Liens in my way wholesale deal

11 Replies

My name is Garth I am a newbie wholesaler in the northern Illinois area. I have come across a property in my target area through my bandit sign marketing. The property is run down, needs a total rehab, and looks like a few squatters have been borrowing it. The owner hasn't been to the property in years and is just ready to sell as soon as possible. We agreed on a purchase price of 7k, but we haven't signed the contract yet. I am a bit hesitant because I recently found out there are 8 liens on the property totaling about 3k, also according to the county they owe 2k for unpaid taxes in 2010. I'm not sure if i can still make this deal happen. Should I come to the seller with a lower offer of 2k? Should I keep my offer the same and write the contract to state the liens will come out of their 7k? Or should I put the responsibility of the liens on the end buyer? I was planning on marketing this deal to my buyers for 13k, but these liens have my head spinning. This would be my 1st wholesale deal if I were to close. I could really use some advice from the bigger pocket community, I'm open to any and all suggestions. Thanks

@Ana N.  @Wendell De Guzman  can either of you answer?

I am not a wholesaler but I can imaging you would need to have a discussion with him and ask if he intended the $7k to cover the leins / taxes.  He can't sell the house with them so they need to be paid off

Thanks @Brianna Schmidt for the mention.

Garth,

1) renegotiate the deal - get it for $3K instead and mention the liens as leverage (mention $2K as starting point and then go no more than $3K)

2) once you have it under contract, get Power of Attorney from seller so you can negotiate with the lien holders in his behalf

3) negotiate with the lien holders (the 8 liens totaling $3K). See if you can make them agree to 1/4th of the lien amounts.

By this time, all the liens + your purchase price will be...

$3K (purchase)+ $750 (8 liens) + $2K (unpaid taxes) = $5,750

4) wholesale the deal for $12K and viola - you get a $6K wholesale fee

@Brianna Schmidt Thanks for your Assistance on this

How did you write the purchase agreement? Unless you specifically stated that you would net the seller a certain amount, the liens and past due taxes come out of his purchase price.  I'd get the contract into escrow and get the title report going.  That way both you and the seller will know what you are working with.  The seller may well have been aware of lien issue, but IMO it's best that the seller see and hear about the lien amounts from an official source (title report or escrow company) anyway.  I wouldn't rewrite the contract until you really know all the costs involved.

Wendell,

Thanks for the advice, your suggestions seem like they would have definitely worked out for me. Unfortunately, the person down at the county building called me about a hour to say he made a mistake yesterday. The seller actually still owes taxes from 2010,2011,2012 totaling $8800. Even with negotiating those liens down I dont see any more room on this deal. If you have any suggestions I would love to hear them. Thanks again!

@Garth Collins   So there are at least two lien issues?  Unpaid taxes totaling $8800, which probably must be paid in full.  And $3K in code compliance liens, which maybe could be discounted?  

Why not find out what your buyers would pay?  See if there is any room and then go back to the seller.

What's the status of the past due taxes?  Do you have lien certificates in IL?

@K. Marie Poe Yes, there are two lien issues with this property. According to our county clerks office, the property is scheduled for a tax sale in october if they havent been paid in full by this time. Thanks for the advice, I am going to reach out to my buyers in the area to see if i can create a large enough spread the make this worth while. Knowing the area that this one is in though its going to be a tight squeeze.

Yeah, this deal is dead. Just buy it at the tax auction.

Originally posted by @Wendell De Guzman :

Yeah, this deal is dead. Just buy it at the tax auction.

I'm curious how it works in IL.  How will buying it at tax auction reduce the purchase price.  The code compliance liens don't go away, do they?  Will the tax sale be a tax lien sale, or an actual tax deed sale?  Will the county reduce the minimum bid to less than the $8800 owed?

Sorry for the late reply, was out of town, although I think @Wendell De Guzman gave some great advice there!

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