Why wouldn't owner just sell for full value??

Bird Dogs, Wholesaling
1

I was talking with some guys the other day who are in the mortgage business, about my desire to start investing in real estate by doing a combination of wholesaling, and rehabing. I reside in the over-heated So. California market. They were telling me it won’t work here because people know they can get full price for their property.

So that got me thinking and it makes sense what they were telling me. Let’s say someone defaults on their loan and the bank starts the foreclosure process. Let’s say there is 65% LTV on the house. Why would the owner want to sell to me for under market when he could easily sell for at market? Are we as investors just hoping to take advantage of someone who is not educated on the fair market value of their house?

2

Even though I have no personal nor REI experience with foreclosures, I would have to think that someone who is in foreclosure has major money problems. Regardless of how the money problems came about, finances are impacted to a great degree or they wouldn’t be in foreclosure and facing ruined credit for years. So these people probably are 100% leveraged or upside down in their mortgages. You mentioned 65 LTV but lets forget about motgages - there’s all kinds of personal debt (i.e., credit cards, student loans, medical, etc.) that they may have accumulated and that’s why the money isn’t going towards the house. It takes money to cure a default and reinstate a loan. By the time foreclosure is started they are 90 days in default - that’s at least 3 mortgage payments. I’m in Maryland and that’s several tens of thousands of dollars for some people!

Selling to you ( RE investors) means selling fast and quickly, usually for cash. And w/o a realtors commission to pay plus all the other costs associated with selling a house.

I think many people in foreclosure are also probably in a state of denial; they don’t want to accept what is happening until the absolute last minute before the sheriff’s sale or however it is done in any particular state. Then they need to sell FAST and try to preserve their credit.

Just MHO

3

I wandered the same thing before , but it comes down to “motivation” from the seller, usually a timing thing like pre forclosure, relocation, etc.

You are targeting people who need to sell pronto, this is why investors with cash on hand get the better deals as they can act in days.

If I was loosing my house, lost my job, had no money in the bank and no time but knew I could sell my house for 200k but the average days on market in my area is 60 days, that wont work, I only have a week, so I take the sacrifice and sell much cheaper to save my credit, and walk away with a few bucks…better than loosing everything.

I have also exhausted all my options such as refis, personal loans, I have no other choice
but to sell quick and cheap or walk away with nothing.

Alot of mortgage people will say what he did, and he is right regarding people who happen to be selling their house just to sell, why would they sell a house at 160k that is worth 200k, they wouldnt, they arent distressed and in no rush, no “motivation”.

My first week in rei someone at a rei meeting said to me :“You are looking for motivated sellers not houses”

Best advice I have ever got.

Also, dont listten to the naysayers, there is a ton of cash to be made everywhere, just gotta believe and find those people in need.

Good Luck!!