If the owner agrees to sell -- DO THESE THINGS.
Hearing an owner say “YES” to your proposal was your goal from the beginning. Now you’re ready for the next phase of the process.
The first thing to do is have the owner sign an authorization form giving you the authority to talk to their lender(s) or lien holder(s). Arrange to walk through the property to make sure it meets your criteria as a buyer and use the opportunity to get your form signed. The authorization form should include:
- Printed name, signature, phone number, and date of authorization from the owners
- Name and account number for all lenders
- Last 4 digits of the owner’s social security number(s)
- Date of birth of the owner(s)
- Contact numbers for the lenders
This is the minimum information the lender(s) will need to verify you have the owner’s permission to discuss their loan. This signed form is mandatory to submit to the lender(s) or they will not talk to you. However, once they have the form, they will include it with the owner’s file and be willing to a.) talk to you and b.) work with you.
The second thing to do is get the general terms of the deal on paper. This is NOT TO be confused with a purchase contract. Rather, call it a Letter of Intent. Here is the reason you do not want a purchase contract at this point: you need to verify what you have learned about the AMOUNTS and TERMS of the liens with the lender(s). Find out everything you can about the owners situation, liens, or potential problems with purchasing the house. Tell the owner you will provide a purchase contract once you have contacted the lender(s) and verified all financials. Avoid using specific figures at this time. Instead, use general terms like “buyer intends to pay seller’s arrearages,” and “stop the seller from foreclosure,” and “save seller from serious credit issues.”
I'll conclude this topic on the next post.
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