I never thought this would happen to me as I am just a beginner at Real Estate Investing, but out of the blue I had a phone call from a friend of a friend who got a divorce and now has a vacant house he cannot afford.
He called me up and this is what he said to me:
“Hi Amy, this is John. I am friends with so-and-so. I have a home that is sitting vacant and I am really close to foreclosure on it so I need to sell it. I have it listed on the MLS at $139,900. It is 3200 Sq. Ft. 4 bd/ 2 ba. If you agreed not to go with a realtor I would be willing to sell it to you for 130K. I owe about 125 K on the mortgage so I wanted to be able to walk out of this with at least $2,500 to buy my mother a new furnace. I have no money and am a very motivated seller.”
I asked, “Are their any repairs needed on the home?”
He said. “No, nothing needs to be repaired. All that may be needed is some cosmetic work, new paint and carpets.”
I am having my mother go to the home and have him show it to her tommorrow so she can take a ton of pictures of it for me and give me her opinion as I have not moved to the area yet and therefore cannot see it in person.
He is a friend of one of my friends who I trust completley. They are in the same neighborhood. All the surrounding homes are being sold for 170K so I am sure I could resell at this price after just doing minor cosmetic changes.
My question is… since there is no realtor, how should I write up a purchase offer? Also, with his money situation, owing 125K & not having any money, what would be the best way for me to make this work as a win-win situation?
What would you do in this situation? Is 130 K a good deal on this? Thainks, Amy
This is only a deal if you can buy it subject to the mortgage. Pay the back payments to the mortgage company and give him the $2500. Do you have the cash to do the down stroke and repairs and make 5 or 6 monthly payments.
Make sure you know all the expenses to the mortgage company including late fees, attorney fees etc. Got good repair estimates on the pain and carpet and misc repairs. It all adds up. Estimate too the closing costs when you sell including 4 to 6% commission and title insurance. The $40,000 spread can get thin quickly. If you can not net $10,000 quick you may want to think twice about the risk.
UtahREI, do you know what te rents are in the area? If you can get about $1100-1200 you can at least have a small cashflow if you buy and hold for a while.
I smell a rat here. Listed on the MLS for 20% under market and no offers…come on. Is the house REALLY worth $170K? I think not. All it needs is carpet and paint?
Have you mom check it out; IF it looks OK the go there yourself and double check it.(even it means a plane ticket and a day off from work).
I agree with the other post about checking local rents, but I think you will find that this “deal” presented by your friend is not so great after all.
In the end, you have to check out all deal; many don’t work…some do and make you good money.
My Mom saw the house. I am not getting it. Layout is really bad, none of the rooms are square, all these weird angles in the walls. Plus, there is a metal spiral staircase to the basement. I think that would be dangerous for little kids. When my mother walked into the house she said it reaked of cat piss. There was junk all over the place. The house looked like it had never been cleaned. Don’t think I wanna deal with that. The other homes in the neighborhood are 170K and this is the same size as all those, but I think that with all the bad things this home goes for it, 130 K is still way over priced.
Question for everyone on this… the very first part… I am in Ohio and you have to be a realtor or broker to list a home on MLS. She said they listed it on MLS - a For Sale By Owner can list on MLS in your city?
if this is someone you might want to talk to again, offering 80K will very likely piss them off as it a super low ball offer; plus nobody goes $55k in hole on a deal like that; they will let it go to the bank first.
a short sale is a tough road since the abnker will think its worth a $170 (like you first thought)
lol Worst they can do is say no, right?