I am trying to figure out what to offer on a home that I would like to buy. It would be subject too purchase.
Value is 155,000
Balance on mortgage is $135,000.00
PITI is $1,270.00
I was thinking of taking over there mortgage and asking them to pay me 3 payments.
Why would they pay you 3 payments?
I could understand them paying you maybe if the value was below the owed amount. They could retail it to someone with a realtor and walk away with cash in their pocket rather than pay you cash. Are there details you are leaving out that would cause you to think this is possible?
To get the house off their hands. If they hold the house for sale for three months, they lose most of that money to interest anyway. If they need to sell now, even at a loss, but don’t want to bring a check to closing, they may accept this. I’ve not done it yet, but know a few other investors who have managed to get this type of deal.
Yes, if they have time to wait for a buyer to come along. Which could be how long from now? They still have the monthly payments to pay. Sometimes the seller just wants it to be over now, and will give you those payments for peace of mind.
Also, if they’re having trouble making payments, how will they be able to come up with additional cash at closing if they sell for less than they owe? Provide them a way out via this payment plan.
Start by asking for more, say 6 months, or 1/2 of the payments over 12 months. Worst they say is no, and then you reduce the time frame.
Have your conversation go something like this:
Hello Mr Seller,
I want to buy your property from you, but my money is tied up in other investments at the moment. I just bought XYZ Main St, and don’t have money to put as a down payment. However, I have monthly cashflow and can afford to take over your payments. My plan is to rent the property, but it’s going to take me some time to fix up the place, and find a tenant. Tenants can be difficult to manage, but I do it for a living. If you keep this home on the market, and it doesn’t sell in six months, your going to be out an additional $7620. You do know winter is coming, which is the slowest time for selling real estate. There are so many other properties for sale out there, I cannot buy them all. But I can offer you the following: I will take over your payments, but you need to pay the next 6 months of payments, to give me time to fix and fill the property. You get the peace of mind knowing the house is sold, don’t have to come to closing with a significant amount of cash, and you can move to Florida, or …(insert other good thing related to their motivation). I know you’ll follow through on the payments, because you don’t want a our loan agreement to show as a default in your credit report. I know it’s perhaps not a good as you were expecting, but that’s the best I can offer. Has anone given you a better offer?
If they don’t accept, check back in a few months to see how things are going.
You have an unsecured payment from the seller in most cases, but if they are really worried about their credit, they will likely pay. Secure it against other assests when possible. At worst they skip out without ever paying.
Use the 3-6 month time period to rent, lease-option, or resell the property. Any cash you get in that time frame is all yours. It’s equivalent to getting 0% financing for 3-6 months.
Now the real question is, can you get someone to pay you at least 1270 a month?
In reviewing your script to a potential seller, here is my take.
“I want to buy your property from you, but my money is tied up in other investments at the moment.”
Your opening negative statement tells the seller you are broke. Not exactly what a motivated seller wants to hear.
“I just bought XYZ Main St, and don’t have money to put as a down payment.”
Unless you just bought a property at XYZ Main St, it is a lie and to tell a new person this is the way to start their investing career, he would be better off selling used cars.
“If you keep this home on the market, and it doesn’t sell in six months, your going to be out an additional $7620.”
They have to live somewhere so where is the savings, unless it is at the Salvation Army.
As far as seller paying 3 months in advance I only know of one course that teaches this, but I am sure since both out you only had one post when you became involved in this thread there is no correlation.
The majority of sellers in a Subject To deal, need help for one reason or another and asking them to make 3 or 6 months worth of payments while you find a buyer is not what I would call having confidence in your investing methods, let alone making it a win/win for everyone involved.
Either you are going to take on the responsibility of purchasing the house and finding a buyer, or you are acting just like a real estate agent, only brokering without a license.
Just an opinion, of course I have done enough Subject To deals to know the difference.
John $Cash$ Locke
Yeah asking for payments is taught by one guru as far as I am aware (and I almost own them all). I would not rule out using it, but I would definitely not consider it unless I am willing to walk away from the house. There are situations where the owner owes too much or the deal is risky and may take a while to find a buyer for it, then I may consider buying is if they paid me some kind of a difference since I have nothing to lose and I was planning to walk away anyway (never done it though… I did have one offer to pay me $10k to buy their $84k house but they owed $86k). With $20k equity, they won’t take the offer and it will be suicidal offer that would be difficult to recover from if they rejected it. Chances are, they want some money.
If the reason you want to make such offer is because you have no money to make the payments then you would not take on the deal unless they made the payments. In that case, it does not hurt to try it. You have nothing to lose anyway. But if they don’t make the payments, then you should. At least thats my phylosophy.