Wholesaling a Pre-Foreclosure

[Daniel I.]

I have a motivated seller who inherited a townhome. It has since gone into pre-foreclosure. There was $49k left on the mortgage and she just heard from the bank that the lowest they'd settle for is $28k. How would I go about getting this under contract and still getting the bank to accept $28k? If she sells it, would the bank then try and get the $49k balance instead?

There's definitely a potential deal here since the property's ARV is probably around $70k, I'm just not certain of how I'd go about getting this done. If any seasoned wholesalers or investors had any advice, it'd be greatly appreciated!

The other caveat is there are tenants living there who are not paying rent and haven't signed a lease. Apparently a lot of drama with them. Would it be best to try and do cash for keys after purchase? Am I able to evict them without a lease in place?

[Marvin McTaw]

Hey @Daniel I. that's great that you've found the situation and might be able to help this seller out of a tight spot. I'm not familiar with the laws where you live but here's what I would recommend: 

• Begin the eviction process: depending on where the property is, it can take a long time to get the tenants out and most buyers won't want an occupied property, especially if they are going to fix it up. If the deal closes before you're able to evict the tenants, then try cash for keys but I would at least begin the eviction process and not hold anything up. 
• Get the property under contract: even though it's in pre-foreclosure, the owner still controls the property. Getting the property under contract gives you a starting point for negotiations with the bank. In many cases like this, the bank may ask the owner to list the property for sale. Even in the case where you have to have it listed, it will go up on the market as a pending listing instead of an active listing since you already have it under contract. 
• The Bank Cares About The Bottom Line: banks generally only care about their bottom line. You should structure your deal to cover closing costs on the front end agreement and close in 30 days or less. My suggestion is to write the agreement up for a little bit less than what they've said they would take to at least get them to negotiate with you. They may say they will only take $28K but they might be willing to take even less as long as you can close in a timely fashion and/or stricter terms (e.g. no due diligence period).
• Get An Authorization To Release Information Signed By Seller For You: get the seller to sign an authorization to release information form. This will allow you to talk directly with the bank or mortgage servicer.  
• Make Sure No Deed Restrictions: you will want to make sure there are no deed restrictions on the property that would prevent you from quickly flipping the property to another buyer. If you are buying it as a non-owner occupant there shouldn't be any sort of deed restrictions but just check to make sure the bank doesn't try and place any on the property 
• No Assignments / Do Double Close: do not try to assign your purchase contract. Instead focus on doing a double close. The mortgage holder is going to try and minimize their losses so the fact that  you would be making money on the deal means they are missing out. 
• Private Marketing: when marketing the property, don't market it publicly or with the address. Focus on your buyers list or other private arenas. 
• Cash Buyers Only: if you are going to wholesale this property do not try and do it to a financed buyer. Focus on cash buyers only to close the deal.

I'm sure there is more but that's all that comes to mind right now. Good luck wholesaling your pre-foreclosure deal!