Purchasing a pre-forclosed property from a motivated seller

4 Replies

I am meeting with a motivated seller tomorrow evening who has missed "one or two mortgage payments" but is not yet technically in foreclosure. He owes 30K on the note and wants me to purchase the home from him for somewhere between 60K and 70K. I believe it's ARV is ~$80K. The property is located in my wholesaling "sweet spot" (No intention of any rehab due to the location.) I am inclined to offer him $35K for the following reasons:

1) If I have to wholesale it, I have been advised to offer an amount less than 50% of ARV (which means I must offer less than $40K)

2) My intention is to make a $5K wholesaling fee (which takes it down to my intended offer price, which also leaves him with $5K after his loan is paid off.

Is this a good strategy? Do I have to worry about anything if it is on the verge of foreclosure? Any comments regarding purchase and exit strategy would be HIGHLY APPRECIATED as this is my very first (potential) deal. Thanks!

John

you are on the right track here but I would adjust a little. For starters, if you dont buy the house, he will most likely go down in flames.  Start off by telling him that.  Something like "you realize that if we dont come to terms here, you credit will be destroyed and you wont be able to buy another house for like a decade, that and car and credit cars will get a LOT more expensive for you.  On a good note, I am here, and I do have a plan to save you from credit death"

then my offer looks a lot like 5k for moving money, paid after they get their crap our of my new house, and a subject-to takeover of his current payments.  Then I would turn about and sell the house at full retail for 10k down (or really any number over 5k) and monthly payments that are greater than my sub-to payments.  You should look to make 50k plus over this deal.  Dont shortchange yourself.

To your success

Josh

What would you do if you have competition there that will pay the guy a little bit more?

Originally posted by @John Baskin :

I am meeting with a motivated seller tomorrow evening who has missed "one or two mortgage payments" but is not yet technically in foreclosure. He owes 30K on the note and wants me to purchase the home from him for somewhere between 60K and 70K. I believe it's ARV is ~$80K. The property is located in my wholesaling "sweet spot" (No intention of any rehab due to the location.) I am inclined to offer him $35K for the following reasons:

1) If I have to wholesale it, I have been advised to offer an amount less than 50% of ARV (which means I must offer less than $40K)

2) My intention is to make a $5K wholesaling fee (which takes it down to my intended offer price, which also leaves him with $5K after his loan is paid off.

Is this a good strategy? Do I have to worry about anything if it is on the verge of foreclosure? Any comments regarding purchase and exit strategy would be HIGHLY APPRECIATED as this is my very first (potential) deal. Thanks!

 Just curious, what area is this property in?

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