A Pre Foreclosure Opportunity?
have a pre-forclosure, the amount to bring current is $21K. The house is worth ~$225K. The current payments are 1169 per month. I am wondering, how exactly could I leverage this? The amount owed on the loan $98-100K. So we are looking at a possible 95K equity deal, instantly. My phone conversation didn't go as I had planned, she asked, what can you do for me. I told her I wasnt certain I had to get the numbers first... Any ideas??? I called her back and found out, only 1 mortgage, she wants to stay in the house...She also said she would probably sell for the first mortgage. (100K) I could lease back to her...
Looks like it might be a good opportunity. If this were me here is my to do list:
1- verify mortgages and liens on title at county recorder
2- Put together an offer to purchase for the amount owed on first (plus lates and fees)
3- talk to owner about her idea of staying there. If she cant pay a payment why do I think she can pay me rent? See if I can convince her to take a few $$ and move instead. I cant make any money until she is out and I sell the place. UNLESS you want monthly cash flow instead of a larger 1 time gain.
4- How did you get value of $225,000. Make sure you have good comps and round down a bit.
Thats just me.
I am going to verify the title etc. I got the value of the property from Domainia.com and the tax assesment is $229,000. So I am actually being conservative. Our tax ratio is about 94 %.
However, I don't think I am going to be able to do this deal anyway. I just got off of the phone with my mortgage broker. I have issues?
1. Great credit score -790
2. I have a rental home in another state.
3. I have a house being built currently...
4. I don't have the 20K cash to put down on it...
Oh, and she got behind, becasue divorce, etc. The son (an adult) moved in to help, and lost his job. Now he has a job. They tried to bring loan current, but GMAC said no... But I am with you on the quick flip...[ Edited by cmiller2 on Date 12/05/2002 ]
I think you just named your deal!
Work up a deal with the owner and assign the contract to another investor in your area. An assignment fee is better than no fee!
Or, find someone with the $$ to bring her mortgage current in exchange for a 10% fee on the property sale and a 50/50 equity split, similar to what Bill Twyford likes to do.
Hope this helps.
[addsig]
cmiller2,
I agree with Kea. I would contact the REI group in your area and find a partner ASAP.
Sounds like a great deal. Do not let if go if the numbers are correct
[addsig]
KEA,
Thanks, although I am so new at this (e.g. I have never done anything before) I am not certain what to do.
I do recognize this as a great opportunity. Time is not on my side though, the house will go to foreclosure on the 18th.
Clint
John,
Closest one is in Northern VA, a good two hours away...I am trying to work everyone I know to back me on this...
You dont need to buy the house! You only need to 2 things-
1- a quit cliam deed so you have ownership of the property.
2- enough money to bring the loan current.
Ypu just bring the loan current and keep the payments up for a month or so until you can sell it. That probably $5-$6,000. With a 790 creidt score you can get a credit card to float that....or even a signature loan.
DONT BRING IT CURRENT WITHOUT THE QCD!! Did I yell that loud enough?
You dont want them occupying the property if you are paying the payments....they may not ever leave...and you want to sell this beauty NOW.
Got it?
Thanks for the info. I talked to her again last night and she balked. Said she had another offer, wouldn't elaborate. She wants her equity!!! I offered that I was a viable oppty. to her losing her equity. I also think I am going to counter this morning. Tell me what you think:
Offer to pay off her mortgage: 100K
Offer her a second for $50K
This will have $150K tied up for no $ out of my pocket. (I have been approved for 100% financing including closing from a broker at 9%).
This gives me a house valued at $250K (relative price of neighborhood) for $100K equity.
Thanks,
Clint
Earlier she said she was willing to walk away for $100K. Find out why she changed her mind. Do you think she is telling stories to get you and the other party to go higher?
Remember what your limits are. For me...I dont buy over 70% LTV , dont get caught up in emotions of the deal (possible losing it to someone else), and it needs to be a win-win for everyone. Stick to your guns or walk away. You might get the deal later when the other investor back off to.
Good luck, hope that helps. If I diddnt address your issue well enough please let me know. I know that was a little off.
I think she balked because she had another deal in the works. She didn't ask for the $50K, I offered. This is still only 60% LTV. (Full $150K)
I flat out asked her what the other party was offering, and she wouldn't tell me so I don't think she is doing it to get us to out bid the other.
As far as the reason, I think she knows she has a $250K house she has lived in since it was built, and she wants to get out from under the deal with GMAC. I could be making a huge mistake, but I think I can make $50K on this deal although $100K is more realistic.
She told me she would let me know tommorrow morning when she talked to the other interested party. so....I will let you know.
But back to your original question: Yes, I could use an investor as well, I have about 6 possible pre-foreclosures. (A very ripe market here.)
Thanks,
Clint
cmiller2
Clint,
I know you have been working hard on this one, I'm glad I was able to give you some ideas that helped you.
