Want to help motivated seller

Please detail action steps so I may help a seller who is motivated and about to face forclosure.
Seller tells me there is $40,000 in equity, home value $115,000, repairs about $5,500, behind in payments $2,600, loan balance $45,000. Home is schedule for acution 7/11/09. Seller wants to sell to save her credit.

I’m needing step by step as to why to do this deal if a deal. I’m new and read many of the posting I know there are many methods used. All I’m asking is for help, you may pm me to do split.

Thanks for the support

Purchase subject2 or catch her up on payments and enter a sandwich Lease Option. Contract for Deed maybe to. My 2 cents anyway. Herbster
PS where are you? you can PM me that.

The first thing you need to figure out is how much the seller wants. That’s step one. That could be a deal killer alone. The next step is to verify the fixed up value of this house. The next step would be to get the title checked. Next, have an attorney close the deal for you. Then
take over the loan “subject to” make up the back payments and cash out of the house after making repairs or rent it. Done.

Couple of things bother me:

  1. You want to help the seller. You’re not in the business of helping people, you’re in the business of Real Estate. By selling to you, they can help themselves. Otherwise, you will take the wrong decision and hurt yourself trying to help them.

  2. “they say they 40k in equity” you did not verify this? I never trust what they say. Find out what the equity is like for sure.

Now, what to do with the deal…

What is your exit strategy? what do you plan to do with the house?

If all numbers hold true (I have doubts on the repair costs too):

  1. You get a loan from a bank, will require you to put 10-20% plus closing costs plus explaining why buying so cheap, plus holding costs till the house is purchased, fixed, and sold. So you’re looking at around $20k out of pocket ($7k closing costs, $5k down, $5k repairs, $3k holding costs). $45k + $20k = $65k.

  2. You take it sub2 like others suggested. You bring the loan current $2600, repairs $5500, holding costs till done then you’re out of pocket $11k.$45k+$11k = $56k. Assuming you do the closing yourself, there is a cost if you close through title company and if you get title insurance…etc.

Now, if you plan on retailing, then you need to look at the cost of selling and the realistic selling price. Most qualified buyers will want to give you lower offer than you’re asking price, ask for contributions towards closing costs, and realtors 6% so you’re looking at another $12k based on the $115k price. This goes from the proceeds of the sale, so not out of pocket expense.

$115k - $12k - $65k = $38k profit potential
$115k - $12k - $56k = $47k profit potential

Either way, keep in mind you may need to season it for 6 months.

If you plan on renting or selling on owner financing you need to keep in mind that you will have to keep some money into the house for long time so make sure you don’t need the money for now.

How much to offer her, I would offer her somewhere between $20 and $2,000. She is going to lose the house into foreclosure anyway and will get nothing but bad credit. If you want to “help” her and give her money, then it is up to you, but I would not go over $10k max. In the case of owner financing, she gets a second note payable when I retail the house in the future. Might give her $500 to $1k to move and rest as a note.