Pre-Foreclosure Steps Need Help
I was wondering if someone can give me a basic outline of how to deal with owners of pre-foreclosures. When approaching a "seller" do I offer them cash for the equity or a % of it and assume their loan? Or do I offer them a total purchase price including the loan balance and a little bit of cash for their equity? I am really confused and I am not sure how to structure these deals. Thanks for all of your input.
First before you offer anything, ask them what they want, if they have equity, ask how much they want for their equity.
There are so many different ways that you can structure a deal. I guess it all depends on how much cash you have to work with, how good your credit is.
Keep in mind that if you deal with owners that are facing foreclosure, there are desperate to get help. It's all up to you how much you want to pay for their equity and how much you want to make on the deal.
You can give them some moving money and take their loan "subject to" (refer to "Subject To" forum), which means the loan will stay under their name, until you ( if you decide to keep the property) or whoever you going to sell the property to will refinance.
Now if you have enough cash, you can simply buy the property and payoff the existing loan.
I hope it helps.
Alexander.
It really depends on the situation. You should approach the situation by offering advice and expressing interest in their property. Find out all the particulars (mortgage balance, back payments, any liens, judgements, repair cost, etc) necessary to make an informed decision about the house.
If the cost to obtain the house exceeds the value of the home, you should look into doing a short sale. This basically means there is little to no equity and they should be happy to get out from under the house.
If the cost to obtain the house is fairly low and there is little equity in the home, you can look into taking the home subject to and bring the mortgage up to date. In this case, your offer for their equity depends on how much you feel is fair. Generally a few $$ never hurts and can be really helpful to people in financial difficulty.
If the cost to obtain the house is high and there is sufficient equity, I would do conventional financing with a reasonable purchase price. This way, you clear up all the back payments and consolidate this into a low monthly payment. It will also require less cash out of pocket when costs are high. Again, what you choose to give the seller is your business and I would probably ask them and figure what they think they are owed.
-Chris
[addsig]
The joy of this is that you can use any approach you want as long as it works for you and the seller. Win-win. You want the seller to feel as though they've won and got a good deal and you want to maximize your profit. Negotiate the win-win situation. If they won't negotiate to where it works for you there not motivated enough.