How to help a home owner in pre-foreclosure? (Wholesaler)

Question

Hi Everyone, I am new to real estate investing and I am trying to understand the how a whole seller helps a home owner in pre-foreclosure.

So far it is my understanding that I identify a person in pre-foreclosure, and with their permission (I get the home owner to deed me the property, making me the owner?) I negotiate with the lender a discounted price for the remaining balance of the loan,once that figure is agreed upon, sell the property to the new buyer. I am kinda confused on what is the best way for a wholesaler to tie up the property to be able to talk to the lender and wholesale the property to a buyer. Can someone please clear this process up for me.

Thanks

Dave Savage · Answer

Two quick things to get you started:

If the owner is in pre-foreclosure there are two ways to help them:

1.  They may have equity in the house, but are still facing foreclosure.  In that case you can get a contract on the house and wholesale it normally as long as you ensure the foreclosure process won't be completed by the time your end buyer closes on it.  (Note: make sure you know what the property tax situation is by doing research before you start offering it out to potential buyers, also ask for any other liens from the owner, before the title check happens)

2. If they don't have equity you will have to work a short sale.  Typically these aren't assignable, but you might be able to bring in a partner who wants to rehab it and you have them put in the offer to the bank, and you get paid on the backend on the sale.  In this case the easiest way to work is to find a realtor in your area who specializes in short sales and you can have them work with the bank to get the offer in.  Usually you won't get far as an individual investor with the bank.

Mary B. · Answer

@Liz Stewart Another option: leaseback, where you buy it and then lease it back to the defaulted owner. You can give them an option to buy a few years down the line after they get their finances in order, if you so choose. That option can be presented in the current lease or a future lease. My coin.

Kudos,

Mary

Eric M. · Answer

These might also be opportunities for "subject-to" deals, where you find an investor willing to bring the mortgage current, pay a certain amount of equity, and take title to the property but make the mortgage payments with the home owner's name still on mortgage. There are a variety of issues with this route, namely, "due on sale" clauses, and you'd probably have to just arrange for a fee from the buyer for your time, but this is certainly another option,

Jay Hinrichs · Answer

@Samantha Lotti  in Oregon it is illegal to work with anyone in foreclosure unless your a licensed foreclosure consultant.. Look up the regs in the Oregon statutes.

Omid A. · Answer

The ideal situation would be one where the seller has enough equity for you to come in with a cash offer and have her walk away with some as well. However, if there is no equity then a short sale would be your best option. It's a lengthy process (generally 3-4 mo in Oregon) but it can definitely be done. You will want an experienced short sale negotiator who specializes in these types of deals. If the house needs a lot of work then your probability of getting the SS approved at a price you can make money on increases. The reason being that the bank will require a BPO agent or an appraiser go out to the house and determine what they believe the value is, if that value comes in at your strike price then you've got yourself a deal. If, however, it doesn't come in at your strike price then you can negotiate using whatever leverage you have...like repair bids from 3 different contractors.

Wayne Brooks · Answer

This, I'm sure will be a well received response.

As for the best way to help someone in preforeclosure, as a "typical" wholesaler?

Stay away from them, especially if they are upside down.

Samantha Lotti · Answer

@Wayne Brooks That is good advice also. I have read/heard both sides of dealing with pre-foreclosures. "Don't touch them" and "Oh... I deal with them all the time", so with that said, I will study them more before I jump in. They do interest me and like I said, I will do my homework.

Thanks

Samantha Lotti · Answer

@Eric M. @Mary B.

Great advice! Thanks for sharing. So many options in real estate and that is awesome!

Samantha Lotti · Answer

@Dave Savage Very interesting stuff you put. You explained it in very simple terms. That's awesome.

I have been wonder how pre-foreclosures and short sales work, and how they work in with wholesaling.  This definitely gives me an idea and something to work from.

If you have any other info to add to this, please do. I am very interested in both pre-foreclosures and short sales.

Thanks again!

Andre Lindsey · Answer

How do you get the financing for a subject to deal on a pre foreclosure deal? Are hard money lenders a good option?

How to help a home owner in pre-foreclosure? (Wholesaler)

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