Great potential lead from our Direct Mail Campaign but there is a problem!

26 Replies

We recently received a call from our direct mail campaign.  Seller is motivated and owns the property free and clear.  The property is 3/2 1500sqft. home in a A-B class area built in 1972.  The property is worth 170-190k.  The owner is already mentioned he would like to get around 100k but we feel we could acquire it for around 90k.  

Now here lies the issue.  He acquired the property from his brother by quit claim.  The problem is the brother's daughter (and immediate family) is living in the house.  They were paying rent to their father when he was alive and owned the house but when he passed they stopped paying once the uncle took over.  There is no lease agreement, it was verbal.  The owner wants nothing to do with evicting the family members.

The owner says he had other investors interested but he has not heard back from them.  He went to the house with police to see it and they would not let him in only the police officers.  The officers walked through and said it seemed it was in good shape except the dish washer was missing?.? 

If we acquire this property, we would have to evict the tenants.  Would this be a big issue?  The plus side is the property can be acquired for a great price with a ton of room to profit.

What would you do?

What I would do is sit down with the tenants and explain to them in a very polite way that you will be buying the home and once that happens there are two options they will have. The first option is I will give you X days to move out and X amount of cash to take with you. The second option would be for me to take you to court, have the sheriff evict you and you and I would not want that because court fees are going to cost more than it would to simply move out and in the end the you guys don't have a lease agreement that would help your case.. so take this cash and I'll give you X amount of days to move out. Be firm and polite And actually follow through if they choose the second option. 

@Jawad Ihmoud    Would you sit down with the tenants before or after getting property under contract?  What if they are not willing to speak to me.  They will not speak to the current owner and he is a relative.

Originally posted by @Ryan Billingsley :

@Jawad Ihmoud    Would you sit down with the tenants before or after getting property under contract?  What if they are not willing to speak to me.  They will not speak to the current owner and he is a relative.

 Ryan you know how money seperates families all the time unfortunately...

If you approach the tenants directly after I have the contract signed and find out how you can solve their problem while securing the property. Being able to converse with the tenants and create a WIN-WIN-WIN is where the money is MADE on this deal! This would also be the reason why you can push for the $90k price as well... 

You might want to talk to a lawyer in the process and make sure some ancient "Homestead Law" doesn't exist on the books and make sure you can get clear title. I am not familiar with Missori laws. But that would be my starting point.

@Tyron McDaniel    I agree that we have a bargaining tool by evicting the tenants.  

@Ronnie Wilson    That is my concern.  I do not want to get involved in a long drawn out scenario that results in wasted time and money.  I want to have a clear plan of action.

Don't complicated the issue, guys. 

@Ryan Billingsley  You are negotiating to buy an asset at a bargain price in return for dealing with a problem the seller prefers not to solve. It's trading equity in return for solving a problem. 

The occupant us your best leverage here. Deal with her later.

You agree to buy the property and, after closing, attempt to negotiate with holdover tenant. If she doesn't vacate, you've budgeted for an eviction attorney to handle the who thing, from noticing to court, if required. 

something great you can also do is tell the owner that it's going to be a lot of trouble getting them out and If it goes to court I have to spend this much money. I'll sign an option to buy contract for 80,000. Low ball him and show him all the potential problems you might be facing. I assure you that a guy like him just wants to get rid of the house because it seems like it's a pain and he's making no money off of his tenants. Tell him 80,000 and use those negotiation techniques

@Rick H.   @Jawad Ihmoud    Great advice!  We are planning to meet the seller tonight.  He is motivated and just wants to get paid.  He don't know where to begin when it comes to the eviction process.  He is retired and has zero interest in keeping the property.

sound's great,  I'm curious to know what happens. Keep us updated. Low ball him at 70,000 to 80,000 if you have too. It seems like an easy deal from what you're telling us. One more piece of advice is to go to your local sheriff and ask him what your options would be when it comes time to evict.

@Jawad Ihmoud    My partner is the one that has been in contact with him.  From the sound of it, the seller has been already speaking with other investors and negotiated prices.  But they have dropped the ball and have not contacted him back.  So now is our chance to take action and get it under contract.

