Real Estate Investor · Charlotte, NC · Member since 2015 · 29 posts · 15 votes
Hey BP fam,
Excuse my noviceness but I would love some of you folks that have more legwork to help me decide if this is a deal or a waste of time.
Call from a direct mail
1800 sq 4/2.5 bd/bth - $120k - $130k - Sold comps and Seller says he owes about $120k with a mortgage of $1250/Mo. Its in good condition well kept 10-15k repairs.
Any advice or help would be so appreciative.
If I don't have anything here I understand.
Seller is very motivated and I would like to help and give him great service.
Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
11y
I never understood this aspect of wholesaling. This is a common question on bp.. "I found someone wanting to sell a house!!! They want full retail for it?? What do I do??? Someone wanting to sell doesn't equal a deal. Especially a wholesale deal.
There are thousands of homes listed for sale on the Mls for retail pricing. I'm sure of those thousands probably 50% have a considerable amount of equity. Of the 50% probably 10% are very motivated to sale and would give up said equity for a quick sale.
So the question is why devote a considerable amount of time and energy bothering with a deal like this?
My advice would be build a relationship with a local realtor. Send these retail sellers to the agent and hopefully he/she can help them out and squeak in a commission on the deal. In return hopefully said agent will alert you when a real deal comes along.
REALTOR® · Bastrop, TX · Member since 2013 · 324 posts · 191 votes
11y
How long has he been in the property?
Only a few different things can result in that situation. He overpaid, market is in decline, comps are wrong, or he just bought it within the last 12 months.
Real Estate Investor · Athens, GA · Member since 2015 · 44 posts · 20 votes
11y
What can it rent for? You could buy it sub-2 and lease option it to a new buyer (if it will rent for more than 1250 plus a little for profit). What terms are the original mortgage? Negotiate a short sale if he cant afford the realtor fees and needs out. Good luck.
Sylmar, CA · Member since 2015 · 21 posts · 12 votes
11y
You have to remember that you are running a business and that you dont work for free. The deal has to make sense for parties involved. If the seller needs to sell at market value for the deal to work for them, than the best help you can give the seller is point them in the direction of a good realestae agent.
Northern, CA · Member since 2014 · 674 posts · 444 votes
11y
My thought was lease option until you mentioned the 10-15k repairs. Still may be the best option, ask @Brian Gibbons or John Jackson. You could maybe do a sub to if the rent can cover the mortgage and let the guy walk, he doesn't have much to lose in this situation if he is ready to move on. I'm a rookie so take my advice for what it's worth, which is not much!
Real Estate Investor · Charlotte, NC · Member since 2015 · 29 posts · 15 votes
11y
thanks so far guys. I did leave out some things that may help. Forgive me
House is 1989.
First owner. bought in 1990, should of been paid off, seller says he has two loans total about 120k. Hope he is lying but the older guy (64) seemed truthful. He paying $1250 a month. I apologize again for looking at Zillow but Redfin has sold comps at about $140 3/2 which this is 4/2.5 -this where Mls access would be more helpful probably.
Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
11y
I never understood this aspect of wholesaling. This is a common question on bp.. "I found someone wanting to sell a house!!! They want full retail for it?? What do I do??? Someone wanting to sell doesn't equal a deal. Especially a wholesale deal.
There are thousands of homes listed for sale on the Mls for retail pricing. I'm sure of those thousands probably 50% have a considerable amount of equity. Of the 50% probably 10% are very motivated to sale and would give up said equity for a quick sale.
So the question is why devote a considerable amount of time and energy bothering with a deal like this?
My advice would be build a relationship with a local realtor. Send these retail sellers to the agent and hopefully he/she can help them out and squeak in a commission on the deal. In return hopefully said agent will alert you when a real deal comes along.
Real Estate Investor · Charlotte, NC · Member since 2015 · 29 posts · 15 votes
11y
seller has agreed to move on if someone paid the loan off and is open to any Rent/Lease options like someone said - if it makes sense.
