Baltimore HUD Homes Blog

There are two types of houses you can buy from people in foreclosure: those with equity and those with no equity. This article is about a system I designed for those situations where the house you’re looking to invest in has equity and the homeowner in foreclosure wants some cash for their equity.

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Let?s say there is $50k in equity. You?re going to make an offer that includes $5,000 for the homeowner if the homeowner has brought up the need for cash to you. You get the homeowner to agree to take $5,000 for the equity in the house. But the bank cannot know that the homeowner is getting any amount of money or the deal is dead.

This is where the Bill of Sale?or the “BOSS” System?comes in.

Here?s an example of how this works:

After negotiation, the homeowner has agreed to take $5,000 for $50,000 worth of equity. You?ve done a good job, because you?re going to buy it at a discount.

As you sit there with the homeowner, you explain the BOSS system like this:

“Mr. Homeowner, you and I have come up with an agreement that is acceptable for both of us. I agree to pay you $5,000 for your equity in the house. We agree on this, correct?”

“Yes.”

“However, you need to understand, the bank does not want to know that you?re getting any money. If they do, they will reject the proposal.

“So what I?d like to do is buy that television sitting right there for $5,000. I will produce a bill of sale for that. I will pay you $5,000 for the television. And by the way, and I hope it?s ok with you, but if the television is not here when I come to the house, after you move, I?m not going to worry about it.”

So what you?re telling the homeowner is, you?re going to give him $5,000 for the deal, they take their TV, and you?ve got a deal. You give them a promissory note for the TV for $5,000, contingent upon a successful sale of the property to your company. You give them a Bill of Sale as well, so you can record it as a transaction, as a cost of doing business.

Once the property is sold to your company, the homeowner can, if they have to, place a lien against the property for $5,000 so just get them the money as quickly as you can. The homeowner wants to know that they?re going to be protected. You tell them that you?re going to have that $5,000 for them upon the purchase of the property.

Paul Wells has been investing in foreclosures full-time for more than 5 years. For more foreclosure investing secrets like the one in this article, subscribe to Paul’s Free Bank Foreclosure - REO Investing course here: http://www.FreeBank Foreclosure - REOInvesting.com