Scenario

I received a call from my partner’s bandit sign (I Buy Houses, Full Price, All Cash or Terms any condition, any price)

I spoke with a Mr. Sam Brown who said he had a house worth maybe $150,000 with $154,000 loan on it. I asked him “what he would like to see happen.” He said he was just looking for someone who would take over his payments. I then asked how much work needed to be done. He said maybe $10,000 worth.

Next, I asked how far in arrears his payments were. He indicated that they were current…for the moment. I then asked what he would do if I were not able to help him. His comment was that he just wanted to walk away, and that he had no cash and would not be making any further payments, regardless of whether I took the house or not.

I told him I'd call him back the next day after checking the title and getting some comparable value information together (comps).

The comparable sale in the area showed the property to be worth perhaps $155K to 160K after fix-up (still no equity for me).

I then calledMr. Brown the next day and arranged to meet him at the property.

After seeing the mess (broken windows, a yard full of trash, weeds up to the windows, windows frames that didn’t meet the walls, peeling linoleum on the floors, dry-rot and termites), I commented to Mr. Brown that I could see that he was really in a pickle on this one...he agreed and reiterated that he had no money and had no choice but to let it go back to the bank if I didn’t want it.

After inspecting the house, I determined that actual refurbishment to a reasonable cosmetic condition (with good but cheap labor) might run no more than $6,000 to $7,000. I reasoned, as well, that by keeping the loan in place and asking for $10,000 up front from a resident beneficiary on a 50:50 equity share, I could get all the work done. I figured I could advertise it at $165,000 and perhaps be able to start out at break even (without cash out of pocket).

I then had Mr. Brown sign a 15 days option (tried for thirty, but he was afraid of having to make another payment). Upon handing him the option to sign (with a dollar bill stapled to the front), I also gave him an unsigned copy of the Purchase Offer (Appendix #1 of the 10-Step Process of Documentation Manual), explaining that the dollar was just legal consideration (‘stops them from asking for an option fee).

I next beat it to the county court house and recorded the Memorandum of Option, then over to the newspaper office to run my ad:

NO BANK QUAL
NO DOWN
NO CRED. APP
3 Pmts and Clos Costs
Moves you in. $165K 3+2
Needs TLC. xxx xxx xxxx

I next had my friend “Bob” put a coat of gray paint on the front of the house and had him frame all the window and door openings with 1X6 boards. He then painted all the trim a nice bright white. We then took all the trash that was in the front yard and threw it in the back yard. Next, we Roto-Tilled the front yard and planted some flowering plants along the front of the house. After two or three hundred dollars at most, the house looked quite “cute” from the street. The plan was to THEN start work on the rest of the house, in hopes that someone might drop by and offer to do the rest of the work for a reduction in price.

After the front of the house was cleaned up the ad calls started coming in. One after the other I repleated the same mantra:

I have the little property over there on Xxxx Street and if you can afford the 9 or 10 thousand that it’ll take to get and the 1,200 or so in monthly payment after you ad the tax and insurance, I’ll just give it to you. The only thing I want out of it is to

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