Re: Contract Help!! - Posted by JPiper
Posted by JPiper on May 03, 1999 at 12:36:22:
When you say you “agreed to purchase” this house, the question that comes to my mind is what you agreed to. Obviously what you discussed with the seller is now his understanding.
One way though that I might attempt this deal assuming your “rehab” number is accurate and includes ALL costs like carrying costs, etc is to have the seller execute a note for $15K, which will be subordinated to a new first mortgage for the rehab, and which will be due upon sale, or within one year. When this $15K note is subordinated to the new first mortgage, it will now be a second mortgage. Now you go to a hard money lender, private lender, or bank to get a new first mortgage in the amount of $35K based on the after-fixed up value. Note that this puts NO money in the seller’s hands until the property is sold?.so if that is NOT the seller’s understanding of your “agreement to purchase” it probably won’t fly.
Another way to do this deal would be to tie it up for $15K cash, and then market it to a rehabber for an assignment fee. Include a contingency that will enable you to walk away if you are unsuccessful at finding an investor to assign this to. It goes without saying that a $30K-$35K rehab is a substantial rehab?.probably not the best place to start if you don’t have experience. The fact that you wondering how to structure this and/or put the funds together would imply to me that a $30K rehab is not the best first step for you. My advice would be to assign this.