Ok im a little confused about exactly how the motivated seller gets paid. Lets give an example and remember these #'s are only examples:
- Motivated seller wants to sell and owes $80,000 out of $100,000 loan.
- House can be sold for $140,000
- Motivated seller has $10,000 of backed up payments and needs to sell. So in reality the total owed is $90,000 ($80,000 loan balance+$10,000 back mortgage.)
- Motivated seller calls me and I put her in contract. I only want $5000 assignment fee.
- I find a buyer.
My question now is how much do i market the house to the buyer for and how much does the seller receive? I mean once we close the lender gets the $90,000 and how much should the seller get? I know it sounds confusing but can anyone show me some examples?
Your question isn't confusing at all. From your example, the seller owes $90,000, and you want to make $5,000, so the very minimum you could market the house to a buyer for would be $95,000. If someone agreed to buy it at this price, you would get your share ($5k) the mortgage company would get their share ($90k) and the seller would not get any money at all. Most of the time, sellers expect to get [i]something[/i] if nothing else than for "U-haul" money to move their stuff. A more likely scenario is that the seller would have to sell their home but need $6,000 out of it for whatever expenses they have. In this case you would have to try to find a buyer for the home at $101K- (90k for mortgage co, 5k for yourself, and 6k for the seller.)
A more practical way of getting your assignment fee is to put the house under contract for 96K, (90k mortgage co and 6k seller) and then charge the buyer your 5k fee to assign the contract to him. There are different ways of getting your fee, read around and get educated on what all methods their are and check to see which ones works best in your area (legality, mortgage companies/title companies/RE agents willing to go along with it, etc)
Hopefully that answers your question
So i guess the seller has to be really MOTIVATED to accept a deal like that. Because some of these dead beats think that they would be putting something in their pockets. I mean even in some of the preforclosure deals ive seen some of my friends do, they pay the seller a couple grand to deed the property to them. A person like you or I would NEVER accept an offer like that. I guess most of these people are probably going to be in default with their mortgage or owe HOA dues or property taxes. What if the seller starts questioning you about equity and all this junk whats a good response to tell them when they find out that they arent getting a dime? Also so you’re pretty much offering the loan balance to the seller as the purchase price correct?
I know you didn’t ask this question but make sure you take into account any repairs that are needed as well. There is a formula investors use to help guide them to an offer…
ARV * .70 - Repairs - Your Profit
Hope that helps