The bottom line on a deal like this is...sales ability or negotiation skills, this lady is working you in my opinion. As you develop your talents in creative real estate investing you will soon see the importance of closing the sale (not over the phone, but face to face with the seller) and apply your investing knowledge to do so.
A little example, one of my students called and needed help on a Condo deal he found. Being brand spanking new, he decided that it would be better if he took a birddog fee on this one.
John (LV) our Director of Corporate Research (normally John is to busy doing research to go out on appointments) went with the student to meet the seller this afternoon at the appointment time, in less than 45 minutes John closed the deal on the Condo, he gave the seller $10.00 total for the sellers equity on a 'Subject To' deal and the seller is making the next months payment. The seller is leaving the washer, dryer, refrigerator, etc., because John knows how to get the Deed and anything else that will help re-sell the property.
The student noticed one very important thing John assumed the sale before he even met the seller, he knew how to close the deal.
In your case I would go meet this lady face to face, tell her you have other properties you are considering, bring an offer and acceptance agreement with the terms you are offering, in the offer state that your offer is good for 12 hours. As I understand it the property will be forclosed on December 18, so she is running out of time (and so are you if you are doing the 'no doc' loan by the 18th), remind her of this. If she cannot make up her mind go on to the next deal, because there was never one there in the first place.
Clint your deal is a little larger than John's, but it shows how important knowing what to say and how to say it is in getting the job done.
I am available to help if you need me just call, by the way I am helping Clint for no charge whatsoever, just helping a fellow investor in need.
John $Cash$ Locke
I agree with John $Cash$ Locke,
I have this happen all the time with folks in a pre foreclosure situation!
Keep in mind that the negation is not on the homeowner's side, it is on yours.
I never give them more than 24 hours to accept my offer, the more time you give them, the more time they have to shop for other investors.
In REI sometimes you hold them and sometimes you fold them.
I would visit this homeowner and lay it on the line, you will loose your home on 12/18, I would like to help you, but my offer stands you have until 12/9/02 4pm to accept my offer of help at this time I am going onto the next deal!
[addsig]
John $Cash$, and John Micheal,
Thank you again for your sage advice. I haven't knocked on her door yet ( I was trying to go with the 52 phone call rule [so to speak]) Although I know it wasn't call the same person 52 times, I was trying to establish territory that would be worth my time. She has shown interest but she is a bit indignant as well.
I will drop by her house this evening. I will give her the 12 hour offer. Thanks again [John $Cash$} for the advice on (1) Using a mortgage broker instead of a bank and (2) suggesting the lo doc/no doc loan.
These are exciting times...
Clint
Quote:
On 2002-12-08 20:40, JohnLocke wrote:
cmiller2
Clint,
In your case I would go meet this lady face to face, tell her you have other properties you are considering, bring an offer and acceptance agreement with the terms you are offering, in the offer state that your offer is good for 12 hours.
John $Cash$ Locke
Do you advocate always getting face-to-face or do you ever just mail an offer with an expiration date on it?
Thanks.
Hello all,
Here is the latest; (By the way face to face is definately better-I should have done it first.)
The woman was ready to sign last night, her deal fell through with a r-e agent who was going to buy. (he ulitmately decided he didn't want to tie up all of his cash). So I was ready to sign. She hedged, again, and wanted to think about the offer. (I mistakenly spoke first in negotiations, which I shouldn't have done, I believe that cost me the deal) I had offered $160K and she pay closing costs.
I came home to type up the agreements (Always have blanks in your car!!!) and she called me to say she'd like to think a bit more, so I gave her the ultimatum. I don't have any more time. She conceded once again to sign, twenty minutes later she called to renege--a family member was coming to help her (an eleventh hour plea I suppose). I learned a great deal, I want to thank John $Cash$ Locke for providing me guidance. Incidently I have found another deal with over $100K equity here. So, here is my strategy:
1. I called and left the following message yesterday:
"Hi, Mr. Mathews, my name is Clint, and I buy homes, I saw in the paper where you were having some difficulty, and I believe I can help you out of it, please call me at xxx-xxxx."
2. Today, I go by and knock on the door. (time is of the essence on this)
3. Today, before going over, I research his property title for any 2nd's etc.
4. Blanks in car, Blanks in car, Blanks in car.
5. Get in their face, become their friend, get them out of their situation
6. CLOSE!
Yesterday's no, is one step closer to a new deal.
These are exciting times... Let's make money.
Clint
CMILLER,
these guy's are out of hampton, hope it might help
TRIGofVA@aol.com
-Tony-
robertmichon,
Glad to meet you.
I always get face to face, if you send a letter it is impersonal, when I meet the seller in person I can see and hear their reactions, this way I can counter any objections, solve any problems, then hand them the pen to sign the deal.
Sales ability and negotiation skills are very important in this business, I believe a must, so meeting your seller in person will close more deals than a letter ever will.
Welcome on board this board, you will enjoy your journey here at TCI.
John $Cash$ Locke
sorry guys I don't know how it got on here twice
[ Edited by Tonyy on Date 12/10/2002 ]
Tonnyy,
Thanks for the link.
