First SS deal?

Another newbie here!! Doing my first SS and think I’ll do fine with the package, cover letter, etc. The problem is that the homeowner who is just about to enter foreclosure (because he is 3 pmts late, and failed to follow a lender initiated “catch up plan”, wants 20K out of the deal. Here’s a few figures that I am working with:

ARV: $170K (on the low side)
Repairs: $50K
Current Bal (incl mortgage, early payoff fee): $100K
Will initially offer: $45K (maybe get it for $65K after some negotiating

$65K + $50K + $20K = $40K left to market, sell, and profit?

  1. I realize that I can’t provide the homeowner with $20K as part of the deal, but was thnking that I can pay him by having him do some work (he is a carpenter by trade).

  2. Will the SS price that I reach with the lender include the early payoff fee, late payments, late fees, attorney fees, etc. or will that stuff all be added up as an additional amount that the lender will want me to pay for?


You are buying the house from the owner, not the lender. So, the purchase contract should include all of the terms, and the lender will approve/disapprove on that basis. Typically, one would use a purchase agreement that stipulated the transfer of clear and unencumbered title. This is also why the lender will want to see a net sheet, or HUD-1, to determine the “costs” that are part of the transaction and how much they will “net” from the $65k that you offered.

Thanks, that helps

In my opinion 20K to the guy is WAYYYYYY to much. Does he realize that if the deal doesn’t work, he loses everything? I’d do a bill of sales and “buy” 5k worth of stuff from him. The banks don’t care how much stuff you “buy” from the seller, long as they still receive the bottom line ammount on the hud. As far as the 2nd question. you’ll have attorney’s fees that you’ll have to pay for, and any back taxes that are owed.

Are you going to be the actual end buyer, or are you going to do a double close and use the funds from your buyer to buy the property from the seller?

The reason why I ask, is that you’re going to have to get the short sale done for way less that 65K if you’re wanting to make a substantial profit.

Here’s why. If the ARV is 170k Investors want the property 65 cents on the dollar or less and thats including the cost to rehab it.
So going from your numbers 65% of 170k = $110500 then subtract $50,000 in repairs and that brings it to $60,500. Thats what an investor is going to want to buy the property for $60,500. So anything that you can get the bank to agree to and attorney’s fees and what not is what you’ll make.

Then if you are the end buyer. you’ll be in the property for about what 135K. If the houses are selling for 170 in the area, you want your property to be the least expensive in the area. Because if you try to sell in the 170 range with the market the way it is now. You may have to hold onto that property for a while. Possibly making mortgage payments on it month after month till its sold.

That was a lot of information, if you’d like a lil more advice you can send me an email to

THE OWNER CAN NOT PROFFIT FROM THE PROCEEDS!You can get into big trouble if the bank finds out.Explain this to the owner and if they still insist on it then WALK AWAY and make an offer after it goes back to the bank.