Posted by Ed Copp (OH) on February 11, 2001 at 11:47:23:
on how much cash you have available. If you have cash it would not hurt to attempt to buy the underlying note.
If you have limited cash it might be more prudent to deal with the current owner, purchase from him; and correct the forclosure.
How to structure this deal? - Posted by Dave
Posted by Dave on February 11, 2001 at 10:53:53:
When dealing with motivated sellers (in foreclosure) that have a balance owed with a skinny spread ($56,000 owed, after repair market value approx $69,000) am I wasting my time dealing with the owner? Should I be calling the lender to discuss a discounted note? House needs very little work but holding costs may whittle away at my profit. Should I typically be looking for wider spreads, or can these situations be profitable?
Thanks in advance,
Not much meat on the bone here, BUT… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on February 11, 2001 at 19:47:51:
Dave:
Although it might be feasible for you to negotiate a way for this motivated seller to be able to sell their home, and get out from under their existing debt, there is really not a lot of “spread” or equity here between what this seller owes and what you might be able to retail the home for. I generally look for opportunites where there is no more than 65% owed against the possible retail sales price. In this instanace that would be around $45K or less.
However, you could market this home FAST for the seller by using OWNER FINANCING as both a marketing and financing tool. If the home sells for $69K and you can get 10% cash down, then the note balance of $62,100.00 could be sold to generate around $57,000.00 +/- in cash. This $57K cash along with the 10% cash down payment ($6,900.00) provides approx. $63,900.00 in cash. This is certainly enough to pay off the existing debt, help these homeowners stave off a foreclosure, and put a few dollars in your pocket for your trouble.
To your success,
Michael Morrongiello