What Type of Offer Should I Make - Posted by CBWilson

Posted by Monique on June 07, 2000 at 17:27:52:


I am new to this, so others with more experience may see it differently …

Just how motivated is your Seller if her asking price is FMV for House #1 and the house needs some work. The same for House #2 even though it is at a slight discount.

Also, what is your exit strategy? How do you plan to sell these houses and make your profit? Will you buy and flip – if so, you’ll need a big discount to be able to do this quickly and keep your holding costs down. Will you sell with a L/O? Will you sell with a Land Contract? Your exit strategy will have a huge impact on what you offer to make the deal work for you.

In any case, since the homes are owned free and clear, lead with Seller Financing. You should first find out how much cash she NEEDS now. Not WANTS, but needs. For example, is there a downpayment required to move into a nursing home? That amount is a NEED.

If the amount that she needs is relatively low, make an offer for that amount as a downpayment, with the balance paid in monthly (or quarterly) installments until paid off. She might appreciate having a nice income stream that she can count on receiving each and every month.

If the amount she needs is larger, you can take an approach that I learned from William Bronchick. Offer the Seller one-third of the purchase price as a downpayment if she will owner-carry. Then, get a hard money loan as a first mortgage. With a 33% LTV, you should have no problem finding a lender who will loan you this amount without proving your income or checking your credit. Use the proceeds of the hard money loan as your cash down payment, and the seller holds a 2nd mortgage for the balance.

—>> From a negotiation standpoint, if the Seller only needs a little now, you might consider making both offers at once. Offer #1 at your highest offer price (something way less than $350K for House #1) and Offer #2 at a lower price. In order to get the higher upfront cash amount, the Seller’s concession must be a lower purchase price.

OFFER #3: If the Seller does not want to hear anything about Seller Financing, you can offer to pay her all cash at closing if you two can agree upon a price that works for the two of you. Then, structure the deal to be contingent upon your finding a suitable buyer that buys from you. It is an Option to Purchase, you have the right but not the obligation to buy. Once you find your buyer who pays you more than what you pay your seller, you make your profit on the difference. I’m leaving out details on how to find the buyers with tactics such as seller financing, but you get the gist of the concept.

Good luck with your deal!

What Type of Offer Should I Make - Posted by CBWilson

Posted by CBWilson on June 07, 2000 at 14:48:59:

Hi everyone,

I have found 2 homes owned by the same person in a very desirable area of Los Angeles and would like a few suggestions on the types of offers I could make. Because both properties are free and clear, I see the possibility for some creativity. Neither house has been remodeled and may need updating, though they are habitable. The owner is moving to a nursing home and needs the money to assist in the costs of living there.

I presently am working on 2 heavy fixers where I will assign my position to generate quick cash. However, with the 2 properties metioned below I want to consider other ways of doing a deal. I do have REI materials that I have referred to, but I would like to know what some of you would do in this situation.

House #1 - a/p $350k, reduced from $375k; FMV is $350k; has 3bd/1ba, 1392 sq. ft. with room for a motorhome in the backyard.

House #2 - a/p $250k, reduced from $275K; FMV is $268K; has 2bd/1ba, 920 sq. ft.

Any suggestions are greatly appreciated.