Will the owners balk at this offer?

I live in the Chicagoland area. A house in my neighborhood is in foreclosure. Here are the facts:

  1. House needs new windows, top and bottom. I would put glass block windows in the basement windows and maybe in the upstairs bathroom if it faces the street (It is a corner lot).

  2. House also needs privacy fence, a new roof, gutters, aluminum siding (under where the roof extends out from the house about 2 to 3 feet).

  3. The garage is wooden and needs a roof and a paint job and to replace the wood near the roof and probably in other areas I don’t see.

  4. It might need concrete for the walkway from the sidewalk to the stairs.

Basically the people who own this house did almost nothing to it from the time that they moved into it (about 12 years ago), but it has the potential to be a great house. I’ve noticed this for years.

First, what is the best way to estimate these repairs?

Second, do any of the repairs above indicate that there are other problems with the house that need to be taken care of that can’t be seen from an outside visual inspection?

Third, original mortgage balance was close to the purchase price of around $81,000, but now is around $55,000, but I have to verify the current mortgage balance. The Lis Pendens notice was on 9/29/05, so the seller has until the end of April (7 months). I plan to send a letter to them soon.

Fourth, if similar houses in the area are selling for about $145,000 (not on corner lot and not across the street from trailer park), and all this work needs to be done and I take the ARV as $145,000 and multiply this by 75% and back out the repairs, will the seller balk if the amount is the same price as what he paid for it 12 years ago?

I would love to rehab and sell this house. It would be my first, but if it seems to be a huge job, I could wholesale it to another investor.



The seller can balk – they will really balk when the sheriff sets them and their possessions on the curb. That’s what a foreclosure can look like.

The seller should be glad that someone might be able to save them from having a foreclosure on their credit!

As for the repairs, a bad roof can lead to various and SIGNIFICANT interior issues – rotten everything, wet ceilings, wet insulation, electrical problems, etc., etc. In areas of bad weather (hummmm, like Chicago!) bad soffits (the boards up under the eaves) and fascia (the “facer boards” right under the edge of the shingles) can be destroyed and open the property to further damage also.

The best way for a new investor to estimate the repairs is to get contracts in and give you an estimate.

My two cents…


I think it’s important that you read the forum topic on “equity stripping”. You just can’t take 25% of the seller’s equity and be comfortable that the regulators won’t be breathing down your throat. Rule of thumb: Always make it a good deal for the seller.

More important. What do the sellers want? What do they need? With an existing loan balance of only $55K, why not take it over and give them some moving money, promising them a little of their existing equity plus 10% of future appreciation after you refi or sell in 3 years? It can easily be done without violating the DOSC and is a GREAT deal for both you and the seller. No problems with regulators.

You can turn around and make a nice monthly income, plus a whole lot of equity on the back end. Good luck and keep in touch to let me know how you do.

Gary, could you please explain the part of his post that has something in common with fraudulent equity skimming. It is not illegal to pay below market value for a house. If I missed something or misread something, please say. If I misunderstood something, I would like to know. Thanks.

There is a thread on equity stripping. No, it’s not illegal to pay below market value for a house and I wouldn’t do otherwise. I’m referring to pre-foreclosure situations where vultures swoop in and take a major part of the existing equity. Regulators vary from state to state but frown on this and it’s important to know your local foreclosure regulations. I didn’t mean to infer that she’s doing anything illegal. I just like to protect at least some of the seller’s equity. Keeps the government at arm’s length and it’s Good karma.

I looked up equity stripping, and the illegal part…at least one…is when an unscrupulous investor offers to take over the mortgage, AND ALSO promises the owner that they can buy their house back, often with them paying much higher premiums. Then if they miss a payment, they get evicted. They often make the monthly payments so high that they know there is a high chance of them not being able to make them. Other ways involves some fraudulent dealings with lenders and 3rd parties, but the ones I read about seemed to involve some kind of fraud, or else it involves an investor trying to do something unscrupulous. I’m sure all honest investors would want to see this kind of thing stopped.

When you mention equity stripping…and only say something about the investor taking a major part of the equity…then mention regulators and laws ands such, I have to say that I consider you leaving out the fraudulent part misleading. Just the part about taking equity is not illegal as far as I know. If it is, I would like to see the law.

This is why I was confused about your post bringing up equity stripping. I feel you should have mentioned the real illegal and fraudulent parts. Just mentioning equity stripping…and only talking about an investor taking equity is misleading in my opinion. Personally, I wonder why it was even brought up, considering the original post. I do not see the connection.

Regards, Tony.