Questions on a potential HBS deal

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  • CFD community,

    Last week’s conference call on HBS has been on my brain since I listened to it. Last week a friend approached me with a probate lead that he has and does not know what to do with in terms of crafting a deal. The details make me skeptical but I did see A HBS angle and I would like to solicit opinions from the community.

    Property: 4/2/1.5 split level SFR, 19 50 ft.², low-end neighborhood (not the worst of the worst but far, far from the best). Homeowner receive the property from their mother after she passed away and tried to manage it as a rental but cannot find a reliable tenant. She wants to sell the remaining mortgage balance.

    Problem: deceased took out $125,000 mortgage on the property in 2006 at 6.75% interest. She says PI TI is $1100 a month. Mortgage has been paid down to $104,000 so there is very little equity in the property. Comps in the neighborhood are all over the place but $100000 would be top of the market for this property in its current condition.

    Solution: the house is sitting vacant and the seller wants to be rid of it. She is in denial mode and doesn’t want to discount at present. That being the case, wholesale deal is out of the question but I was curious to see if a HBS for biggest down payment and then buying subject to would make sense since she has so little equity built up in the property.


    1) if I can come up with a solution with the HBS, my friend is willing to take a finders fee for the deal and possibly assist me over the weekend of the HBS. I don’t see a lot of meat on the bone. What’s the best way to maximize the return for myself/friend with regards to a biggest down payment sale? I understand the option idea but I’m having trouble wrapping my head around how it works with the down payment.

    2) how do I qualify the potential buyer at a HBS sale beyond just the down payment? As I said, this is not the best area of town and while I’m sure there could be potential buyers with enough of the down payment to buy subject to, I’m not sure the same people would be able to qualify for a loan or mortgage.While I understand the importance of protecting the seller and giving her the ability to get the property back, I want to get her the best qualified buyer possible. Does that just mean hoping for the best in terms of getting the highest down payment possible?

    3) due on sale? Most advice I read seems to be just do it and hope for the best?

    4) Not worried about this applying to me since it is only a one time deal but how do most people doing HBS escape the provisions of Dodd Frank on owner financing?

    The lady trying to sell is a nice elderly person and I’d like to help out but I’m not sure if there is a way with so little equity. If anyone has any input, I would greatly appreciate it.


    I would walk away and find a new deal. To much risk not enough upside. Sorry buddy just my observation.

    You could do a highest bidder sale for a flat fee. Tell the seller that you get your flat fee ( $6,000 sounds good) and she gets the rest including the cash flow if there is any. you just want to do this deal the walk away.

    You won’t make much money but you will gain a lot of experience. The seller will not get the mortgage paid off but they will get payment relief.

    Part of your option agreement would be that you will release your option for a $6k payment when/if you find a buyer during the highest bidder sale.

    you will likely pick up another option deal or two during the HBs

    You should have each bidder bring in a credit report. they can get it free online This will help you pick the BEST bidder, not just the highest bidder.

    it is super thin but you could make it work if you are willing to work for a small flat fee.

    Many thanks to both of you for the response. Don, trust me, your conclusion is mighty similar to my own but Jackie’s viewpoint of doing it for the experience/training (since I’ve never done an HBS) is valid as well. I’ll let y’all know what happens. Thanks again! JB

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