How to offer a deal to owner before the auction?

Question

As a newbie to this REI, I am looking for a help here...

I am looking into a deal which has 70% equity. Property is scheduled for auction in two months. I would like to know, how can I work with buyer and lender? Will it be considered as a short sale or preforclosure and What should I be aware of while working with them?

Seth.

Eric Foster · Answer

I think we were saying the same thing basically…

Seth said he already felt there was 70% equity, but I questioned why he felt that way...

What I was saying was basically what you said... I was saying to not waste a bunch of time figuring all that other stuff out right now... After all, you can’t buy any property if the seller won’t sell.

I was suggesting (since he felt there was 70% equity) the best thing to do now was to get a conversation going with the owner.

Take care!

Ben Larson · Answer

Eric gave you some very good advice.  The only part I don't fully agree with is that you shouldn't worry about what to offer, or how to evaluate the property.  You should worry about these things too, and want to make sure it's worth your time.  If there isn't any real equity in the deal you're going to have to do a short sale to create equity.  If you don't know how or don't want to do short sales, then you know right away to move on to the next deal.  If you're comfortable handling this deal in any number of ways, then yes, the most important first part is convincing the homeowner they should work with you, getting to the bottom of what their motivation is, and how you can help them the best.

Eric Foster · Answer

Easy there... One step at a time!

First, you need to approach the owners... who knows what is really going on. Everything else can wait... so forget about everything else for now!

i.e. doesn’t matter "what to offer them", "how to valuate the property", "how to search if there are other loans or not" etc... None of that stuff matters right now unless first they will talk to you, and "if" they want to sell.

Step #1 is Fact finding with the owner... 
Call them, send them a letter, knock on the door... somehow make contact with them. If they won’t talk to you, you will not be able to buy from them.

It may go something like this... Hi Bill, thanks for calling... (I like to say something open-ended like) "So tell me a little about what's going on"... This lets them choose what to talk about, with no pressure and it opens the door for them to “tell you the story”... Write it all down... and only ask questions when they are done talking... let them talk!

Make sure you get the info on "who they owe, and how much"...

That is a great place to start.

Also, I like to set an appointment to meet with them on the FIRST call. That way they feel something “is in the works” and they quit calling other investors. If they are anxious, I go NOW... otherwise tomorrow is best. That gives you time to do other fact finding on your own...

Go get em!

Eric Foster · Answer

Hi Seth,

Why do you say it has 70% equity? Have you viewed a title report to see if there are any other liens besides the one that is in foreclosure? I am asking because not too often do you see a person with 70% equity in foreclosure.

While the owner is in foreclosure, you would work directly with the home owner to buy the property. The lender is not involved... unless you are asking them to take less than what they are owned.

Talk to the owner... And yes, it is considered a “pre-foreclosure”

Take care.

Ash Seth · Answer

Eric and Michael,

Thank you very much for your help and making it clear to me.

At this time I am not sure yet if there are other loans involved or not as I haven't done the enough homework for that property. Being a newbie not sure what should be the steps to:

how to approach the owners,
what to offer them (for example: for a 300k property- if they have 200k already in equity, on average what should offer to them.)
how to valuate the property (actual + repairs), 
how to search if there are other loans or not,
how to take over the loan.
and anything else I must need to take in to account.

Since it will be the the first time for me so not sure how you advise me to move forward.

Thanks.
Seth

Account Closed · Answer

Hello Seth...

Yes communicate with the seller but make sure you are not coming across as "NEW". They are typically bombarded by Investors, Lenders and real estate agents so you have to come across powerful.

Let me know how its works out.

Michael Quarles