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Wow, a motivated seller!. Now what do I do??? - http://www.dealmakerscafe.com Forums

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manneke

63.28.152.252

"Wow, a motivated seller!. Now what do I do???" , Mon 31 Jul 18:34

I finally got a call today from a motivated seller. She received a postcard I sent (tax deliquent). She and her husband started a restaurant, it went under, and now they have $1 million in debt. They are scraping to come up with the monthly payments and they need to get out asap.

Here are the details:

$217,000 mortgage
$2,600 monthly payments
$290,000 county appraisal
~$310,000 market value

She's three payments behind and was begging me for options. Her husband doesn't know she called me. He thinks that some kind of miracle will happen and they will save the house.

She's knows that a realtor will cost her about $18,000 and she doesn't want to pay that much. Although she's motivated, I question whether she's going to let me get hold of the property for much more than $18,000 in equity given she's reluctant to pay that to a realtor. If I try and get more than that, I'm afraid she'll tell me to take a hike and call a realtor. They need to get as much equity as possible out of it to buy another home.

I'm torn. Although she's motivated, I just don't see how I can get her to sign it over to me for $217,000 and I don't know if they would do a lease/option given that they want as much equity as possible to buy another home. What do I do?

I'm thinking about doing a straight option and try to resell it myself. If I can get $10-15K, that's better than nothing. Not nearly as good as doing a subject-to, but again, I don't want to drive them off by bidding too low.

She seems to be motivated, but if I propose a subject-to, will I totally alienate her and drive her to call a realtor (which she has considered).

Please, any suggestions would help.

Thanks in advance.

Mark

Replies:

lynnhahn

216.78.36.22

"Mulitple Offers" , Tue 1 Aug 09:22

I can't add much to the good advice you have already gotten except that Matt said:

quote:
As investors we can try however we will NEVER master the art of thinking like a motivated and desperate seller.

Matt is right, so why try and guess which way the seller will go. You should make multiple offers. Sellers love it when I make multiple offers because they feel like I am giving them options.

You can make a pure option offer, a subject-to offer, and a lease-purchase offer. If you are leaning toward one or the other just make the one you like more attractive.

Words of caution: As Matt said, they need to get the property out of their name (you can suggest that they put it into a trust even if you don't buy it).

DON'T WASTE YOUR TIME JUST TALKING TO HER! I understand her thoughts etc., but you are spinning your wheels if you think that she can properly present your proposal to him. To quote Ron LeGrand Ask me how I know that! Explain to here that you will set down and show her and her husband several different options, but that you need to be the one to explain them to her husband so that you can answer his questions properly.

If he will not agree to meet with you, than he isn't motivated yet.

Hope this helps!
Lynn

manneke

12.5.51.130

"Re(1):Mulitple Offers" , Tue 1 Aug 10:30

How do you do present multiple offers? I can think of two different ways to do it. I could begin with the most desirable (for me) which in this case is taking it subject-to and, if they balk, go on to the next best alternative, then the next alternative, etc. This doesn't seem to be a good way to go. Alternatively, I could simply lay out all three options and let them choose. I could try to steer them to the subject-to but would leave the choice up to them.

How do all of you do this?

After reading all of your responses I really want to try and get the deed. Why sell myself short and assume I know what they are thinking?

Mark

lynnhahn

216.78.37.134

"Re(2):Mulitple Offers" , Wed 2 Aug 09:20

You write all of your offers down on a legal pad and then explain each to the seller and let them pick. "These are my three offers .... (explain each)... which would you prefer?"

If you prefer "subject-to" than do something to make the subject-to offer more attractive than the others. For instance, when we do a lease-purchase, we take care of all minor maintenance, but when we buy subject-to, we take care of ALL maintenance. That is just one example - you can play with the numbers in any number of ways to make one more attractive than the other.

Another Example: Once we told a seller that with l/o he would have to continue to pay the taxes and insurance, but with subject-to we took care of it.

WARNING

Don't make your lease purchase offer totally unattractive or you may end up with nothing.

