Sub2 With Equity
I got a lead from a lady my wife works with. She has a sister who is trying to sell. They have a little for sale by owner sign in front. House is worth about $70,000. They owe $51,000. Payment is $420. Interest rate is 8.9%. Taxes $1650. Not behind and no other liens. Husband is laid up with back problem and they cant take care of it anymore. I have not been inside yet. I mentioned taking over payments and she did not really say much. They are not sure what they are asking for it. She thinks its worth $67,000 to $70,000 which is close. They want to move fairly quickly but I dont think its a money issue. Normally I can tell someone if they listed with an agent and paid closing costs that they would not make much if anything. These people could make $15,000 if they sold it. How can I show them that I am offering something good by taking over payments?
The first thing to remember is that not all leads really turn into deals. You could issue a promissory note to pay her the money when you get a buyer however on a house at $70,000 i don't think you are going to command much of a deposit. The interest rate is high as well so you are really going to have to get someone new to agree to a super high rate.
Where I do see potential is in a rehab situation. You need to go through the house and determine what the FMV of this house really could be. What are the comps in the area? You truly have to be a creative investor here because I just dont see the numbers being there to make a sub2 deal work the way it should.
Just my non-expert piece of advice.
You are offering them something verry valuable...TIME and MONEY.
If they sell with relator they stand to make 15K, maybe...
70 Sales price
loss of 4% for negotiation
loss of 6-7% to realtor
They will probably make 6 more payments on the house ($2500)
Paying closing costs/points 3%
I see it that they stand to make about 7K
AND they have to live in a house they no longer want for 6 months.
You can offer them that you'd buy the house next week, give them some money RIGHT NOW and get them on their way...
Think about it, you are offering them something valuable..you must believe in the product you are selling!!
Good Luck
Sam
Oh yeah, good point BOSS, one of the other very important negotion tools. The cost of all the repairs. If it needs 5 K in work, you're talking about giving them 2 K for their equity. Now you can probably handle that.
I wouldn't worry about the interest rate too much... BOSS must not have been around in the 80's LOL... I just got done talking with a seller who had a 13% interest rate, now that's high
... the payment is fairly low, and that's what matters.
Sam
No sorry I was born in the 80s so I definately don't remember much about interest rates!! Thats true though, the payment is really all that matters.
Well actually it is not listed so I cant use the whole realtor commission thing. It does need some repairs so I can use that as a bargaining tool. I am planning to sell lease option as long as it doesnt need to much repair. I dont really want to rehab this one. Thanks.
Quote:
Well actually it is not listed so I cant use the whole realtor commission thing.
Of course you can. If they don't sell to you, they're still going to have to sell it right? Many people are afraid of FSBO, and will trust that a realtor will do the right thing for them. Use this to your advantage. (Make sure you point out the pitfalls of FSBO too if they bring it up.
Quote: It does need some repairs so I can use that as a bargaining tool.
Absolutely!
Good luck with this one. Please let us know how it goes.
Something looks funny about a house that's worth $70K but has taxes of $1650, that sounds way too high, even for Wisconsin (this coming from a Minnesotan). What do they base their valuation on? Might it be a sleeper worth more?
After reading your post, we do not see how the seller is MOTIVATED at this point to consider a deal to transfer anything to the investor. In our opinion you do not have a deal (no problem to solve). If you want to make a few bucks, offer property management services for exterior care and servicing. Rent the house for them and make a percentage of the rent.
Eric & Rosa
[addsig]
Definitely going with classimg on this one. No motivation = no deal. They should be trying to convince you to buy, not you trying to convince them to sell. Have your wife's co-worker give them your name and number, and if they're interested in a quick, painless sell, to call you. Otherwise, start looking for something else.
Roger