Looking from the outside its in pretty decent condition. That gives me a feeling that the inside isnt that bad, I actually came up with about $10-15k repairs, even though seller says in his words- no repairs needed.
Didn't want to set up a meeting unless I knew I can help.
Sorry haven't been too familiatized with the Sub to Concept or lease options but I guess I will be up all night.
Specialist · St. Charles, IL · Member since 2015 · 33 posts · 3 votes
11y
Make sure the Comps are similar to the asset at hand and make sure the sold comps are 30-90 day old and that they fixed up comps and not distressed assets that need repair.
Real Estate Investor · Charlotte, NC · Member since 2015 · 29 posts · 15 votes
11y
Thats funny Ed thanks for the chuckle. I guess I may be barking up the wrong tree. But telling by my negotiating skills, and his motivation. He agreed with every option I gave him. I did ask him if he would take what he owes or the idea of taking over his pymts with nothing in his pocket. Which he Happily agreed to as well. So I already know he may be that motivated to take a loss, instead of paying a realtor and have his business out to the public. Which some sellers in my line of business choose to do. I'm confused how this can help the Agent more than me, I mean we all are trying to make a profit.
I am just looking at all my options and soaking up all that I can learn.
Thanks for the all the eye opener suggestions. Trust I'm soaking it all up
Real Estate Investor · Charlotte, NC · Member since 2015 · 29 posts · 15 votes
11y
Thanks Leon,
That's so true. Since this is the first night I recieved the lead.It looks like I have some more fishing as in actually looking face to face with some of the property Comps. But then again if he is that motivated I guess I just need to structure a deal that makes sense for everybody. That's where I'm at right now.
Real Estate Investor · Lake Forest, CA · Member since 2015 · 17 posts · 8 votes
11y
@Ed L. has great advise! No reason to move forward on a deal that's not really a deal. Your time is an opportunity cost, and offering this "deal in disguise" to a realtor builds a bridge for prosperous deals in the future, worthy of spending time on.
Real Estate Investor · Charlotte, NC · Member since 2015 · 29 posts · 15 votes
11y
Thanks Jason,
I agree 100% with you and Ed. I actually was humored that I didn't want to see things clearly due to hearing sellers problems. But thanks to Ed, I was snapped back into reality.
Research showed it can only rent for $1000 a month. He has to pay $1250
I don't see anything happening here.
Thanks again for everyone's help and the Reality check.
Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
11y
@Geoffrey F. I love these situations and will buy from these sellers all day long. But NOT with that payment. Even assuming the $1250 is PITI it's still too high to stay in the middle.
Like @Brian Gibbons said, your only option here is to do a lease option assignment. You should be able to assign it for $3-$5k, but I believe you will have a hard time moving it with that payment. You'll have to decide if it's worth it for you to try.
If you have any interest in doing these types of deals. I'll tell you that I would be looking for a PITI of about $800-$900/month to make that mortgage/price work. I would expect to make roughly $150-$200/month cash flow.
Thanks for the good advice. I am hoping seller isn't being honest about the $1250 payment. Maybe he was trying to use that as a negotiating price point or he just made too many refi's and loans against the house. Wish I can find out this info
Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
11y
@Geoffrey F. The payment would be an odd thing to lie about but I suppose it could happen. Personally I take everything at face value at this point and if the seller doesn't give me numbers I can work with I wish them luck. All of that info can be verified once you have the property under contract.
Besides, if someone is going to lie to you upfront you might want to think twice about being in a long-term deal with them.
Thanks for the advice. I will give a call back to confirm more info on the situation and take it from there. Haven't yet done any deals on Sub2 or seller financing yet, thought this could be my first along with gaining experience on the process.
It may be a dead deal but this situation forced me to think out of the box, I feel like I graduated mentally when it comes to RE.
