LETTER OF INTENT TO PURCHASE CONFIDENTIAL & PRIVILEGED

Date:

This is a letter of intent for seller to sell and buyer to buy from seller

(property address) for

(net dollars) to seller. This intent to purchase is contingent upon buyer and buyers attorney approval of the results of: 1. Conversation with sellers lender(s). 2. Conversation with listing broker. 3. Preliminary Title Report.

Closing is to be expedited upon removal of all above contingencies and attorney approval of release of funds for funding this transaction will occur on the next business day. Buyers attorney is .

Possession of property is to be given to buyer immediately upon acceptance by seller of this letter of intent to purchase. Buyer retains first right of refusal in the event seller receives and accepts any other offers.

If any of the above contingencies or approvals cannot be fulfilled to the satisfaction of the buyer and buyers attorney, buyer will terminate this intent to purchase the next business day upon dissatisfaction or disapproval. Possession will then be immediately released back to the seller.

Seller accepts costs that buyer is already incurring as consideration for this agreement. This agreement may be assigned by buyer to expedite closing.

Working with the Lender When we contact the lender in the pre-foreclosure phase, we are looking for two things. First, we want to establish a contact with someone working for the lender. Second, we want something in writing from the lender so we know where we stand money-wise with what the lender thinks is owed. This is called a payoff quote schedule.

(Buyer)

(Seller)

(Buyer)

(Seller)

Payoff Quote Schedule

Principal Interest Late Charges Returned Check Fee Foreclosure Expense Attorney Fee and Collection Cost Legal Fee Foreclosure Cost Foreclosure Fee Property Valuation Fee Property Inspection Fee Payoff Quote Fee Escrow Advance Total Amount Due

$81,057.19

$ 3,720.37

$ 828.63

$ 100.00

$ 1,000.00

$ 855.00

$ 200.00

$ 502.30

$ 549.29

$ 234.00

$ 7.75

$ 10.00

$ 3,944.60 $92,989.13

Is this an incredible list or what? Why is there a foreclosure expense for $1,000, a foreclosure cost for $502.30, and a foreclosure fee for

$549.29? What are the differences between a foreclosure expense, a foreclosure cost, and a foreclosure fee? Only the lender knows. We think it is padding the bill.

In the nickel-and-dime category, how about the property inspection fee for $7.75 and the payoff quote fee for $10? Someone drove past the property, and the bank charged a fee. And did you catch the returned check fee for $100? Guess how many returned checks we are talking about. Two!

What is important about the payoff quote schedule is that it becomes the basis for the lenders credit bid at the foreclosure sale. In fact this is very close to the actual credit bid this lender made at the foreclosure sale.

Try as we might, we could not get this lender to budge in negotiations during this pre-foreclosure phase. We did not want to pay anywhere near $93,000 for this property. We couldnt find anyone else who wanted to pay that much for the property either.

Because the property was vacant, we were able to bring five different investor groups through it in a weeks time. All were in the buy, fix, and flip business. This property definitely needed fixing. We had estimates from these five investor groups from a down-and-dirty $10,000 quick fix to $30,000 to $35,000 to do it right.

We also had prices that the investors would pay for the property in its as-is condition that ranged from $70,000 to $85,000. Surprisingly enough, the investor who said he would only put $10,000 into the property to fix it was the same investor who would only pay $70,000 for the property!

The retail value of the property fixed up would be $125,000. If you do the math,it doesnt make sense. Once you pay the lender $93,000 for the property and spend $35,000 to fix it,you are already upside down in the deal. You would have to sell the property at above the retail price of $125,000 just to break even. That was not very likely to happen. We told our contact person with the lender to forget about it.

Upside-Down Deal

Retail Value Lender Payoff Fix-Up Costs Loss

$125,000 $ 93,000 $ 35,000 ($ 3,000)