» Knowing How to Structure a Successful Foreclosure Deal » Posted by Realestator      

Knowing how to structure a successful foreclosure deal is critical if you will be using this Buying Method. Usually it works one of Two ways:

1. Offer the seller “Cash to Walk”. Simply ask the seller, “What do you need to walk away with?” You’d be surprised how little some people want just to be rid of the headache and heartache. They know they don’t have a lot of equity anyway in some cases, so you would be doing them a favor, and at the same time saving their credit.

2. Propose an “Equity Split,”. This is the most common way these deals are structured. For example, the seller has a $260K mortgage that is $15K behind in payments and fees, so they owe the bank $275K. The home could be listed and sold for $415K. Realtor commission and closing costs would equal $30K. This is how it would work:

$415K Sale Price

-275K Mortgage Balance/Late Fees

- 30K Commission/Closing Costs

$110K Net Equity - split 50/50 = $55K to seller and $55K to investor

The bank gets their money, the seller gets out of a horrible situation, and the investor gets a house with $55K instant equity. WIN-WIN-WIN

Now you’re probably asking if there’s $110K in equity in the house, why wouldn’t the homeowner just list and sell it themselves? First, because in order to make a deal of this type work, the homeowner deeds the property legally to the investor. The investor immediately brings the property current in its payments and stops the bleeding. Then the home is put up for sale, all the while the investor is paying for everything, something the homeowner could not do. If the property didn’t sell quickly, the homeowner for sure would have had their house sold at auction. So getting out of trouble and walking away with $55K is a dream come true for most of these folks. Remember, in the first 90 days the homeowner normally does nothing. So by the time you find out about them, there is little time left for them to do anything to help themselves.

Knowing how to structure a successful Foreclosure deal and which option to use depending on the circumstances will be a learning process. This is an extremely complex Buying Method, and one I definitely recommend you purchase a book, take a course, or even better, find a mentor to help you with the first couple of deals so you are confident you know how to do these transactions correctly.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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» Posted in Buying Methods on May 25, 2008.

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