****SUBJECT TO***** Should I reveal my plans upfront to the owner?

Question

Good morning BP,

I am interested in buying a 4-unit building in the suburbs of Milwaukee, WI. It is currently FSBO for $210,000.
1st - I think the owner priced the property at least $20,000 over market value. I am estimating the value at around $180-185K. So where should my starting point be for my offer?
2nd – I would like to propose a subject to existing financing clause into the contract. Should I wait until I see the property and evaluate if I even want to purchase the property, or should I inform the owner immediately that I would like to perform the “subject to”?
I did conduct some due diligence. The tax records are in the owner’s name and they state that he lives in one of the apartments in the property, but the listing also contains a telephone number for Denver, CO. (Hopefully this will increase his motivation) Public records leads me to believe that he is quite elderly.
Thank you in advance for all inputs and suggestions.
William S. Newman
NIT Realty
A Limited Liability Company

Ronald Jones · Answer

Hi, William. Based on the information you have given, there may not be an existing mortgage. Seller might own this property free and clear. If so, you would want to make your offer based on "seller financing". With this creative method of purchasing, you inform the seller of how he literally becomes the bank and makes much more than the purchase price because of the interest he will receive from the financing.

Wayne Brooks · Answer

Apparently you also have no idea of what financing is in place, that you would want it subject to.

William Newman · Answer

@Darrell Shepherd, Thank you for the excellent advice. I know at times I could be a big dreamer, but I am also a realist, and your comment makes sense. You never know until you throw that line out and see what bites. Might be a big fish, might be an old sneaker! I will most definately use your approach. I have to remeber, that I really am here to help the seller, and to obviously make money!

Darrell Shepherd · Answer

Get all your info before you submit any offer. This includes how much they owe, at what rate, etc. making an offer subject to without knowing this info doesn't work. You need to make offers that make sense to you and your seller. You begin by asking what his needs are, why he's selling, etc. When I make sub2 offers I say things like "since this loan is already in place it doesn't make sense to pay it off just to go get another one". Or "I can pay you more if we leave this loan in place". 99% of your sellers will have no idea what sub2 is and a confused mind will always say no, so you have to approach it right. I don't want to spoil your enthusiasm, but generally speaking people don't sell houses subject to unless they have a reason to, so you've got to approach it right. I've done a LOT of them, but I got them from highly motivated sellers. Making Sub2 offers to things listed in MLS is going to be a low percentage ball game. Make enough of them and you'll stumble into a motivated seller, but it may take a while...

William Newman · Answer

@Dorothy Templer, Thank you for the extra motivation. Those were my sentiments exactly. He must be ready to leave rentals alone and go relax. I will relieve him of his troubles. Do you suggest a call or email? I can explain more through email in a concise manner, but the phone call is more personable. Decisions, decisions??????

Dorothy York · Answer

By all means, go with all of the good information you are getting from people on this forum who have been there, done that. But don't lay awake at night dreaming about this deal because my experience with multi unit owners in the Milwaukee-metro area is that they have unrealistic expectations about price of their properties. Add that he is a FSBO, and those expectations go even higher.

William Newman · Answer

@Ronald Jones - Right. All I can do is ask. Don't think myself out of making actions. Just dive in and see what happens. @Bill S. - Thank you for your post. You're correct. Just trying to see all angles I could possibly play. The property is in a great area and depending on the terms, the passive income would be great to have

Bill S. · Answer

Area code for a phone these days means nothing. Just that they bought a phone in Denver. Might even be a google voice number because they have family in Denver that set it up so they could make local calls to the grandparents. The seller doesn't want their home number on the internet so is using the GV # to screen calls. Don't infer too much from the area code.

Ronald Jones · Answer

By no means. If he gives you the details, you have more information to work with. If he doesn't, at least you tried. Remember, it's not personal...it's business. I have had sellers give me the info and others tell me to get lost in the meanest way. Nonetheless, it is a part of the business.

William Newman · Answer

Hi @Ronald Jones. Thank you for the advice. Is it out of line to ask the seller how much he owes on the property?