Have you checked title to see if the foreclosing lien is the only one? Does that balance owed include all the fees incurred so far?
An option may be to just buy the house at the sale. You may have to move really quickly at this point to stop the foreclosure.
Jon Holdman, Flying Phoenix LLC
I agree with Jon, always be honest and buying next week at auction may be the best way to secure this property, due a title search!
You need a title search, you need the actual payoff (not whatever amount is shown on the sale notice), actual comps (not tax assessment info). And you need to find out what laws apply when working with sellers in foreclosure in WI. If there are laws in CA about it, IMO the good people of WI will have even stricter laws about protecting consumers in foreclosure.
Do not tell a seller you are planning to live in the house when you are not. That's the kind of thing that DAs go after: investors misrepresenting themselves and their intentions to consumers. Not trying to frighten you, just trying to make you aware of the dangers of that kind of white lie. Plus it's not necessary to misrepresent your intentions.
Do you have the cash to reinstate and/or payoff the loan? Otherwise you may be wasting time going into contract if you cannot stop the sale in time.
I can go back to her and tell her that I won't be living in the property, that's not a problem. But where do I find the laws that relate to working with seller's in a foreclosure so I know exactly what the laws are? I'm not sure where to look for that. I do have the cash available to buy this house right away.
Just a thought.
K is right to bring up bringing the note current if you have the proper agreements and knowledge to secure your inertests.It's a subject to Deal. It's propbably the cheapest way to control the property in this situation considering the price range. Also it may allow you to pay a liittle more by saving on the financing. Thereby helping them and yourself out at the same time. Not to mention releiving your conscience. lol Beware the DOS (Due on sale clause) but in my experience if the bank getting their money that clause is almost never exercised.
As far as misrepresentation to the seller it's never a good idea. It's only headaches.
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