Wholesaling a seller/owner-finance deal?

Question

Hello all I'm a newbie wholesaler and would like to know how to go about buying and wholesaling a deal where the homeowner is offering to do a
owner-finance just to make the deal work for my end-buyer. How and/or when do I collect my assignment fee from my buyer is what's confusing me the most?
 
    Also she owes 40,000 on the house and it comps somewhere in the neighborhood of 165,000. I know that she's going to need at least $40,000 cash to pay off her existing mortgage. How do I structure something like this?
  
Please help...

Thank you much in advance for all of your expertise. 
 Reg Jr.

Reginald S. · Answer

Wow, OK thanks Will I so needed to hear that from somebody that really knows this business. This learning curve thingy is so frustrating.    So close, but yet so far...

Will Barnard · Answer

First off, if it has been listed twice, is in great condition, and it has not sold at $189k, then it is over priced at that price which means it does not have a value of $189k.

If it is worth $160k and you can buy it for $115k, then you have a good deal at 71% of value. Add in a benefit of an owner carried note and you can make even more money.

Reginald S. · Answer

Yupper, and I was thinking about making an all cash offer of 115,000. She and the listing agent are actually related. 
Oh and I have built up a real good rapport with the homeowner. From what I gather she is getting really tired of the high cost of up-keep on the property too.

Andrew Massaro · Answer

Listing agent?  There's a realtor involved?

Brian Levredge · Answer

Based on your last response, it doesn't look like you have a deal.  She's "settling" for 189k but you think it's worth 165k?  There may be equity there based on what she owes, but you've got a ways to go to make this even close to workable.  Furthermore, unless the listing agreement has expired (after one month?) then you are going to have a hell of time trying to do anything with the place.  Also, don't use Zillow's Zestimate or tax records to establish comps.

Reginald S. · Answer

Wow, thanks guys for your expertise. However I'm not exactly sure about the details that your looking for nevertheless here's some more info on the deal.
    The homeowner said she and her husband purchased the home in 2002. I don't know what she paid for it though. 
   Her husband past away in 2005 and now she feels that the house is just too large for her to stay in alone. Her plans is to move into her daughters (soon to be vacant) condo and assume the mortgage there which has about three years worth of payments left on it according to her estimates. 
   She listed the house with a Realtor (for the second time in two years) about a month ago asking for 189,000. She said she only owes 40,000 on her existing mortgage. I don't have a concrete ARV on her house however the house is in excellent condition and I believe that she got her asking price from her realtor who we know pulled the necessary comps. 
   When I asked her what she personally thought her house was worth she said she is settling for 189,000 because she knows that she will not get the  FMV for it in this current market.
   A call from her via one of my business cards asking me would I consider buying her house is how I met her. 
   Another investor that I met online gave me the suggestion of offering her a owner-finance deal as a second offer if she decided to turn my first all-cash offer down. However he did not give me any details as to how I should structure such a deal.

PS. I got my guestimated ARV from Zillow and the Tax-assessor's public records. I requested comps for her home from the listing agent (via email) but never received a response.

Well sorry about the length of the post guys however I hope this added info help to shed some more light on the subject for you,

Thanks again all, U guys rock!!!  Reg. Jr

Andrew Massaro · Answer

You're right, Will.  Need more details.  However, the simple answer to this is to flip it exactly as you would normally.  The only difference is the seller acts as the bank.  You negotiate the purchase price, and the seller dictates the terms (10% down at 5% interest, or whatever).  And then you lock it down with contracts and send them to the title company.  The title co will prepare the closing docs.  And you get paid at closing.

Will Barnard · Answer

Not enough details to give a proper answer, but you do not necessarily have to pay off the first to get this done, it could be worked out on a sub2 purchase with an owner carried note on the back-end.

One option would be for you to lock up the deal purchasing subject to the existing mortgage, then sell the property to your end buyer with an owner carried note. You could end up with two incomes, one at the start from the down payment, and one each month on the difference between your costs and the increased note to the new buyer.