They went to see the house as “dreambuilding,” fell in love with it despite the high price tag and asked if the sellers (who were motivated but not behind) would consider approaching their lien holders about a short sale.
In putting together the purchase and sale I joked with the buyer that you could offer 25 cents and the seller would sign it because they will receive nothing out of the sale and payoff approval comes from the bank; the number on the P & S is irrelevant to the owner.
The buyer is a dear friend and a willing learner in the game of investment real estate. One of the pitfalls of investment education is a couple of 3 day teaser seminars leave you feeling well equipped to take on Donald Trump. Inherent in the saleability of real estate courses is the belief the formulae and catch phrases work in all situations and are guaranteed to give you a successful result. There are mentors who (and I’ve had them), feed you the seminar hors d’ouevres, push you out the door and aren’t there for you when things go a little “oopsy.” It’s a difficult place for a buyer/investor to be in.
My friend talked to a mentor who told him, among other things, they needed to get together with the seller and do a conveyance for $25 to begin the purchase process. He was also advised that 70 cents on the dollar for an un-distressed property was a reasonable offer.
A conveyance is the transfer of title. It happens at closing when all the terms in the executed contract have been fulfilled or waived, and the appropriate monies are paid to the appropriate people. Your conveyance *may* say $25, or $10 and other valuable considerations in a variety of conveyance forms, but unless you’re buying fire damaged in a Detroit war zone, that is not likely to be the purchase price. The amount of the transaction will be shown on your HUD1 and recorded on other types of conveyances. In the case of a short sale, the transaction amount is reached through negotiation with the bank(s) and is reflected in their payoff approval letter.
A payoff approval will have not only what the sale price must not fall below, but also terms and timelines which are strictly adhered to. Generally you can expect an “as-is” clause, as the bank is taking less than what is owed and will not funnel more money in for repairs.