A motivated seller agreed to my offer to buy his property. Mortgage is $80,000. value worth $60,000. I will buy for $40,000. Now, what would happen to the ramaining $40,000. that he owes on his morgage? Im using a wholesaling strategy, flip the contract. Should I ask him to carry on a mortgage after he sells it to me? how would I determine my after repair value? My buyers like to buy properties from me that are value price higher than morgtage, what would be my exit stragety? help! please and thank you.
When you go to the closing table, you will bring a check for $40K + your share of the closing costs and he will bring a check for $40K + his share of the closing costs.
Keith
More information is needed. How many bedrooms? Baths?What would it rent for?What is the Value of the property after is is repaired to sale able condition? ARV= After repair value. I generally don’t care what the mortgage is but in your case the mortgage holder will have to agree to the short sale. The mortgage co will agree to take the loss=Short sale. If not. the Seller will get stuck owing the difference or they will not allow the sale until paid in full. Meaning that the mortgage holder will strike down your deal. You need more information to even see if this is a good deal, before making any kind of offer.
What i would do now is find out what the house is worth by asking a trusted Realtor or several of them, if it is high enough I would start calling your buyers list and see if you can complete this deal. If the value comes in lower than you have projected then, i would try to lease option the property, if the rents in the area support your pricing.
1st build your team.
2nd build your buyers list
3rd build your knowledge of the values in your area.
4th build knowledge of the process of wholesaling
5th make offer from #3 and #4
6th build bank account
Redhawk
http://i105.photobucket.com/albums/m201/wearingsa/MEACFansZone/hahaha.gif
Seriously though to the original poster, please go back and read what you typed. Now tell me does that make one lick of sense? I’m not trying to discourage you, really I’m not.
You need to back away slowly from this deal and start from scratch with your education. And I mean from scratch! :eek2
I agree Keith. This can’t even be counted as a “newbie mistake”, it’s an absolute “non wholesaling education” mistake. Thanks, the odds in the seller coming to the closing table with $ 40 grand on a house that is only worth $80 grand is going to be remotely slim to non existent. I bet the buyer is assuming you are going to pay it off. Thanks, please please please tell us that you have an inspection or finance clause in your contract that allows you to back out of this. Going back to what I said, don’t submit another contract until you get a solid education on wholesaling. This isn’t something that you can just “wing it”.
I may not agree how it was said, but besides that they are 100% right. This is NOT a deal… Sorry, but you need a few more sleepless nights getting your hands on some material to better educate yourself on how to do these deals. It is simple once you know how. If not it can be a train wreck. This my friend, is a train wreck.
The good news is there is a ton of free information on line. You can also get some good training courses that are fairly inexpensive.
I wish you the best of luck.
Here is a potential strategy for you. Find out what this property would rent for conservatively. Find out from the seller how much is the mortgage payment including taxes and insurance. If let’s say the seller’s payment is $600 (PITI) and the property could rent for $800, this would give you a $200 positive cash flow.
If this happens to be the case, take/buy the property for what he owes on it (subject-to strategy). You will then hold the property long enough until such time its value can recover or just let amortization works for you.
This deal would be a long term play.
I see what you’re suggesting there. I’d do that only if the seller would pay the closing costs and possibly even pay ME to take over the loan. The down side is even if he gets the house totally free subject-to he’d still be essentially speculating on the possible appreciation of its value.
Only strategy I’d even begin to consider with this deal is a short sale.
Even if the property does not appreciate, the debt is being paid down by the renter. If he gets the house for Free, the renters are the ones paying the mortgage. On a short sale, if the bank accepts a $40k short for the property, you still need to come to the table at closing with that cash. On a sub-2, providing the owner is not behind, he can get this property for free.
I do agree with you and its a good idea to ask the seller pay for closing costs. Even if the seller does not pay me to take the deal, its still worth it.
The point I want to make here is so many investors (experienced ones included) dismiss this type of transactions without really considering all the angles.
When I look at a deal I always ask myself…
- Can I wholesale it?
- Can I retail it?
- Can lease it with option to buy?
- Can I get a straight option on it?
- Can I take it subject-to?
- Can I refer it and get paid a fee?
- What is the highest and best use?
- Can I get owner financing?