Realtors - How do i sell a house that has no equity? - Real estate investing

Joe: Welcome to my video series for realtors. As most of you know, I teach real estate investing and one of the things that I found out is that when a real estate agent would get involved in my program and start implementing the techniques and marketing ideas and the strategies and investing techniques that I teach, their real estate agency business would explode; their commissions and sales would go way up. Joe: What I'm going to do on this series of videos (and they're going to be a bunch of 3-5 minute videos) is answer questions that I've received from agents all over the country and try to help them take the ideas that I teach and put them into perspective and into use for realtors so that you can use these techniques. I'm just going to get right into it and start reading the questions and give you answers. Linda: "Dear Joe. I've got a seller who owes $165,000 on a house that is currently worth $170,000. If I list the property AND I sell it for full price, he'll have to come to closing with nearly $10,000. He wants to use me but he just can't afford to pay my commission. I even thought about listing it for free because he's a past customer but he couldn't even pay the co-op fee if another agent brings in the buyer. What do I do?" - Linda from Austin, Texas. Joe: Linda, this is a tough situation and its happening all over the country right now. People are running into this situation everywhere, and actually this is something that happened to me back when I was a realtor. Joe: I was a realtor for about 7 years. I was also a top producer and we did a lot of listings and had a lot of sales. We ran into this situation a lot and I didn't know what to do with it, either. We'd go to the listing appointment, we'd think we'd have something really solid going and they'd want to list their property, but then when we told them that they'd have to come to closing with 10 to $20,000 just to sell the property (and I know in more expensive areas its even higher than that) it made it impossible for us to do that. Joe: So, some of these techniques that I'm using now for investors creates some different opportunities. One of the things that you can do in this situation: so let's say we've got this property and $165,000 is what they owe, and it's worth $170,000. They want to get rid of that property. They want to buy another property. A lot of times, what these folks do is sell it to us. Joe: By the way, if you go to for sale by owners and they'll say, 'This is a for sale by owner' and you went to them and you said, 'I want to list your property,' they really don't want to talk to you, but if you say, 'I want to buy your property,' then it changes everything; it changes the whole dynamic of the situation - because that's what they're advertising for. Joe: Now, if you've got one that already wants to sell and they trust and they want to work with you and they need to get rid of that property, one of the things that we can do is buy it from them and buy it "Subject-To". Joe: We don't want to use our credit. We don't want to use any down payments. We don't want there to be any risk in the deal. Those are my criteria when going into this. Some of you know the story and the experiences that I went through in California. I don't want to repeat those bad experiences again, so what I want to do is make sure that it's going to be safe. I'm not going to have any money and no credit or risk in these deals. Joe: One of the ways that we can do these is buying the property subject to the existing loan, which means essentially, and the very basic concept here is, that they're going to deed us the property and we're going to start making payments on the loan. Joe: We're not qualifying for the loan. We're not having our credit checked. We're not giving them any down payment. In fact, we're not going to ask them to make the next month's payment (because interest is paid in arrears, so if they pay on the 1st coming up, that'll have covered the interest for the previous month) and it'll also give us a month to go out and find either a tenant or a lease option buyer and gives us 30 days to do that, so it's a very safe way to do this. Joe: You can also set this up so that you buy it on a purchase agreement without transferring the deed and give yourself 90 days to find a buyer during which they can continue to make the payments, and then when you find a buyer then you can have it close and have it transferred over to you. When you get a little better at doing this, you can just go ahead and have them do it and have them transfer it over to you, and then you'll own the property. Joe: So how are you going to make money on the deal? (Because that's the whole point here, right?). One is owning a property like this. First of all, you've got a little bit of equity in it. You didn't have to put a loan in your name. You didn't have to go out and get credit. You didn't have to put any down payment down. You didn't have to pay any closing costs. This is a really beautiful way to buy property. Joe: By the way, if you're wondering if buying subject to the existing loan is legal, it is. Look on your HUD statements. It actually says "loans taken subject to". There's a line for that. It's right on there on the HUD statement. It is legal to do it. There are some things like due on sale clauses, insurance issues and things like that which I'm not going to get into on this quick tape, but that's one of the things that you can do with this type of deal. Joe: There's other things that you can do as well like put a lease option buyer into the property. I'll get into those in some of the later videos that we're going to talk about as we go. I hope that helps.