Maybe there is family troubles.  They might be ok paying rent to you.  Just because they are feuding with family doesn't mean they are bad people.  You might be able to start collecting rent and then flip it as a turnkey investment to someone.

@Jay Kiehn    Thanks for giving a different perspective.  Our plan for the property would be to flip it so letting the tenants stay would not be an option.  The tenants were paying 300 per month rent to their father before they stopped paying.  The market rent for the property would be around 1200.  It is in a great school district and in an active area for recent sales. We project it selling after rehab for 190k.  The house looks like it is in good shape from the outside.  If we acquire it for 90k and and worst case scenario invest 50k in rehab and holding cost, we still stand to make a substantial return flipping it.

Sounds like possiblity for a  monster head ache. Somewhere on BP there is a post that is over three years old and running about dealing with a tennant that didn't have a lease and was there when the property was bought.

On the other hand, the tennant might happily take a check and leave, I would definitely wannt a solid agreement before closing.

you will be helping the seller by taking possession of his headache, but at what cost. budget for eviction and vacancy, lay it out to the seller, of course demonstrating how painful an endeavor it will be for you to deal with 

UPDATE:

Last night we met with the owner.  We learned that he has been involved in a lawsuit with the tenants (niece and her husband) for many years.  The lawsuit is for another property that the niece and husband are claiming interest to, which is a 4 family property that their father use to own.  (Their father is currently in a nursing home and his power of attorney is his brother who owns the house we are interested in).  The owner of the house was also fighting to evict the tenants and his lawyer combined the two cases.  Since then he is working to get a new lawyer to separate the cases.  The owner is tired of dealing with the 2 tenants.  The tenants have been unemployed for many years and have not paid rent since 2012.  Supposedly the tenants are forging signatures and creating fake documents that are giving them rights to the 4 family.  The owner is 80 years old and just wants the situation to come to an end.  We agreed to terms on the house and put it under contract with many outs and a 120 day closing deadline.  We decided that we would work with him to help evict the tenants.  We negotiated that we would buy the house pending the eviction of the tenants.  The tenants have zero claim to the house and we plan to do some research to see what options we have.  One idea was to go to the property with a police officer and explain we have the property under contract to purchase, and offer cash for keys. 

@Ryan Billingsley  Sounds like a messy situation.  Cash for keys might be a great way to get them to move out.  Especially if they are in lawsuits already.  They hopefully wont want to be bothered with more.

@Jay Kiehn    Yes it is a mess.  But on the bright side, we are problem solvers, and by solving the problem for the owner, we are set to make a great profit!  Persistence breaks resistance!  

Originally posted by @Keith Kessler :

Sounds like possiblity for a  monster head ache. Somewhere on BP there is a post that is over three years old and running about dealing with a tennant that didn't have a lease and was there when the property was bought.

On the other hand, the tennant might happily take a check and leave, I would definitely wannt a solid agreement before closing.

 The Occupants from Hell thread is about California.  Missouri should be far easier. I'd take Rick Harmon's advice and just buy the house.  Then cash for keys or evict.  

@Jon Klaus   We like a challenge.  Most of the major systems have been updated within the past 5 years.  The outside of the house looks very well kept!  If the inside is anything like the outside, this could end up being a gold mine!  

Any update? Sorry for the bump, but it's an interesting situation that I'd like to learn from. @Ryan Billingsley

@Joe Kooner   We were able to get this under contract.  But we came to find out that he was not really the owner and he was in a lawsuit with the owners children.  We spoke with his attorney and found out he had zero rights to the house so the contract was null and void.  He would call us and ask when we are going to pay him.  He was trying to sell a house he didn't own!  People are crazy!

You want one to first figure out if there are any encumbrances on the house. Considering that the seller was conveyed the property by a Quit Claim Deed. That means that the previous owner did not promise anything to the new seller. Therefore, I would make sure the title is clear first, then worry about the tenants. 

This is a tenancy in common, and once you become the owner, you can terminate it with a monthly notice. 

@Ryan Billingsley Wow! That's for sure a learning experience! How do you prepare for this for next time? Do you have some sort of verification process set up to make sure the seller of the home ACTUALLY owns the home?

@Joe Kooner We were very aggressive on that one because the house was a steal!  Too good to be true..  In the future we will do our due diligence. 

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