Possible First Preforeclosure Deal...need Ideas
There's a house I'm looking at with an market value of about $325,000. Taxes are $5000/year with owner still owe $193,000.
Owner is falling behind 4 payments ($1800/month with all taxes, escrows, and insurance included).
Questions:
1. Is this a deal?
2. How would the deal be structured? I guess I can offer to pay the 4 late payments to keep them to date but then what? What are my options? I'm interested in bringing them up to date and take over their left over mortgage payments and then put it on the market for $325,000. Is this how it should be done?
Why is it that you think that the Homeowner would consider entering a 'deal' with you... rather than selling the property on the open market at it's fair market value?
Seems to be a valid point, but wouldn't that same reason hold true to anyone that's in pre-foreclosure then? They can just sell their house on their own?
Why would anyone be interested in a RE investor for their pre-foreclosure?What should I be looking for in any pre-foreclosures which would then make a deal, something which is below market?
You'll never know if it's a deal until you talk to the owners. The numbers definitely work out, even if you give the owners some walking money, you can sell it 10-20K below market to move it and still pocket 90K. The equity is there, talk to the owners and see what they will do. If they're 4 months behind in payments, they know they need to do something!
Good luck!!!
Doesn't seem like its close to getting to the dock as yet - but there is equity in the property, and for the owner to sell it in the open market requires time s/he doesn't have - so I think if you do some good negotiation, you got a sweet deal in hand. Since you mentioned its your first deal - make sure you figure in the cost of repairs.
"Seems to be a valid point, but wouldn't that same reason hold true to anyone that's in pre-foreclosure then? They can just sell their house on their own?"
Yes. Just about anyone in foreclosure (providing there is sufficient time before a forced, public sale) can list and sell their home before losing it to mortgage or tax foreclosure. Assuming adequate equity, the homeowner can sell at full market value, or even at a slight discount.
It's the Homeowner who waits too long, has a traditional deal fall thru, or has little, zero, or negative equity that MAY be a prime candidate for a creative transaction.
Ask yourself... "why would anyone in their right mind surrender $10,000, $20,000 or $100,000 in equity if there were other options?" Would you?
So for example, if I can work a deal out to not only cover all their late payments and offer a discounted price for their house(let's say $265) this could work? I'm thinking since the owners might be running out of time, they might go for it?
Let's say the owner goes for it...now what? What would I propose to them and how should I get my funding to cover?
If the Homeowners are runing out of time (the process differs from state to state, and even couny by county) than they should consider accepting a discounted purchase price offer, or should explore other, non foreclosure alternatives.
Cash is king.
If you don't have the means to complete the purchase, or a network thru which to assign your Contract to someone who can complete the deal... then that is something to consider before you make any representations to the Seller.
There are scores of strategies available to speculators, and 'transaction facilitators'
Identify your resources, devise a business plan, and work the plan.