Clint
clint,
here is there web page it has some profiles on it, there are about 120 members plus guest 0-40 yrs experience
-Tony-
You have lots of advice, both pro and con. One thing that bothers me about the deal is the current situation in your market area. You said it was a very "Ripe Market for Pre-Foreclosure."
If they cannot sell it what makes you think that you can turn it quickly and effectively to make your deal profitable?
What is the status of the market in your area? If it is stagnant or declining as is happening in some areas you may have a white elephant on your hands, with a large monthly payment for a long time.
Not being pessimistic, just realistic. Have not done foreclosure since back in the 70's and it was different then.
Investigate before you Invest
Good Luck
Bill,
Great to meet you. Great question. I am certain others have thought the same thing. What I meant by 'ripe' was this: The daily paper has from 2 to 20 foreclosure notices. --every single day Sunday through Sunday.
Mind you, my situation has been limited. I have yet to 'do' a deal yet. However this is what I have found on the two or three I have contacted. 1. No For Sale sign. 2. A huge level of either denial or wishful thinking.
In the case of my first potential deal. The woman was in denial. she had 8 months of not having paid, she knew what was coming; the irony of it--She works for Wachovia Bank in the lending dept.!!!
On the economy here, it is really good. We have relatively low un-employment ~4%. The county I live in is rapidly growing, and new houses are being built. The turnover for homes is high. So, I guess the persons who are being foreclosed on just don't get it, or have some notion of staying in their house.
Again, I haven't done any deals but I have criteria for the ones I scope out.
The homes have to be at least three years old, prefereably 5 -15 years. There has to be at least $25K in equity. The two I have been working have over $100K equity. The housing market here has appreciated 28% in the last three years. So, those are the numbers I use. I hope that helps your question.
These are Exciting Times...Let's make Money!
Clint
Quote:
On 2002-12-10 21:11, BillHinton wrote:
You have lots of advice, both pro and con. One thing that bothers me about the deal is the current situation in your market area. You said it was a very "Ripe Market for Pre-Foreclosure."
If they cannot sell it what makes you think that you can turn it quickly and effectively to make your deal profitable?
What is the status of the market in your area? If it is stagnant or declining as is happening in some areas you may have a white elephant on your hands, with a large monthly payment for a long time.
Not being pessimistic, just realistic. Have not done foreclosure since back in the 70's and it was different then.
Investigate before you Invest
Good Luck
Quote:
My phone conversation didn't go as I had planned, she asked, what can you do for me. I told her I wasnt certain I had to get the numbers first... Any ideas???
When someone asks a question like this, a normal reaction is, "Well I could do this, or I could do that..." which leads to nowhere.
More effective: "Well, I don't know if I can help you at all- it may be too late."
Or, "We could go on and on about what I CAN do for you, but before you decide now what you should do, let me ask you this: What would you like to see happen?"
Then, delve into qualifying questions.
Don't ever get into a conversation with a pre-conceived notion about what the solution is. Ask first. Check for motivation. Then go to the house.
Quote:
My phone conversation didn't go as I had planned, she asked, what can you do for me. I told her I wasnt certain I had to get the numbers first... Any ideas???
When someone asks a question like this, a normal reaction is, "Well I could do this, or I could do that..." which leads to nowhere.
More effective: "Well, I don't know if I can help you at all- it may be too late."
Or, "We could go on and on about what I CAN do for you, but before you decide now what you should do, let me ask you this: What would you like to see happen?"
Then, delve into qualifying questions.
Don't ever get into a conversation with a pre-conceived notion about what the solution is. Ask first. Check for motivation. Then go to the house.
Quote:
On 2002-12-10 11:41, JohnLocke wrote:
robertmichon,
Glad to meet you.
I always get face to face, if you send a letter it is impersonal, ...
I believe a must, so meeting your seller in person will close more deals than a letter ever will.
Thanks for the warm welcome.
I wouldn't ever substitute sending a letter for going to the home.
What I'm curious about is whether you send anything if you don't have a phone number to generate a call-back from them.
Thanks.
Clint,
did you get the other page? It is a little different then the one in my area but if you play around you can get a lot of info off it i.e. current and previous owners what they paid sq ft. County assessed value and so on.
-Tony-
Tonny,
Yes! IT was very helpful. The latest house I found, I needed to get the info for the city of Richmond, and I couldn't find it anyhwere. Again, many thanks, As it turns out the house I am looking at in pre-foreclosure (a new one) is valued at $400K, and they owe $264K
Clint
robertmichon,
I know a top flight investor who use to set the appointment over the phone, then meet the seller face to face.
However, he became so good at pre-qualifying motivated sellers over the phone he pre-qualified himself out of business. No one was motivated enough to go and see.
I have done pretty well in this business, so when I get the phone call from the seller that is all the motivation I need to get face to face.
IMHO
John $Cash$ Locke
clint,
I will send you a bill......
-Tony-