Real Estate Investor · Williamstown, NJ · Member since 2011 · 29 posts · 5 votes
My last question of the day. If a house has a mortgage on it regardless if its paid or unpaid, how do I negotiate a deal? I dont understand what happens to the mortgage. Who pays the mortgage? Does it get paid? Can someone please give me a scenario of how to deal with a house that has a mortgage, paid and unpaid? Please help me out with this mind boggling question. Thank you.
I will have to respectfully disagree with Manny. Many motivated sellers have a mortgage. Life problems (job loss, back taxes, etc.) and the pressure of making the mortgage payment is often what is driving their motivation. Free and clear owners do not have the stress related to monthly mortgage payments and they're typically less motivated to sell at a steep discount.
To answer your question:
The mortgage must be paid in full at the closing.
Your offer price must cover the mortgage or your seller will need to cover the difference between your offer and the mortgage. If your offer covers the mortgage, your title office will use your end buyers funds to payoff the mortgage. It's that simple.
Please don't discount the chances of a home owner bringing cash to the table. If they can afford it and they're motivated enough (divorced, moving, inherited); they will do nearly anything to get out of the house.
When a seller has a mortgage or as many call it a loan. Basically what you want to make sure is that they owe less than the deal ( unless you are dealing with REO's and shorsales) For example, a house worth 100k, and the seller owes 40k, for some odd reason something happened and they need to get rid of the property quick! Well what you do is, you make sure it's a deal first, 100k*.7 - repairs-your assignemtn fee= maximum offer. So for example, this property would be a good deal, 100k valued house after repairs * .70 = 70k - 10k repairs - 10k assignment fee, your max offer is 50k, than you re-assign for 60k, you just made 10k, the seller owes 40k on the property, you put it under contract for 50k, so the seller is happy, gets loan paid off, plus gets 10k, you get 10k, and the investor gets the rest of the cheese. Hope this helped.
@Matt Thanks. just what i needed. Yesterday is the first time I took action and I think I found a motivated seller. Shes a out of town owner. I looked her up on facebook because I couldnt find her in the white pages. I sent her a message about who I am and if she was the owner and she responded I am DEFINATELY the owner call me. I got excited and nervous because I dont know what to say. I have a script its just making the offer. Like the repair cost. How can I find out the repair costs if shes out of town? I dont think its boarded up but I dont think she will send me a key.
@Gary. I've been reading your posts inquiring about wholesaling properties with a mortgage lien. While these threads are a few years old, I have found them to be very insightful and targeted to the very same questions I now have as a new investor, particularly as it relates to wholesaling a property where the owner/seller has a balance owing on the mortgage. Referencing your last post (altho over 6 years ago) where you looked up an owner on Facebook and she reached out to you, can you tell me what the outcome of that interaction was? Were you able to make a deal? Also, wee you able to make a deal with any of the potentials you came across where there was a mortgage owing on the property?
Question, to rebound off of the original question, if the arv is 315k repairs 25k my fee 10k mortgage balance 105k discount at .82 I contract it at 118.3k and sell it to my buyer for 118.3k?
All liens, taxes, HOA, judgments against the property are paid at closing. Your offer to the customer must cover all of this. It's important to ask a seller about not only mortgages but other potential liens against the property. The title company will pull this information but if you can get a head start it may save you time on a bad deal.
If the offer cannot cover this you could explore the short sale route but coming from someone who managed them for several years it's unlikely it will be approved. It's highly regulated and a default borrower is going to need to provide documents to support the offer, including proof of funds from the buyer, an estimated HUD and some banks require the home to be listed on the MLS.
I went to Mark Whittens seminar and I didnt connect with alot of people because I didnt have any business cards. I have a Reia meeting this tuesday, I dont know what to say, because I dont have any business cards to give out I feel like no one will want to work with me because I'm a newbie.
You can get business cards made quickly. Don't let that stop you from networking though. It's about making connections. I met a lady at my REI meeting and I found her a property using my software (she doesn't like looking) and she paid me a finders fee of $2,000.
I went to Mark Whittens seminar and I didnt connect with alot of people because I didnt have any business cards. I have a Reia meeting this tuesday, I dont know what to say, because I dont have any business cards to give out I feel like no one will want to work with me because I'm a newbie.
You can get business cards made quickly. Don't let that stop you from networking though. It's about making connections. I met a lady at my REI meeting and I found her a property using my software (she doesn't like looking) and she paid me a finders fee of $2,000.
My point is, find another group til you find the one that suits you and there's people that you connect with. I went to several. I found that the most successful people are the most giving of their knowledge. Sit next to them! And I do recommend investing in a subscription service that helps you find properties. Then you can be of value to someone or you can partner with someone. You bring the property, they bring the money... There's lots out there...Propstream, Flipster, RealEstateIQ, Pin... (I like Flipster).. You can find cash buyers on this software or here on Bigger Pockets or on ConnectedInvestors.com or in Facebook groups or at your REI meetings.