OfflineSo I have read about half of Profit from Real Estate now and I am all fired up. I was so confused this week about contracts, then I read chapter 8 and it was like all the answers to my questions just fell in my lap. My have done a lot of research about pre-foreclosures. i understand the concept of dealing with an owner who is motivated to sell. i understand finding a great deal below fair market value. What i'm having trouble with is seeing how an owner gets to keep equity in their home if a sale is done. so lets say a property owner owes $150,000 on his property. The home is worth $200,000 after running an analysis. I come in as his problem solver an offer $155,000. This pays off his loan and then I re-sell to another investor for $160,000 making $5,000 profit. Where does the owner keep his equity? I am seeing that he potentially has $50,000 in equity in this example. Am I not seeing that correctly? Or is it just that he can walk away from the home. thanks for your reply
what does it mean for an owner in pre-foreclosure to keep equity?
Posted on: Thu, 07/02/2009 - 17:20
what does it mean for an owner in pre-foreclosure to keep equity?
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- by buffs28
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If the owner's house is foreclosure on he/she looses that equity they may have build up over 5 years or 20+ years. You create the instant equity for the buyer who may require financing because that's part of what may break the deal apart because if there isn't a certain amt of equity in the home the bank won't fund the loan. If they (owner) sells the home they retain some of the equity, not all, that they've build when they brought the home. They pay off the debt because they might not owe that much on the home. Does that make sense? Or do you need me to further explain. Equity is basically a cushion.
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When a home owner is in pre-foreclosure ,and they receive a letter from their mortgage lender. That means that they are at least 3 months behind , right? So lets say that they have 91% equity in their home. The market Value is $199,000 and their Loan amount is $18,000. My Question is how do you know what to ask as far as a selling price or how do you get it refinanced and for what amount?
Silknotes
If you purchase the property for more than what is owed the seller gets to keep that part of his equity. If it is only 5000 dollars more than what it took to pay off all the debt the seller would get the 5000 dollars. If FMV is 40 or 50,000 more than that the seller loses that equity. You however will be the beneficiary once you resell the property
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Preforeclosures with no equity are more common. If the seller owes as much or more than the property is worth you still may be able to negotiate a deal. Once you have analyzed the property and determined an offer amount make an offer to the seller even if it is less than what is owed. If the seller agrees to accept that offer subject to the lenders release of the note you can contact the lender and see if they would consider a short sell. This is where the lender is accepting less than what is owed as pymnt of the debt.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
the offer made for the pre-foreclosure is towards the owners equity an not the actual loan amount? i really want to know what am i offering the owner to sell me the house to re- assign it to a buyer ?
we go hard or go home
All of the lien holders are paid off first. If there is anything left it's the sellers. Sorry this took me so long. I am sure you have the answer already. Somehow your msg got lost in the shuffle. I do apologize.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Hi,
I thought,I saw a port-hole in what i was reading with pre-foreclosure equity.
I can see it would be a better deal to avoid short sale,After all of the flyers and post cards and contacts that were made. Thank-you for giving alittle;Your friend
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