The fairest price way to sell a property FAST in the Dallas / Fort Worth area, where the property has 30% equity or more, even when the seller is behind on payments and facing foreclosure, is through an Equity Partnering arrangement.
Equity partnering involves selling a property that has equity (where the property is owned outright or is worth more than what is owed on it) to an “investor partner” that in turn resells the property (possibly as-is or possibly after renovating it) in exchange for agreeing to share the profits with the original owner. There are many variations to this – only limited by the creativity and experience of the investor partner.
This can be a great program for a property owner that needs to renovate their property, but does not have the cash to do so. Note: depending on the property, location, amount of renovation, etc. an investor may or may not be willing to do equity sharing on a property. Renovating properties is high risk, and there must be enough profit to justify the transaction.
This can also be a great program for people that need to sell FAST to avoid a foreclosure, but still want to receive maximum proceeds from the sale.
Other forms of equity partnering involve properties (generally not needing renovations) in which the investor partner finds a new buyer that is willing to pay the existing mortgage payments going forward, and then refinance the property in the future, at which time the profit is shared with the original seller and the investor partner.
Equity Partnering Sale Example
– Property Value after repairs: $200,000<>
– Renovations Needed: $30,000
– Existing loan(s), taxes, etc.: $110,000
– Purchase price: $110,000
Note:The investor buys the property, completes the renovation, and resells the property on the retail market to an end buyer.
– Investor expenses (renovation): $30,000 (plus any purchase expenses, back payments, taxes, etc.)
– Sales price to end buyer: $200,000
– Costs of sale (commissions and closing costs): $15,000
– Total profit: $200,000 – $15,000 – $30,000 – $110,000 = $45,000
– Share of profit paid back to original owner: $20,000 or more (depends on agreement)
In this example the investor buys the property (generally buying it subject-to the existing financing by taking over the payments on the existing loan), completes the renovation, and resells the property on the retail market to an end buyer. Because the investor is able to purchase the property with financing and at a low price, the risks to the investor are minimized, and thus the sale can occur very quickly and with less due diligence, and the investor and seller can join into an equity partnering agreement where both parties share the common goal of quickly and cost-effectively renovating the property and then reselling it for maximum profit, which is shared. This has many advantages over the more standard process requiring the investor to do extensive calculations on resale value and repair calculations in which rough estimates have to be performed in a short time frame (if there’s a pending foreclosure), and negotiations are more complex.