I must say y'all stepped up to the plate and helped this newbie understand Sub2's and Lease option agreement's. I look forward to researching thru Bp forums and pod's to learn more.
Feel free to continue to give advice to some of us out here trying to make a dollar out of 15 cents.
I appreciate the comments and wish you all much success.
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
A Seller Contribution Solution
"Mr Seller, here is a solution to your no equity house problem.
"First, you can rent it, ask for fair market rent and if there is a negative of say $300 a month, you feed that, pay that. And you pay for a property manager of 8 - 10% of monthly rent.
Second, you allow me to get a "lease 2 own tenant". Lease 2 Own tenants pay the same rent, but you generally do not need a property manager. So you save the property manager expense. You still contribute to the deal, at $300 a month.
Also I get the tenant to pay for a FICO Mortgage Coach to get a mortgage approved.
The Tenant pays me a fee for the deal. You pay nothing.
Here is what you need to get your head around, 3 possible solutions: renting it, Lease 2 Own, or a short sale, those are your options.
Actually there is a 4th: you can list it with an agent, pay 10-15% percent to sell it, with commissions, closing costs, holding costs for a vacant house, and sellers concessions, but you probably do not want to do that.
@Doug P. what do you think of a Seller contributing?
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
I agree with @Brian Gibbons. Nice script btw! This seller needs to contribute to get out of this. He has obviously cashout re-fi'd at least once and needs to remember that. If he can't or won't contribute to making that ridiculous payment monthly, he needs to help satisfy the 2nd mortgage. Get solid figures on the mortgage(s) and who they are with. Is the 2nd held by a bank or private party @Geoffrey F. ? May have to stop making that payment to soften them up. May have to fold on this deal and move on. Not much meat at the end of the day but I appreciate your willingness to help!
I don't know if I learn the seller contribution script from Ron LeGrand but you got to remember that second mortgages are generally "debt consolidation on credit cards or taking a cruise money"
It's important that the seller knows that the money in the second mortgage is got nothing to do with improving the house, it's got to do with improving their life with fun money.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
@Brian Gibbonsexactly! Funny how short seller's memories are about how much money they pulled out of their house and blew on this or that. My script is not as nice as yours. It's more like, "Past choices got you here. This is a symptom of your compuction to spend money and use your house as an atm and backstop. You can not out-earn your stupidity. Do you want my help or not?" Or something to that effect!
Lol. Y'all all right. I found out he had two refi's, also I passed by the house and new cars are outside. Which this is showing indicators of someone spending up a lot of money. sounds like he put himself back to where he started 20 years ago when he bought it for $125k. So sad
But I will use the loss approach and see where it goes. It does look rentable as is.
@Brian Gibbonsexactly! Funny how short seller's memories are about how much money they pulled out of their house and blew on this or that. My script is not as nice as yours. It's more like, "Past choices got you here. This is a symptom of your compuction to spend money and use your house as an atm and backstop. You can not out-earn your stupidity. Do you want my help or not?" Or something to that effect!
Geez Steve that's pretty brutal! :)
My issue with seller contributions is that when the pain is released that you get a lease to own tenant in there and the sellers think they're overly entitled, that they don't have to contribute anymore, so I worry about the seller contribution deal falling apart on the poor tenant buyer.
I might say to the seller something like,
"Now Mr. seller my reputation in the community is very strong because I help seller sell on terms and solve problems and also help buyers buy on terms and buy the house.
Once you leave this house you need to make a $300 a month payment every month.
We need to put together an automatic withdrawal from your checking account to go directly to the bank to pay the PITI.
And we can put another automatic withdrawal from tenant to the bank paying the PITI
We got to make sure that the tenant buyer is protected, and the two loans are paid on time."
People new to the "terms business" when you are talking to sellers and buyers you are basically being "parent child"; we are the parent of the child.
You talk to them like you talk to 17-year-old teenager.
You're the boss.
They are not the boss.
If they don't like that, you lose all control and you are just gonna have a problem down the road.:)