The Part-Time Real Estate Investor: How to Generate Huge Profits While Keeping Your Day Job by Dan W. Blacharski & Jim Kim

Author:Dan W. Blacharski & Jim Kim
Language: eng
Format: epub
Publisher: Atlantic Publishing Company, Inc.
Published: 2016-10-19T20:48:59+00:00

Cash Back at Closing

This is one of those deals the real estate gurus like to boast about in their expensive seminars, but it almost never happens. Nonetheless, here it is for what it’s worth. It requires a desperate seller who has a house with no equity and who needs out from under it quickly. It also requires the seller not to be behind on mortgage payments.

The logic of the deal is this: The seller has no equity, and if they were to sell it through conventional methods, they would have to pay a real estate agent’s commission out of pocket. That could be substantial, often amounting to 6 percent or more of the sale price. Further, it requires the seller to be willing to sell you the house using a “subject to” private contract, and there must not be a real estate agent involved. The deal that you, as an investor, are offering the seller is to relieve the seller of the burden of the expenses involved in selling the house. In exchange, you get some of the money that the seller saves.

You buy the house from the seller on the “subject to” contract. You take over payments immediately, and the seller is then relieved of the burden and can move on with their life. The seller does not have to pay the real estate agent commissions and other marketing expenses, and so the seller agrees to split the difference with you. For example, suppose commissions and other marketing expenses would have totaled $10,000. Instead, the seller pays you $5,000, and then both you and the seller are $5,000 ahead of the game. You can point out to the seller that they may even be further ahead than that. Suppose it takes an average of six months to sell a house in your area, so that means they would have to shoulder the burden of making mortgage payments for six additional months, in addition to the sales expenses.

How do you convince a seller to pay you $5,000 for the privilege of buying their house? That’s the $5,000 question, and the answer is, most of the time you won’t be able to, even though on paper it looks good. But in a few rare cases, this is actually a good deal for the seller, because they may well wind up losing more money by not paying you.

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