I found a preforeclosure house and I contacted the owner and this is the situation. My exit strategy is to assign the contract.
76 days in preforeclosure
2 weeks away from auction
Appraised value is $500,000
Asking around $469,000
Needs about $15,000 repairs
Loan balance owed is $389,000
Default amount is $13,000
She is in a hurry to sell the house before it becomes foreclosed BUT she still wants $40k out of the deal to save for her kids college fund and have money to relocate to Georgia.
Obviously, giving her $40k would make the deal not very good and so I was thinking more around $8k.
My question is, what do I say to her to negotiate the deal to where it would be worth it for me to pursue?
Even though she’s about to lose everything in about 2 weeks, she still wants $40k if I were to buy the house. What is my strategy in bringing her back down to reality?
I would break it down for her like this. If she could sell it for appraised value which is doubtful especially in a time crunch it might play out like this.
500k asking price
485k offer price
30k just in commissions 6% for realtors
15k 3 % closing costs or sellers concessions
13k atleast to cure default
15k repairs
412k to her best case scenario
Her reality is her perception of the deal. You have to shift her perception or “customer concept”.
Try to paint a picture of the big bad bank taking everything from her at auction and she will be left with nothing not to mention the fact that they could come after her for any deficiency or default costs.
You could also pay the default amount bring the loan current and split any proceeds with her if you market the house and find a buyer quickly.
Yeah, but it’s a good starting point. As you know, or maybe you don’t, the laws in every state are different regarding foreclosures. Telling someone something for Wisconsin is useless in California and vice-versa.
Remember not to get to frustrated on a deal, it will drive you insane. Figure out what your numbers need to be and give her an offer and let her know if its for cash or financing since time is running out. IF she says no, go elsewhere but of course contact her in about 2 or 3 days and give her the same offer again…The once you have 1 week left to the bank takes it, lower your offer by 10%…keep offering it but dont worry if she does not accept, its her loss not yours…
Also you can also like mentioned before do an equity split… Talk to bank about a short sale… then when you sell house for a 100K profit, you can give her money…tell her she can have about 25% of the equity or 40K, whichever is greater…
rkmin-
Forget giving her 50%. It is not going to be her house in 2 weeks and in all honesty she doesn’t have a whole lot of negotiating power. First start with asking YOURSELF what is it worth to you. Decide that first, then be straight with the owner about the bank process. Like seanmathes said "point the big bad bank picture and don’t give her more than what she deserves. YOU determine that! There are an abundance of opportunites out there and if she is fixed and stuborn on what she thinks she deserves… she may have to learn the hard way. Run the numbers, break it down for her, and make your profit. What if you give her 50% just because and the house sits on teh market for 3-4-5 months… well you didn’t plan for that, but at least she got her share and you THOUGHT you did. If your doing the work, you get paid. I’m not saying to rip her off by any means but take care of your expenses and account for possible expenses. Good Luck