Happy Investing!
Lynn

Al Jordan

152.163.213.63

"Re(1):Wow, a motivated seller!. Now what do I" , Mon 31 Jul 21:00

Mark,
I have to agree with Matt. It won't feel right, but "Subject to..." is your offer. The part that I would like to emphasize is that you can not assume what the seller will or will not do when your standing there offering them a solution. I've been suprised three times now! It's really that simple and the first time you've just got to hold your breath and spit out your offer. Be flexible though, just like Matt says, build rapport. You'll learn the most by offering, guaging their responce, and then asking more questions. Confidence and actually believing that your offing them something substantial has helped me more than any tape or negotiating advice. You know more than you think you do.
Al

dealmaker
Moderator

32.102.65.49

"Okay HUDDLE UP.. here the play.." , Mon 31 Jul 18:55

I'll speculate you're in a good to hot market. I would go for the deed. Take the property subject-to and I wouldn't worry about alienating her. That won't happen.. The seller that are "very" credit conscious are the ones that usually balk.

They are in too deep (debt).. I doubt they're concerned that much about their credit file at this point. If someone does balk, just offer them another strategy.

I wouldn't L/O the property unless they transfer the property to a trust. Being that much in debt, it will not take long to get judgments and liens on the property.

They do plan on moving right? You mentioned they would like to 'save' the house... not save as in "keep"?? right?

Ask her how many of the payments can they make? (we're going for as many as possible.. at least get them to make up one payment) Then ask her, if you made up the other payment and started making her payments them .. relieving them of the debt .. would that work for you and your husband?

I would schedule an appointment to build rapport w/ her(them) and make the offer!! I know this is your first one but DO NOT ASSUME the seller's response!!! Did you read my post about the "Anatomy of a Deal"?

As investors we can try however we will NEVER master the art of thinking like a motivated and desperate seller.

Me.. Buy it subject-to and have her make up at least one of the back payments and the current payment for August.. and possibly September's if they stay there through August.

If their looking for equity.. I would really negotiate that down and offer them a 2nd Mortgage - no interest, no payments until you sell.

Mark, do your best. Be a Dealmaker..

Call me if you need to.

Dealmaker

manneke

63.28.152.150

"Re(1):Okay HUDDLE UP.. here the play.." , Mon 31 Jul 20:03

We're in a really hot market.

She knows that they need to move. The husband is hoping that something will happen (money will drop from heaven?) so they don't have to move (save the house).

They can't make up any back payments. She said it's all they can do to scrape together enough to make one payment each month. I seriously doubt they will make up any back payments.

She wants me to call her on Thursday with my option(s) for them. If she thinks any/all are acceptable, she'll approach her husband and set up a meeting with me.

How would the 2nd mortgage work exactly?

Thanks.

Mark

dealmaker
Moderator

32.102.65.2

"2nd Mortgage No interest No payments" , Tue 1 Aug 06:13

Let suppose they asked for $20K in equity.. I would negotiate down to $10K - $15K..

You can offer them the equity in monthly payments or NO payments. I prefer no payments if I plan on L/O the house. They will receive the $10K when my Tenant/Buyer exercises the option on the house (buys it from me). DO NOT offer any interest on those payments.

There are several methods to use a 2nd mortgage to make a deal work. You may want to make payments on the 2nd if you have 'positive' cashflow with the 1st mortgage payment and the 2nd. In some cases, you may accept a negative cash flow for awhile if your have a great backend profit (substantial equity).

Being your 1st deal, DO NOT be over anxious about offering the moon just to get this house. STAY "TRUE" to your numbers! Don't fall in love w/ the house. If the numbers don't work.. pass!!!

** Al's post was great. Maintain a POSTURE of confidence and a matter-of-fact approach. These sellers do not have a lot of choices.. The realtor option is not a viable one.

****** You should focus on how FAST YOU can close and get their payments current!!!! This is your selling point..

If you sign a contract, DO NOT WAIT TO FIND A BUYER.. CALL your local papers immediately and place some ads to sell it!!

Mark, call if you need to discuss this one.

Dealmaker

Doug Pretorius

24.112.158.242

"2nd Mortgage" , Mon 31 Jul 22:36

How does it work? Simple.

Say they want (just to name a figure) $20,000. Instead of giving them $20,000 cash you write a promissory note saying that you agree to pay the $20,000 in equal monthly payments (i.e. $500/month for 40 months.) You can then give them a mortgage which they can record to secure the note.

If you're not comfortable doing this yourself, just call up an RE lawyer to do it.

Doug