Here’s the deal.
I have a seller who has 3 properties in process of being foreclosed on with the following profiles:
#1 (the sellers occupied house)
4/2 2100 sqft
Loan Balance $120K
Recording date: 12/07
#2 (currently listed with an agent for $220K)
3/2 1700 Sqft
Loan balance $102
5/2 2400 Sqft
Loan balance $130
What would be a creative proposal to approach the seller with. By the looks of it they are trying to sell one property to save the others, but their time is running out. It looks like they have enough equity, but I am in slow market and it is clear that the seller needs a bailout quick.
Is it best to just go after one (I really want the property that is on the market), or do I take on doing a sub2 for all properties?
Any suggestions would be much appreciated.
Also, has anyone tried a direct call or knock on door approach? Everyone talks about mailers, but I find the most successful method it to contact the seller directly.
Person to Person is always best. WITHOUT the realtors in the middle game. For investors this is the best scenario.
I am puzzled, though, as there is not enough information. Foreclosure usually includes missed payments which chews up effective equity. Further it is not clear if there are other liens against these properties.
There is no reason to lump them all together EXCEPT in negotiating a total win. I am not a proponent of deals that try to wrap a mortgage with a due on sale clause so I am not even going there. It appears …from your numbers… that the seller can walk away from the whole foreclosure thing for $352k … from your numbers.
The total value of the deal at FMV ( what about repairs???) is 600k. Assume he is behind by 10 months per property at 7% and that he has held the properties for 5 years prior. This would be about $400k original loans with equity now about $360k and a payment without insurance and interst of about $2600 monthly. He owes then at least $26,000.00 in back payments, or maybe 30k with arrears of insurance and taxes.
So he needs $378k to break even.
If your FMVs are close to real and the repairs are low then he walks with 10k in his pocket at 388k and you have three houses worth 600k? I don’t get the problem? Don’t forget this is three closes and 3x the costs, but if your repairs are 60k for all three and the properties are really worth 600k, then you are still ahead by a good margin. Then I assume you are talking FMV and not ARV in which case there is even more room. He may have to eat his cap gains or you can throw him a bone, or you could be creative in that area if anything is assumable (likely not).
Am I missing something? There’s more math related to renting and figuring out what to do with them, like lease optioning, etc, but this sounds not like a creative problem, but an aggressive one!