How exactly are we helping the distressed seller?

[Craig Shrimpton]

All,

Please help me get my head around a basic principle.

One of the basic points in buying for cash from distressed owners is the investor is somehow helping them. I'm trying to figure out exactly how.

For example: You find a house that has an ARV of $100K and the buyer has $80K of equity. He's late on his mortgage and the bank is threatening to foreclose on the $20K balance and he comes to you looking for help.

You determine that due to neglect, it isn't worth $100K because it needs $20K worth of repairs to get it to $100K. You offer him $56K for the house thus leaving him with $36K in equity/cash after paying off the mortgage.

However, if he just lets the bank foreclose and they eventually sell it to you for $56K, isn't the owner in the same position? The bank can't keep more than they are owed.

What am I missing? (I think I know, but I'd like to hear the explanation)

Thanks,

Craig