:help
Recently, I came across a seller who was 3 months behind payments on February 8th.
He owed: 189k
House is worth: 300k
My quick offer to him: 205k
HE WANTED: 280k
He had the house listed for 3months at $360k, which is WAY overpriced and so it didn’t sell. He refused my offer and said there’s no chance b/c he wants more money than that. In fact, I know he actually got offended by my low offer.
I had this talk with him on about February 1st, and I told him that he doesn’t have much time, and that my offer is better than having the bank foreclose, ruin his credit, and leave him with no cash. He said he would try to get money from a family member, and if not, he would go with me.
I haven’t heard from him again, and now he doesn’t pick up my calls. :banghead
The million dollar question is:
How could I have approached this differently!? I hear about sub2 people who actually take payments over for the owner WITHOUT giving any additional money! What type of mentality does the homeowner have to not ask for any immediate cash on their equity, even if its a small amount?
Even if he’s 3 months behind, why should he take my low offer? On the 3rd month, the foreclosure process begins, but the bank won’t auction his home for another year or so, so in that time… he could still try to sell his home. I offered him 205k, but I know he could easily sell the home for 250k. And he still has time to do so, because even if he’s 5months behind payments and the house sells for $250k on the 5th month, then he can still pay off his loan and move on… and his credit wouldn’t be destroyed because afterall, he did pay off the amount… am I correct on this??
Somebody please shed some light on this… your perspectives and insights are greatly appreciated.
If he went 3 months behind on 2-8, then the bank probably didn’t even file the FC paperwork yet, so he hasn’t had a visit from his local sheriff. That’ll give him a kick up the ass when it happens.
Did you do due diligence? He might be asking 360 to cover a lien that he’s not telling you about.
If everything comes out good, offer 210, and tell him it’s your final offer. Don’t tell him this, but the reason it’s your final offer is because it’s 70% LTV.
Just send him a postcard every Monday morning telling him you’re still concerned for his situation.
Eventually he’ll crack.
Oh yeah, you didn’t lose the deal yet, you just didn’t get it, nobody said this is easy.
Well, I’m guessing that he found a better option. Namely, he maybe found a buyer to purchase the house for more than 205k or maybe he got money from a family member. Or he realized that even after the 3months of missed payments, he may still have time to sell his home (?)
In either case, I just don’t understand how some people allow investors to take over their mortgage payments while they may have like 100k in equity. I don’t understand the mental thought processing that goes on in that type of transaction. I guess I’ll learn it as I go on forward in this business… right now, I don’t feel too good that I wasn’t able to be more proactive with this deal that I lost. :flush
So, you offered him $16K for $111K in equity? Perhaps a better approach would be to ask him how much did he need right now to make his life easier. This may take some probing. Then you could work from there.
I think that you answered your own question. You said that he could easily sell the property for $250K. If that is true, then why should he sell it to you for $205K?
Even if that weren’t the case, many people in foreclosure are depressed and will “put their head in the sand”, completely ignoring the situation they are in. They cope with the situation by pretending it doesn’t exist. Frequently, these people will allow the property to go to foreclosure, even if it means that they’ll lose whatever cash you are offering. These people are often suspicious (and rightly so) of someone who calls wanting to “help them out”. They are not stupid and they realize that you are wanting to help YOU out (which is true). Therefore, even though it may be a logical move to sell their house to you, they won’t do it because they believe it’s a scam.
Finally, if their house is foreclosed upon they may still get more cash than you’re offering. When the property is auctioned off, anything that is received over what the bank is owed goes to the owner. So, if the bank was owed $235K and the house sold at auction for $260K, the owner would get $25K.
Why would someone give their property to an investor sub-2… because they are DESPERATE, which your seller is not. I have bought several properties “sub 2” and the owners would have done ANYTHING to get rid of their property. I’ve even had the seller bring CASH to the closing to cover the difference between their balance and what I was willing to “pay”. People in pre-foreclosure and even foreclosure and often not “desperate”, even though they should be.
Don’t beat yourself up over this. Not every deal is “gettable.”
It sounds to me like he’s a person of reasonble intelligence who knows that he currently has options other than selling his house at a fire-sale price. It also does not sound like he is not at the “need to sell fast” stage. He might need to sell his house to pay the loan off because he’s in a financial pinch, but he doesn’t have that “Man, I gotta sell this sucker FAST” mentality that you need your sellers to have.
Your first clue that this would be a tough deal was when he was not offering any discount whatsoever on the property. In fact, you say he had it overpriced by 20%.
I look for people who start the conversation off by saying that they will take a 10-15% (or better, preferably) discount on the property because they are looking for a quick sale, then go from there. At least then you have a starting point that you can negotiate down from to get to where you want to be.
Starting at 120% of ARV and trying to go to 70% is probably not going to happen, at least not overnight.
In short, I don’t think there’s anything you could have done to get this one. Keep an eye on it, though.
I did ask him and he said $280k is what he wanted, and that’s practically retail price. In his mind, he still wanted to profit from the sale. He bought the house only 2 years ago for $215k and said they did about $25k in repairs. So he didn’t want to take a loss.
Mike, I figured he would sell it to me for $205k to save his credit and just get away from the deal. But the more I look into it, it just seems as though this wasn’t the proper scenario. You’re right, my seller is not desperate. I guess he’s willing to take a hit on his credit and walk away with more cash, rather than save his credit and walk away with little cash.
Thanks Paul. I realize now that even though the situation may seem right, it’s like you said - not every deal is “gettable.” This seller didn’t have the “sell fast” mentality that we’d be looking for.
I appreciate everyone’s input, if anything should change I will let you all know! :biggrin
also if you have (and should have) multiple prospects going simultaneously then you shouldn’t be over-lamenting or :banghead right now…that’s the only way to play the numbers game w/o driving yourself crazy.
In the meantime I’d just send him those monthly Dave Whisnant “PR” letters and focus positive energy on other deals in the pipeline. :biggrin