How Pivoting Allowed Us to Find an Extra $195,000 on a Deal

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After making some expired listing calls (targeting homes that were with real estate agents that didn’t sell for whatever reason), we received a call back (our expired dialing process is automated and utilizes Sly Broadcast—you can Google that) from a seller who wanted to move to Florida from Michigan but couldn’t sell his home for a year or so.

He had filed bankruptcy a few years prior and had since gotten it discharged but had some challenges. Specifically, the value of his home was roughly $360,000 (he tried asking $370,000 and was down to $360,000 but had already wasted too much time), and he owed $132,500 on his main mortgage. He also had two liens totaling $195,000 or so after a potential offer at some percentage of asking price and then a real estate agent fee. He had to try to break even to pay off all the loans and liens and cover closing costs as well. To say he was frustrated and tired of the situation was an understatement.

Related: Your Belief That “You Make Your Money When You Buy” is Holding You Back From the Best Deals

How Do You Find Sellers Willing to Do Terms?

One of the biggest questions I get on radio, podcasts, and via email is how do you find the sellers that are willing to do terms the way you describe? The short answer is you set up virtual assistants to call expired listings and FSBOs, and you get comfortable following up on those who have expressed an interest.

We structured a purchase subject to existing loans and liens contingent upon satisfactory research of those liens with our attorney. If we found out that interest was accruing or major legal fees and penalties were on top of the liens (I actually thought that would be the case), then we had the option to say we’re not satisfied with our research and we’re out!

What we found out is that the banks had discharged the liens already in the seller’s bankruptcy (so they wrote them off their books), but they were still attached to the home. Our goal was to negotiate with the bank (same bank for the two liens) and get them paid off at 10 to 30 cents on the dollar, meaning a $19,500 to $58,500 payoff. Our plan was to break the mold so to speak and break our rule of using cash on deals because that would mean a huge upside by discounting those liens.

I had a few conversations with the bank and was encouraged by the progress I thought I was making. Then our attorney got back to us with some even better news—the liens would expire due to the statute of limitations in another 4½ years, and at that time, we would have only $132,000, less principal paid over the 4½ years, remaining on this home.

We’re selling it via rent-to-own with a five-year term. The numbers were good and pretty standard without the liens being discounted. So, for example, prior to the liens being discounted:

  • Payday #1: $30,000 (this won’t change, as this is the buyer’s deposit to us)
  • Payday #2: $1,000/month so $60,000 over the term of the lease. The $132,000 mortgage PITI is only $1,237.
  • Payday #3: $25,000 ($195,000 + $120,000 liens and selling $370,000 less the Payday #1)

So this deal is already a $115,000 deal without any work on the liens.

What Happened to Allow an “Extra” $195,000?

The statute of limitations will allow us to pocket that $195,000 in liens that were on the property. The owner wasn’t willing to wait the 4½ years to move to Florida, and I can only assume wasn’t advised properly by his bankruptcy attorney relative to the 4½ more years only.

Now Payday #3 just increased to $220,000. This deal went from $103,000 to $310,000 in profits on a $360,000 purchase price.

Related: 10 Glaring Red Flags That Indicate Your “Great Deal” May Be a Costly Scam

A Combination of Strategies

I always talk and write about the ability to handle any transaction, and this is a classic example. On the surface, this was going to be a lease/purchase when we first looked at the property information sheet. Then it turned into subject to because it may have required some cash, which we would not do without owning it. Then it turned into a subject to deal with liens dropping in 4½ years.


I call this pivoting. Once you get really good and comfortable with this (being able to change directions with a deal), it will pay you very well.

Any questions about this deal?

Leave your comments below!

About Author

Chris Prefontaine

Chris Prefontaine is the bestselling author of Real Estate on your terms – Create continuous cash flow now, without using your cash or credit and real estate investor with over 26 years of experience in the field. He is also founder of Smart Real Estate Coach and host of Smart Real Estate Coach Podcast. He lives in Newport RI with his wife Kim and his family.


    • Chris Prefontaine

      You can use the same ones we do by going to our Investor Resource tab and letting them know you heard it from Smart Real Estate Coach and that way you won’t get a newbie – you’ll get someone experienced. Our Associates around the country have access to our own private VA as well.

  1. David Guinn

    You noted that you did a subject to offer, but could you give just a bit more detail about how you found the information about the status of the previous liens? Was that done through your lawyer, county courthouse, etc.? And how did you find the details pertaining to the liens being discharged?

    • Chris Prefontaine

      All of that David was done after we put it under agreement. We put a contingency in the agreement that we needed 45 days and that on or before then “…contingent upon satisfactory review of lien status”. That gave us an out because “satisfactory” is up to us. If that’s not clear let me know. The original status was caught when we did a title search even though the owners did in fact disclose all to us. You always want to do a title search when your buying or controlling meaning lease/purchase even.

      How We Pulled a 6-Figure Profit from an Owner-Financed Deal: Case Study

      Hi Chris

      Good article!!!
      I don’t see often a article on Owner Financing, My question- what made you decide to give the new buyer the same 4 years As you had with the seller? seThat’s a case by case Willie. We normally will go 6-12 months less than the seller terms but there are of course exceptions to everything so things like: do we think the seller will extend easily if we needed them to, do we think this buyer is very very strong based on the tenant / buyer screening we did (never place a buyer without screening and mortgage ready plan so you’re setting them up to win never to fail plus it covers you from liability of sticking someone in there yo should not have – a huge mistake many investors and even educators are doing. It’s wrong in every way legally, morally and ethically), etc..

    • Chris Prefontaine

      Just an in house term meaning the deal changes for some reason and you need to know which way to turn to make sure it’s still profitable. Too many teachers outline boiler plate deals and don’t share with you how things can go sideways or change on you and how to handle.

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