Estate Sale

[Anthony Silver]

Hello BP,

I am an investor newbie who only has a couple of deals under my belt. I currently have 3 units that cash flow pretty good, but I'm looking to expand my passive income portfolio. A couple of weeks ago I was approached by a friend of a friend with a deal. She and her siblings inherited 4 SFR's with loads of legal issues. They have possession of 3...One needs total rehab, one needs minor rehab, and the other needs to be torn down. They have fines and tax liens in access of 8k. I could get all three for less than 10k.

With the extent of work needed, I was ready to walk away from the deal until I saw the forth house.  It is a fully rented duplex that their mother did a Contract for Deed in 2008.  The buyer was to fulfill the contract in 2012 but never did.  For the last 3 years he's been collecting rents, but not paying taxes or loan payments.  My seller has inherited this problem with no means to retain legal representation to rectify the situation.  There is a tax bill of 22k on the duplex.  So if I buy, I could get possession the forth has relatively easy.

I have nothing signed with the seller, but I made it clear that I would consider a deal without the forth house.  She just wants to be done with the ordeal.  I believe that it will take 65k to tear down and rehab all the units, so that makes 97k for 4 units to which will rent for 800/month. So I'm looking to cash flow about $200 a door after expenses. 

My question is how should I approach the purchase agreement with the seller to protect myself in case I'm not able to get the forth property. Or is this deal even worth the time?

[Account Closed]

An idea that I might try.

• Write a simple skinny contract of sale one for each property
• Make the contract subject to and contingent on third party assignment.
• Subject to lien and judgment report (you need to know what is in the chain of title)
• Get good comps, you need to know the estimate market value
• Need to determine the estimate potential equity
• Once you get a list of liens, attempt to negotiate a discount; write an option to purchase the liens at the negotiated discount.
• Negotiate with a local auction company to sell them at public auction; auction them all in one day.
• The auction should be a "reserve" sale, the reserve is UNDISCLOSED TO THE PUBLIC
• The terms of the auction; as is, all cash and subject to the approval of lien and judgment holders and record owner
• Use banking days in your contract (gives you more time to close)
• Make certain you use an auctioneer who sells real estate regularly and has a god reputation
• Questions to the auctions company; how often to you sell real estate, where would you advertise the sale (news papers, internet, radio, etc. for how long will you advertise, can you give me an advertising proposal, how much advertising cost will you charge me, how do you get paid 1. flat fee, a buyer's premium, seller commission, do you cooperate with agents, how soon can you have the auction, what size signs will you install (sign on the property should be large, maybe a banner on the buildings), how many directional signs will you install, what deposits would you recommend (too high of a deposit will discourage bidding), will you mail post cards to selected areas, will you hand deliver brochures to businesses in the area, will they be black and white or color, will you give me a list of all inquires received
• Your should preview the auction company's disclosures and contracts
• Auctioneer should disclose and announce at the sale that the sale is an assignment sale.
• Auction sales should be conducted in front of the house, inspection should be one hour befor the live
• All high bids should be taken (even if the price is way lower than expected, this gives you and opportunity to negotiate with all  in the chain of title