Amanda,
I see a couple of problems here.
First, if you are sending out letters/flyers or have a “we buy houses” ad/sign and people are calling you, they are motivated. The fact that they picked up the phone to call you is a dead giveaway. People who don’t care if they sell their home or not would rarely, if ever, reply to these things.
Second, if they are calling you and they are NOT clear that you BUY houses (as opposed to financing help for troubled homeowners), then it’s not the sellers that have the problem. Either your ads don’t explain it clearly, OR you are conveying that message to them, either directly or indirectly when talking with them.
Don’t get me wrong. It will occassionally happen that you’ll get a call from someone that is just “kicking the tires” with your ad. They WANT to sell. They’ve seen your sign and are motivated enough to call. However, they may not be motivated enough to accept your deal. Again, though, the reason here may be one of two. One, they honestly don’t/can’t/aren’t ready to accept that deal, or two, the offer wasn’t presented in a way that it appeared win-win to the seller.
I don’t know how you explain the process of sub2 to your sellers, but from your posts, I’d gather that it might have something to do with the seller’s resistance to it. John Locke has a course on Sub2 investing that goes into great detail on how to deal with the seller. If you’re considering Sub2 investing, I’d suggest reading it.
Third, you say that they bought the property for $200k in '98 and that it is now worth $450K. That’s an average of a 15% per year increase in value. Definitely a hot market. IF all you are offering is to take over payments on their property, then yeah, I’d guess that they aren’t motivated enough for that.
I can easily shave off 20-30% from the FMV of the property and the sellers will agree to it. Using 30%, that gets the purchase price down to $315K, or $135K off the FMV. That means you would have to come up with $115K+ as a down, just to take over payments.
If the market is really hot, and it sounds as if it is, then the sellers could list for $350-400K, probably sell it for more, and sell it within days of listing.
I’m not saying all this to get you down, but it’s important to know your market. Your investing strategy has to conform to the market.
As for these sellers, the first thing to do is let them know that they can’t stay in the property. If they are unable to pay the bills now, then getting a new loan isn’t going to help them because those payments will be higher. However, you CAN help them save their credit AND receive the most money for their equity in the fastest time possible. IF they want you to work with them, you can immediately take over the payments on the property, and upon them moving, give the $X amount down (usually enough to cover moving into an apartment/rental). From there you will list the property and hold it to sell it for the highest amount possible AND split the profit with them at closing.
Using that, say sell conventional, putting it up with a GOOD REALTOR and it sells for $450K (because you won’t take any less). Assuming about 10% for closing costs, that leaves a profit of $205K. Knock of the $5k for expenses, and you’ve got a smooth $200K to split. Even a 70%-30% split leaves you with a $60K profit.
hope it helps,
Raj
